May 19, 2010: Sales data from GfK for the first quarter of 2010 confirms recent Canon CDLI research and anecdotal reports from retailers that the photo segment of consumer technology hardware is declining in sales value terms.
Spending overall on consumer electronics products slipped 2.2 percent compared to first quarter 2009, while photo slipped 8.5 percent on first quarter 2009 levels. This was the largest 12-month decline of any category apart from small domestic appliances.
‘Imaging hardware is…in value decline,’ stated GfK, ‘as the matured digital still market moves to a cycle of replacement purchases.’
Gfk attributes the overall slow-down in spending to the absence of government cash handouts and the effect of four interest rate rises in the past six months.
‘The extent to which the government stimulus packages, coupled with extremely low interest rates, affected 2009s consumer splurge on technical goods, seems to have been under-estimated, stated the GfK Temax (Technical Market Index) report. (Begging the question, ‘By Whom? GfK?’)
However, beyond the lack of free government money, the fall in camera sales has underlying structural factors. The era of steady increases in camera sales Australian retailers and distributors enjoyed until 2009 as consumers adopted digital picture-taking, appears over for the time being.
The new ‘flavour of the month’ in consumer goods spending is flat screen TVs, with a modest 3 percent growth in dollar terms and a whopping 38 percent unit growth. (Indicating a bit of pants-dropping in the category over the past 12 months!)
GfK predicts price competition in the flat screen segment to continue into the run-up to the World Cup.
Set-top boxes is another significant growth area.
All other consumer electronics categories, however, experienced double-digit decline. MP3 sales are being impacted by the growth of smartphones with MP3 capability, DVD recorders are being replaced by high definition set-top boxes with in-built hard drives (despite the growth of blu-ray models), audio systems continue their long-term decline, and the value of car navigation continues to suffer from the commoditisation of this market.
A mixed quarter for the value sales of notebooks led to a modest overall growth for the IT sector, of 5.6 percent. Value sales in March, however, showed the first year on year decline for notebooks. Over 60 percent of notebooks are selling for under $1000.
Other categories benefiting from technological developments were storage (+13 percent), and multi-function printing devices (+2 percent). High-capacity hard-drives were a key driver for the storage market, with 8 percent of models boasting a capacity of 1.5 terabytes or more in March.
Within the multi-function printer market, consumers have been willing to pay a premium to trade-up to higher-priced wireless technology.
Growth has returned to the telecoms sector (which now accounts for 16 percent of total spend). Traditional mobile handsets continued their steep decline ( down 45 percent compared to quarter 1, 2009), but the 149 percent growth in spend on smartphones was more than enough to counteract the decrease, resulting in a 3.9 percent gain for the sector overall.
‘Despite the increasing ‘must-have’ nature of technical goods, it is unlikely that spend from April to June this year will be able to surpass that of 2009, particularly as retailers continue to battle it out with pricing and promotional activity,’ the GfK Temax report stated.
‘Renewed nervousness regarding the global economy will also play its part.
‘With the up-coming World Cup, coinciding with the take-up of new TV technologies (3D, LED, IPTV), there is cause for some optimism however.
‘Historically, such events have provided a strong boost to the technical markets, with retailers enjoying increased footfall and the benefits of increased advertising.’
COMMENT: At the risk of sounding like a broken iPod, we caution our readership about the veracity of GfK’s figures. They do not include any online sales, so the 8.5 percent decline in photo gear sales could well be masking a transfer of market share from a measured channel to the unmeasured online channel. Keep in mind that cameras are particularly appealing as an online buy (compared to say, fridges or plasma TVs), as freight charges are relatively low.
Nonetheless it appears that digital cameras are last decade’s ‘to-die-for’ consumer technology, with smartphones and dirty great TVs the things your average aspirational consumer is hankering after. No doubt iPad and iPad-like devices will become part of that party this year.
The increased interest in storage devices and multi-function printers should give retailers who aren’t stocking these products reason to reconsider their overall offer to consumers. Both are intrinsically linked to digital photography.
It will be fascinating to see how the consumer electronics and department store segments of photo retailing handle digital cameras as a mature, rather than growing, product category. Will the shelf space for photography start to appear too generous? Will pressure on price ramp up? Will models or even entire brands be de-ranged? While photo specialists dedicate their entire floor space to photography, department store-style retailers have a plethora of options on what to stock on their shelves. The camera distributors are really going to have to fight each other and competing product categories hard to maintain their presence in these outlets.
Moreover, the camera category within photography which promises the most in terms of growth over the next 12 months – DSLRs and their little brothers, interchangeable lens compacts – are challenging for generalist retailers without the product knowledge the consumer will be seeking. The Canon CDLI also indicated that while consumers were buying fewer cameras, they were after more sophisticated models for which they were willing to pay a premium. This bodes well for skilled and knowledgeable retailers, and should also have a positive effect on their accessory businesses.
Perhaps the party’s over – maybe it’s back to a future more the same than different to the years prior to the digital imaging revolution.
…Did we have a good time?
– Keith Shipton