Strategy Papers — Nikon to Slim Down and Focus on Margins, Canon Diversifies

An official Nikon Q&A on the occasion of financial results for Q2 of the year ending March 31, 2014, reveals some interesting tidbits and strategic objectives; objectives that we actually discuss quite often here on THEME. Expect a shift to cameras with higher margins; might well be that the Nikon Df is a strategic corporate trendsetter.

As suggested here, the market wants fewer similar models and is willing to pay a premium for quality. As reported earlier, Nikon bets on the penetration of new markets to counter sagging DSLR sales. Now it emerges they’re keeping inventory at an extremely low level, meaning they only produce what they sell, so older models will disappear more quickly from the shelves than in the past when you had the awkward choice between new, nearly new and not so new models…

Here’s the transcript:

What is the reason for the lowered market forecast for interchangeable lens type digital cameras?

As the market for digital cameras expands, sales of digital SLR cameras have expanded among not only professionals and high amateurs, but sales of entry-models such as the D3000 Series have also skyrocketed, expanding the customer base globally. For this reason, sales have been affected greatly by the economy and consumption trends of each country. The market in Japan has been favorable, but the market conditions in the U.S., Europe, China and Asia have been severe, and a downward revision of the market was made from 19.5 million cameras predicted last August, to 18.7 million.

Success is all about the next moves -- LensRental's chess set pits Nikon against Canon.
Success is all about the next moves — LensRental‘s chess set pits Nikon against Canon.
What are the prospects for the interchangeable lens-type digital camera?

Though the annual growth of 20 to 30% experienced previously will be difficult to achieve given the current economic environment and consumer confidence, the penetration level of digital SLR cameras is still quite low in markets in China and other neighboring Asian countries. We believe these markets have a lot of potential when the economy turns bullish.

We are keeping inventory of our digital SLR camera at the extremely low level. In the latter half of the fiscal year, we expect a shift from older products to newer products that have higher profit margins.

What are your future strategies in response to the shrinking compact digital camera market?

We are adjusting production in accordance with the shrinking market. We have an extensive lineup ranging from high-end to entry level products, and we have secured the leading or nearly top share of the market in various regions around the world since last year or so. We plan to maintain this product mix, but we will cut costs and ensure profitability by reducing the number of models.

Compare this to Canon’s consolidated results for Q3, 2013. World’s camera leader sees less need for action than Nikon:

Within the Imaging System Business Unit, sales of the EOS 5D Mark III, 6D and 70D advanced amateur model interchangeable lens digital cameras continued to grow. Furthermore, especially in Japan, the new entry level EOS Digital Rebel SL1/T5i cameras proved popular, further contributing to sales and helping the company to maintain its top share of the global market. As for digital compact cameras, although total sales volume declined due to the market slowdown and the increasing popularity of smartphones, sales volume increased from the previous year.

Nikon aims to become more agile and increase margins while the sheer volume of the Canon colossus makes direct comparisons between the two difficult. Nikon will focus more on imaging devices while Canon diversifies “creating fresh growth in new directions,” according to a recent sustainability report.

Canon today makes more money with its office business unit than imaging systems. The Canon of tomorrow will be more of a business conglomerate than the company founded in 1937 as a camera maker.

Interestingly, during its early years the company originally called Kwanon did not have any facilities to produce its own optical glass, so the first Canon cameras incorporated Nikkor lenses from Nippon Kogata, the company later known as Nikon…

BTW, fittingly Digital Trends publishes an analysis on camera makers risking to go bust. Excerpt:

We can’t predict whether Nikon or any other camera firm will be forced to say adios in five years. But we certainly know if the companies do not make radical changes, the future looks bleak (…) Olympus and Fujifilm have already signaled they’re moving away from budget cams and exploiting other areas with better returns. This shows there’s hope for truly forward thinking firms that realize the past is the past and the glory days of hardware-only success will never, ever return. The way most of the major camera makers have acted over the past few years, it’s hard to put them in that category.

(Nikon Q&A via Nikon Rumors)
  • Bengt Nyman

    Nikon’s statement conforms well with what can be expected in a market being flooded with capable smartphones.

    Canon’s more muffled statement might have several reasons:
    1. Overconfidence
    2. Confidentiality
    3. Undisclosed plans for new mirrorless cameras based on Canon Dual Pixel AF.

    The expected shakeout in the camera market has started.
    Nikon aims to remain the no 1 professional camera manufacturer presently sticking to well proven DSLR technology.

    Canon is likely to continue to be the no 2 professional camera manufacturer by offering products with slightly discounted performance also serving the enthusiast market.

    Canon will also have to emulate Sony and successfully innovate in the mirrorless market if they want to retain a market between smartphones and pro cameras.

    Eventually it will all go mirrorless and the continued journey promises to be interesting.

    • Not so sure about Nikon no. 1 professional camera manufacturer if we’re strictly sticking to sales figures…

      • Bengt Nyman

        For sports and news I agree. For high IQ images such as studio and landscape, however, the D800(E) is the top of the line and new MF.

  • Andy Umbo

    It’s interesting that poor Nikon’s been ‘scatter-shotting” cameras for a while now, building so many odd formats (like the V/J series), always looking for a solid “win”. They have much less capacity than Canon, and much less of a diversified company, but they have yet to build a comprehensive line of “G” series f/2.8 primes for their cameras, or any kind of “G” series primes for the APS-C cameras, except for the 35mm 1.8. I was told a long time ago that Nikon finds it difficult to change, and many times must stop building certain lenses so it can build others. They’re still making AI-S lenses for God’s sake! Their alleged vintage F series lens mount, where you can mount any lens ever made onto their current cameras, which you, of course, can’t, and has always been really non-interchange-able since back in the film days, is a major misstep compared to Canon’s division of manual focus/auto focus series lenses, pre-engineered to take the future into account.

    As a pro, 40 years ago, all I used was Nikon (when shooting 35mm), but since auto-focus film days, poor Nikon’s lack of engineering finesse, and “also ran” technology has been so sad, it’s amazing to me that anyone still sticks with them. I don’t know where Bengt’s statement that Nikon maintains their number 1 status with pros comes from, as in the United States, if you’re a “pro”, you’re shooting some permutation of the Canon 5D, and have been since they came out. The only “pros” shooting Nikon are old photojournalists who’ve been using the stuff for years and have a lot of legacy AF-D lenses (and have popped for a body that can focus that lame shaft drive vs. the ones that don’t).

    For a lot of people, the mirrorless consortium of Olympus and Panasonic has gotten a lot of people thinking, and I know more pros changing over to that system and checking it out, than doing about anything else….

    • Bengt Nyman

      Yes, I should have differentiated between pro and image IQ. Pros in the sense of sports and news are doing just fine with Canon 5D II and III.
      So am I.
      However for optimum image quality I go to the D800(E) with Nikkor prime lenses.

      • Andy Umbo

        Actually have to say the opposite, the Canon 5D series actually has a much slower auto focus and is not all that suited for professional sports photography, people I know who are sports photographers use 12-16 megapixel, high end cameras that shoot and and focus faster, like the top of the line Nikon and Canon. The Canon 5D is used by almost everyone else in pro photography and now video. Good time to point out, as always, and as was years ago in photography, photo-journalists, and especially sports photographers, comprise less than 5% of the total field of professional photographers, so their needs for technology are not the majorities need. Nikon’s poor technology has auto-focus that works far worse than Canon, and that goes back to my use of both during the film years. What Nikon does sell is the cheapest camera with the highest megapixel; the D800 is less than the Canon 5D, but the new Sony mirrorless is going to kill that, as the Nikon files don’t have that great of a color. I’m still using glass correction filter when I shoot with Nikon ’cause I can’t get what I want with in-camera settings.

        • Bengt Nyman

          I am sure you are right about the 5% who shoot sports for a living. That’s certainly not my field.
          I am waiting for a quiet, vibration free, mirrorless camera with top IQ for music, theater, opera, cityscapes, landscapes, nature and more. And it has to fit the best available contemporary prime AF lenses.

          • Andy Umbo

            That’s 5% of the total professional photography market for ALL photojournalism, sports included. At any given point, there are probably ten times the amount of people shooting weddings for money in any area than are shooting any sort of compensated journalistic photography. And even more are shooting for commercial general uses that photojournalism. The media focuses on photojournalists because it’s easy, they’re usually in the same office, but they no way comprise the pro photographer market at all. The needs of the photojournalism community, is robust build, fast auto-focus, lots of weather sealing. But their megapixel needs? You can do a double page magazine spread with 12 megapixels (I Have!). 24 megapixel is over-kill!

            I know so many professional photographers checking out M4/3rd’s right now, because it encompasses the needs most pro’s have been looking for since the beginning of digital. 1. multi-format. For pros, the 35mm aspect ratio stinks, most of us have always shot 4X5 or square, something you can easily do in M4/3rd’s. 2. Full frame focus. We’re not limited to focus points, many of which are not at the far edges of the frame. Easy to select one on M4/3rd’s touch screen. 3. Killer primes, most commercial pros never use a zoom at all! Huge selection.

            I’m testing M4/3rd’s right now just for the reasons above!

          • Bengt Nyman

            Long term I am sure you are right; formats and electronics will be getting smaller and smaller. That’s why I am saying that FF is the new MF, and so on.

    • The operational profit numbers of the big two suggest 1 in 16 photographers is shooting Nikon and the 16 Canon. This, of course, includes all business units. Still, maybe you got a point there with Nikon still living in the past. Even though, and this really speaks for them, be it the D600 or D800, Nikon launches new models before the 6D and 5D III. Now who’s copycating?

      • Bengt Nyman

        Forget the brand bashing. I shoot both the Canon 5DIII and the Nikon 800E. There are advantages to both, however, if I had to give one up I would keep the Nikon.

  • Omer

    Sony, Nikon, Olympus and Fuji want to compete with Leica. Well OK. Can we now look forward to even higher prices from Leica (I’m joking, maybe.)

    • Bengt Nyman

      Omer said: “Sony, Nikon, Olympus and Fuji want to compete with Leica.”
      Leica is less than 1% of the market, no longer a leader in anything, and can be safely ignored.

      • Yet, they’re probably the most profitable camera maker.

        • Bengt Nyman

          On a markup basis, probably.
          On a $ bases, forget it.

          • On ROI, likely.

          • Bengt Nyman

            Forget Leica. They are not in the game.

      • Omer

        Well, Nikon, Canon et al are losing market share to Apple, Samsung and Nokia. Leica is not. But lets compare evenly: How much of the market share does the D800 have for cameras that cost over $3000.00? Leica is undoubtedly more prominent there than 1%, and that is where the Japanese want to go (according to the article above.) The question is, do they have the brand loyalty that Leica clearly has.

        PS I am a D800 user.

        • Bengt Nyman

          Nonsense !

          • Omer

            :-)

          • Please, let’s save up emotions for shooting gigs.

  • Jeff Allen

    Guys

    Deal with facts. Until 2013 CIPA data showed DSLRs and CSC cameras were growing and compact cameras were dramatically falling especially lower end models this is where the margin erosion started. DSLR/CSC sales also drove sales of lenses that compacts never did. In 2013 DSLR sales have fallen but not dramatically they are still by an historical measure high (will come in above 15.5M). US data showed between April 2012 – March 2013 $ 2.1bn was spent in North America on DSLRs and lenses.
    In mature markets consumption goes in cycles and indeed global large sporting events drive camera sales there were not any in 2013 unlike 2012.
    Leica are expanding production of the M 240 they cannot currently match demand. I don’t believe Canon or Nikon will disappear in the next five years, neither will Fuji, Sony, Panasonic or Samsung. Olympus because a. imaging is losing money and b. the financial scandel will likely contract to medical and optical instruments.

    Apple & Samsung can keep adding MP to their smartphones but they can never replace DSLRs in the near to medium term and the sensor size is the limiting factor. Mirrorless has worked in Japan, parts of Asia and mainly Germany & the UK in Europe but in North America is a commercial failure overall.
    Flickr has proved photography as a hobby is here to stay try tracking a flying bird, racing car or running lion with a smartphone!