As camera manufacturers release their quarterly financial reports it is instructive to look for comments about product mix and profitability. Shifting a company’s product mix is an important strategy to increase average per unit contribution margin and potentially increase related profitability.
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In its latest financial report covering its Second Quarter 2021 Nikon Corporation made some interesting comments on pages 4, 24 and 25 about its imaging division. Specifically on page 4 the following three comments were made…
- Sales strategy focusing on profitability. Increase profitability by improving product mix and reviewing sales policies.
- Direction for product planning and development. Focus on high-end models for pro/hobbyist. Differentiate with large mount lenses.
- Enter new fields including BtoB. Actively leverage image processing, sensing technology etc.
As the camera market continues to contract these are prudent strategies for Nikon to pursue in order to create a sustainable business model for its imaging products business. We can expect to see other camera manufacturers also adjust their strategies in a similar manner. For example, OM Digital Solutions has already made similar statements about their intentions with regards to its future product mix and product development strategy once it takes over the Olympus Imaging division.
The implications of these strategic shifts will have some predictable impacts on photographers. The most obvious one will be that the number of low priced, entry level camera models will be reduced. In some cases manufacturers may decide to eliminate their lowest priced cameras from their product mix altogether. The mid-range cameras of today, may be the lowest priced cameras of the future.
It is likely that the suggested list prices of cameras and lenses will continue to rise as manufacturers try to squeeze as much contribution margin as possible from each unit sold. Should promotions be needed to periodically stimulate demand, higher suggested list prices would form a new price baseline from which discounts would be offered. This may help mask rising retail pricing to some degree.
Research and development funding will be directed to more expensive, higher margin products. This would logically lead to some rationalization of products. Low volume, low margin camera models will likely disappear. Whether this shift in R&D would also lead to specific manufacturers discontinuing product categories such as DSLR models, or focusing on one sensor size camera system like full frame, remains to be seen.
It will be interesting to see if individual camera manufacturers will be able to profitably sustain their multiple product lines that are based on the use of different sensor sizes. As camera market volumes continue to fall, the customer mix will look like the 1970’s again (i.e. professionals and enthusiasts with discretionary money to spend). As this reality takes hold some tough business decisions will need to be made in terms of which products to maintain into the future.
Product differentiation often goes hand-in-hand with a strategic shift in product mix towards higher end products. This could benefit photographers as camera manufacturers ramp up their R&D efforts to cater to the needs of niche market buyers and bring out more innovative products for them. There is a corresponding downside as these more specialized cameras will likely cost more.
From a business sustainability perspective shifting the product mix towards higher end cameras and lenses will be a strategy that most companies will need to employ. They will need higher contribution margins per unit sold in order to cover their fixed costs when selling fewer cameras and lenses overall.
One can speculate how this shift towards a higher-end product mix will impact the camera market. Worst case, will it serve to drive more photographers out of the market? Will the replacement cycles of camera gear lengthen as buyers stretch out the time frame of their photographic investments? Will folks who are still buying dedicated cameras be willing to spend more money to purchase higher end products that offer them more features and better performance? The answers to those questions will be revealed over time.
Photographs were captured hand-held using camera gear as noted in the EXIF data. Images were produced from RAW files using my standard process. Crops are noted where applicable.
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