Japan Earthquake Effects Reveal Troubling Retail, End-User Trends. How will the disaster affect the way you purchase photographic equipment this year?
The store at which I bought my first camera closed this month. Yes, camera stores close all the time, but this was reportedly the first to close specifically due to supply problems caused by the March 11 earthquake and tsunami in Japan.
Boots Camera was a large retail outlet serving Fresno, Calif., since 1974. It stocked a wide array of cameras, photography supplies and other items that might appeal to imaging enthusiasts: papers, printers, proofers, digital storage cards and developing chemicals. It even carried telescopes at one time.
What it wasn't able to carry, at least in recent weeks, were the latest best-selling SLRs from Nikon and Canon. The owner of the store implied this shortfall was the final straw that spelled the store's demise.
Tsunamis or no, retailers are always vulnerable to supply issues. Brick-and-mortar storefront owners are also increasingly vulnerable to online competitors. The risks of both supply chain disruptions and web competition can be mitigated by selling what suppliers can't affect and what Internet stores can't supply: services.v
Retailers who just take orders will lose business when they no longer have the popular items their customers demand; nor will they stay in business, even with well-stocked shelves, if all they are doing is taking orders for the same items available online at much lower prices.
What retailers can best offer is information, advice, instruction and community, all with a much friendlier face than any online storefront can provide. And customers who come to a store for a trusted source of those wares are also the best potential source of profits from services: helping people make the most of their photographic equipment — and of their photos.
Before the problems of both retailers and end users can be solved, it's important to understand the implications of the equipment crisis the industry is now facing. The calamities in Japan may have happened thousands of miles away, but its ripples may still be felt acutely this summer when photographers have trouble finding the new cameras they want on store shelves.
Status report: Manufacturers
The triple calamities of the 9.0 earthquake, the 30-foot tsunami and the nuclear meltdown crisis that struck Japan grabbed the headlines for weeks in March and April. What did not get as much coverage, however, were the long-term problems experienced at many of Japan's manufacturing plants. Not only did some factories sustain immediate structural damage, but those that are back up and running continue to face power outages due to those off-line nuclear power sources, along with supply disruptions.
Panasonic, Canon, Nikon and other companies closed production lines for a short time in northeastern Japan. These were reportedly the sources for higher-end models and the interchangeable lenses that provide much of the profit in the SLR business.
While most compact cameras are manufactured in Taiwan and China, they depend on components made in Japan. In the two months since the earthquake, there has been no word of a shortage of CCD or CMOS imaging sensors — but that situation could change. Reportedly, many Japanese companies operate under "lean" principles and typically have low inventory levels. The factories in which Sony, Panasonic and Sharp manufacture CCDs were not damaged in the earthquake, but they may be affected by the continuing inconsistencies with the electrical power grid.
Even with ample CCDs, cameras are more than just sensors and lenses, and shortfalls anywhere can affect the entire product. For example, one digital camcorder relied exclusively on proprietary removable storage media made in just one factory — a factory that is now off-line. Major customers of that camcorder, including police, have reportedly already moved on to different products.
Other immediate effects of the earthquake include the following:
- In May, Canon reduced its earnings forecast, citing a damaged supply chain that it expects won't return to full speed until midsummer.
- Sony Ericsson says earthquake effects will linger for several quarters, and notes battery and display supply problems.
- Financial analysts expect profits at many large photography firms to decline, and are lowering their ratings and stock outlooks.
- In what may be a harbinger of times to come, Nikon in early May outright canceled a newly announced compact camera, citing supply issues. The Coolpix S4100 had been announced in February, and was due to hit stores this spring.
- As the top camera manufacturers cut back on the number of units they're able to put out, they are also cutting back on their advertising and marketing dollars meant to sell those cameras — hurting magazines, newspapers and retail stores that depend upon co-marketing dollars. These cuts have even hit major trade shows and photo workshop sponsorships as cautious camera companies curtail their expenses.
Effects on end users
Reduced camera supplies in the near future may simply accelerate issues already facing the brick-and-mortar retailer who cannot compete with the lower prices offered by online or big-box outfits. But even those competitors will also be affected by the primary issue soon to hit camera makers and resellers: End users have fewer reasons to buy a new camera.
When digital cameras first hit the mass market more than a decade ago, demand problems were hardly an issue. Those early digital cameras had plenty of things wrong with them: low resolution, short battery life and slow performance, among other shortcomings. Every year, however, manufacturers offered substantially improved models that customers snapped up quickly.
For the last few years, the market has shifted. Photographers today — from amateurs to top professionals — would be hard-pressed to buy a bad camera, as most of those early problems have been addressed. That means the cameras that photographers bought two years ago are still, more than likely, very satisfying. And that, in turn, means end users no longer have a reason to buy a new model, other than the incremental improvements offered by camera manufacturers.
The incentive to buy new equipment has only lessened since 2008. With the global recession, customers have less discretionary income, so a new camera would have to offer significant advantages over what they already have to entice them to part with cash.
From calamity, opportunity
Even if many amateurs and prosumers are not about to buy a new camera, they are still taking hundreds and thousands of photos with the cameras they already own. What they are not doing with those thousands of photos is … well, anything.
And therein lies the opportunity.
Most people let their photos languish in digital storage devices because to do anything else with them is work. Sharing a few snaps on Facebook or a mobile phone is easy, but managing those photos is hard. Selecting the best 100 photographs of the last year, editing and enhancing them, and arranging them in a book is a serious job — one that many customers would pay someone else to do for them.
This is where retailers can step up and offer services. They are not faceless companies with a website or a packing box in which to stuff once-treasured memories; they are people with whom the customer has a relationship already built. Retailers can be the place where customers go to drop off a storage card or hard drive of photos and say, "Take these thousands of pictures and organize, edit, enhance and print them for me. And for that I will pay you."
Whether or not the Japan crisis has decimated a retailer's inventory, its customers will most likely not need a new camera anyway. But they will need someone to help them with their pictures, and that is where the future profit centers lie for tomorrow's retailers.