INTERVIEW: Darren Ryan, Canon Australia

Earlier this week Photo Counter editor, Keith Shipton, spoke with Canon Consumer Imaging’s general manager, Marketing, Darren Ryan. He calls on the industry to move away from an ‘us and them’ mentality and rethink our approach to the market to survive:

PC: How does Canon see 2012 panning out?

Darren Ryan: We are pretty excited about what we have got on our plate. We’re encouraged by some of the economic data which seems to be more positive than negative these days. That will tend to have a positive influence on consumers and how much they want to spend, so we are positive about that.

We are also very excited about the portfolio of things we are going to do in the market this year. Very bullish that this year is going to be a very, very good year.

And we are incredibly excited by the new products we will be bringing to the market over the year.

Let’s look at the situation with JB and their ‘Direct Online’ initiative. [In November JB HiFi established a grey online channel for popular Canon and Nikon cameras and lenses while still selling locally-sourced Canon and Nikon gear.] When they did this, the message from Canon was ‘let’s see if this actually impacts sales, and we will make decisions based on the data.’ So it’s about 3 months down the track – has the initiative cause you any concerns?

All we can do is judge their performance. JB has continued to be a large part of our business. It’s hard to measure, but we don’t think it’s had a large impact overall.

So it’s ‘business as usual’ with JB?

Our focus and philosophy is always around the Canon brand always trying to meet and exceed consumers’ needs, so that becomes the overriding philosophy that we make our business decisions around. While JB has channels which perform in a way that’s supportive of the Canon brand then we will continue to have relationships with them.

I think that we clearly identified that there has been a change in the market and we’ve worked to make sure that amongst our key customers that they understand what our perspectives are for that, so we’ve shared that with them and they’re aware of how we would make our decisions around that.

At the moment Canon is the only brand whose products are on the Direct Online section on the JB website now that Nikon has been, if you like, ‘taken back into the fold.’ Are you comfortable with that?

I think the market continues to look at ways to respond to this very, very dynamic operating enviroment, so I guess the answer to the question is no, we are probably not. But at the same time we are pretty comfortable with what we’re about and how we’re working to manage the situation.

Our ultimate goal is for consumers to buy locally in this country, and so we’re working through our own plans to make that happen. Because it impacts the operating company locally as much as it does the retailer.

Are there any initiatives from Canon in relation to the JB relationship?

Not specifically to the Nikon-JB stuff. We see it as another step forward for the industry. If you look back over the last two years we’ve been at the forefront of really leading the industry to try and resolve this issue. We have implemented some new pricing in the market, from March 1 so we are already taking steps to do that, and it is something that occupies our thoughts often in any given week. This thing will just continue to evolve and we are pretty confident that over time it will all resolve itself.

So you have some revised prices from March 1?

We’ve taken some price action around March 1, and like I said everyday we continue to monitor the situation and look for ways to try and resolve some of the industry challenges as far as we can as a wholesaler.

(We will have more details on Canon’s price revisions next week.)

Nikon has taken an initiative with their latest program to get people to sign up to not importing grey market product. It’s surprising that isn’t part of a local camera distributors’ terms and conditions already. 

The thing we’re concerned about is the lack of understanding by the industry on what drives this. In a perfect world I’d love to be able to say to a retailer, ‘look, sorry you can’t import product direct’ but the reality of that situation is that the market is much bigger and much more dynamic and aggressive than getting someone to sign up to that statement. Companies need to make sure they can survive in the businesses that they are running. And ultimately that means that they have to make choices. I think that the overriding thing that we’re focused on is making sure the industry comes back into some sense of alignment, so there is no incremental benefit from buying overseas.

If you look back over the actions taken over the last two years the industry and the leaders in the industry have gone a long way to try and resolve that issue. It doesn’t mean it’s resolved just yet, although some of the actions of the last week say we’re probably closer than we were. And ultimately that is the way that you manage this, and you make it in everyone’s interest to buy locally.

It would be really good if we could as an organisation wave a magic wand and make that happen, but it’s not that simple and the thing that we get concerned about as the market leader is that there really is a complete lack of recognition of the real reasons that drive this scenario, and that some of these things are out of anyone individual company’s control

What are the real reasons?

For me the real reasons are multitude. You’ve got a massive global over-supply from just the sheer numbers of competitors out there in our category, and that drives a lot of price pressure and a lot of competition in the market place.

You’ve got that at the time when globally the economic trading conditions and consumer sentiment around the world are shifting dramatically. You’ve got substitute technology that is making the marketplace very, very dynamic. You’ve got cost structures, market-to-market which are significantly different, and again we will reference back to wage rates, where Australian consumers enjoy wage rates at a base level up to three times higher than other markets, and they are a real cost to various companies whether they are a retailer or a supplier. They are real costs that hit peoples P&L and have to be re-couped in pricing.

On top of that then you’ve got tax regimes which just don’t make any sense. You’ve got retailers being penalised for selling locally because external distributors and people coming into this market from overseas…allowing them to not have to pay the GST.

They are all real cost factors that add up to cause significant disparity in the marketplace. Our major concern from there is if the industry itself thinks that by simply aligning pricing it’s ‘job done’ and we’re all in for a great ride, it’s our belief that the industry is in for a bit of a shock. We as an industry have to keep thinking about ways we can build and drive a premium out of the marketplace by offering value over and above a product and a price.

The arguments you put for why prices are high in Australia certainly are valid ones, and hard to dispute, but if I look at, say, Pentax and the fact that they seem to be able to deliver a price point which is pretty well equivalent to the US price point, that kind of counters the argument.

I’d ask you to go and have a look at the price consumers pay – for DSLRs particularly – for their products overseas and compare it to the actual price the consumer pays at the shelf in Australia. I think you will find in most, if not all instances, our pricing is quite competitive against the US.

So you’re talking street price here and from what you say, there is more ‘wriggle room’ between the RRP and the street price in Australia than between the US MSRP and street price?

There are two points to make there. I think yes, you have to look at the price the consumer pays now as the only true measure of the value and the difference in price for consumers, because that is the only point where all the different factors come into play and you get a like-to-like comparison.

So I must admit I was a little concerned reading the article about the Sony product launches (see separate story) because again the question is  – is that a real and honest comparison for people to look at when you are comparing RRP and potential street price in other markets? It’s fundamentally different

I try to go from the press release prices, the official MSRP price in the States and the RRP in Australia. If I don’t do so all the time then ‘mea cupla‘.

The only real way to understand the pricing in the local market is to go to the retailer shelf and talk to them.

If there’s an issue there then it’s easy enough for Sony to say ‘hey you’re wrong there’ or otherwise contribute to the debate, rather than being silent.

I respect that. I think the other part for me, just picking up on the Pentax comment -although I don’t really want to speculate on other brands – but if I categorised market leaders to other brands in the marketplace, you have to look at the amount of investment work we do as a market-leading brand – from people like us, and other brands of our ilk. That again is another cost that we have to recover that other competitors don’t because they’re not much more than a product and a price. That’s not to say that that’s Pentax, but again there are major differences in cost structures between market leaders and other brands.

If I wanted to get my price down to a globally competitive level, you’d have to recognise the amount of shift I’d have to make in my cost base to make that a reality. What are the things that the market goes without to do it, and what’s the impact on the overall category? Consumers don’t find out information, they don’t get experiences that excite and delight them, and on that basis there is no category consumption. It starts to deteriorate because market leading company aren’t out there investing in advertising or whatever else it is… in store programs, retail marketing programs, all those types of things

At a principal level, market leaders bear a lot of costs, and should bear a lot of costs, in developing the market.

I guess to counter that you could say you’ve got economies of scale in terms of numbers of unit shifts. I want to look specifically at Nikon’s latest move, do you applaud Nikon’s initiative?

It’s just part of the industry trying to work this out, and directionally it’s heading the right way.

Some retailers might say it seems like JB have been rewarded for disloyalty to their distributor. What do you think about the ethics behind JB’s move?

I think for me, the industry and everybody in the industry is trying to work out a way that they can build a sustainable business model and on that basis, whilst they may not applaud JB for having to do it, I respect the fact that they are trying to run a business, as are we. What I don’t know about Nikon, and you’d have to ask other people, is: what are the terms and conditions that they’ve put in place right across the channels that they service? To me I wouldn’t look at Nikon and say, ‘well, they’re favouring JBs for disloyalty’ because I don’t have any line of sight to what they’ve done across the entire customer base.

All the retailers benefit, it’s not just an exclusive JB deal. Nikon is offering these new ‘authorised seller’ agreements to all their direct customers with two-year warranties and discounts on some select DSLRs at the very least, and other benefits. It seems like JB has won a victory, if you like, for all Nikon retailers.

The biggest concern I have…is that it seems to me that people lose sight of the fact that for us to build success for everybody the whole industry needs to succeed, and it seems to be a battle of ‘us versus them’ in the way it’s discussed and I just don’t think that’s the right approach.

The impacts have to be felt right across the entire industry. It’s Nikon’s move and we will announce our own things in our own time, but if we move to get to a level of [price] equilibrium in the marketplace, there are still costs structures which mean if we’re as an industry delivering the exact same price as overseas distributors, the thinking is flawed. Really flawed. Ultimately there will be far-reaching implications for the industry if the industry chooses to go down that path.

I don’t think anybody is unrealistic enough to expect like-for-like pricing between the Australian market and US market, but rather a diminution of the differential.

The differential can’t be so big that the value equation says it’s better to go overseas. But the question I would have to the industry is: ‘What are people doing to create an experience, and create other value-adds around selling the product at a price that allows them to command a premium?’ You make your own assessment as to whether the industry is doing a good or bad job at that.

I wouldn’t put JB in the category of a great value-adding retailer.

That wasn’t my point. My point is that we as an industry have to work this out together and rather than make it a combative type of environment we’ve got to start working together to better exceed consumer demands, and that is when consumers are happy to pay a premium. Are we as an industry doing those things well?

What’s your opinion?

I think there’s patches of it, but I think there’s loads more opportunity out there if people focus on meeting the consumers’ needs. You saw Greg John on Friday afternoon. [ At Canon’s 75th anniversary event (separate story) a Canon consumer spoke about his recent positive experiences developing his photography]. His piece was not around ‘do I get a perfect price?’ His piece was ‘a brand has helped me reach a new creative level I never thought possible’. And out of that we won as a brand, and he won as a consumer. The people he gives his photos to win because they see awesome images and the retailers that he bought his stuff from win, so everybody wins from stimulating that interest in imaging.

You mentioned you’ll be ‘announcing our own things in our own time’. Is there something coming from Canon about the JB situation?

To JB or not to JB is not the question! It’s very much around how do we make sure that we build a sustainable business model that supports our consumers. Full stop. To do that properly we obviously need to continue to work on ways to bring the market back to equilibrium and that is a journey that we started two years ago, at least, and we’ve led all the way through.

Without detailing any specific initiatives, it’s business is usual for us to try to find a solution to that problem, and we’re working through that, as we have for the last two years. We will make our announcements as we are ready to make them

Have you got any timeline for that…weeks, months?

If we wait around for too long we won’t keep pace with the market. It will be sooner rather than later, I would suggest. And that’s been something that we’ve been working on for two years and we continue to look at. We’ve taken our price drop in March and that’s not ‘hands down, job done,’ that’s ‘now continue to look at the market and find ways to bring it into equilibrium.’ The conversations we’re having with our trade customers is they’re going to have to rethink their whole approach to the market…

When JB went partially grey, did you consider de-ranging JB?

Based on our philosophy, which is to be where the consumer is, and given JB’s footprint in it, it doesn’t make sense for our consumer to de-range JB.

Does that mean that there weren’t reactions to the change in business model? That’s a different discussion.

So there was internal chatter?

No, we reacted to it based on what was happening in terms of JB’s ability to deliver to our local consumers. We identified things we did or would do depending on where the situation ended up. And we’ve shared that with our other customers.

Shared what exactly?

What our philosophy is in terms of people who chose to go direct.

To finish I’d say that this is really complex. The industry has taken 100 years to create itself and we are trying to completely shift it in less than two. What we would like to see the industry develop is recognition of the issues – not to use that as an excuse for stuff, but at least then people understand there is no magic wand approach available, and as an industry we have to get together and resolve it together.

Everyone is going to have to rethink their approach to the market if they are going to survive.