The multiple pressures on the camera makers are putting increasing pressures on others. In particular, camera dealers.
A camera dealer gets a fairly low discount on a product from the camera maker’s subsidiary. While volume and other things can net a dealer more, you need to figure that your camera dealer is only getting a 15% discount from retail on most cameras and lenses.
But declining volume keeps us in the era of “instant rebates,” and that’s where the camera makers are slowly killing the camera stores.
Let’s work through the scenario where a dealer is selling one US$1000 camera a month. He pays for the first one by sending US$850 to the camera maker. Before he gets around to selling it, the camera maker offers an “instant rebate” of US$200. You walk in and buy the camera for US$800, less than what the dealer paid for it. He has to file a claim with the camera maker at the end of the month to get a credit for US$170. Wait, why not US$200? Because the camera makers prorate the discount into the credit. It was really a US$800 dollar camera that the dealer should have paid US$680 for.
Great, now the dealer has a US$170 credit to order another US$1000 camera. (There apparently are some exceptions, like the perpetually discounted D3100 kit, where dealers get the credit on ordering.)
But remember, sales numbers just keep trending down, down, down for most cameras. The dealer has to order another camera to get his “profit” on the sale (he’s unprofitable by US$50 when you walk out the door with it, remember). But cameras aren’t selling well, and he ends up with another box on the shelf that will, due to low demand, probably take another instant rebate to get it off.
While the camera makers love this scheme as it gets sales on the books for them, the camera dealers hate this situation. Best case they’re a month or two behind on the actual profits from the products they sold, and the only way to get that profit is to spend it on more product.
Lenses from third party vendors tend to work a bit differently, and more like the old rebate systems. Sigma and Tamron don’t discount the rebate to the dealers, and Tamron just sends the dealer a check.
As you might guess, this becomes sort of a slow downhill spiral dance. And heaven forbid that the dealer file the paperwork wrong, late, or the camera maker decide to change its mind on how a program works at the last minute. Somewhere in every camera store there’s an accountant buried in paper trying to keep up with all the deals—and especially the fine print that triggers exceptions—and keep the paperwork flowing fast enough to keep the cash flow at the dealer moving well enough so their heads stay above water.
Every dealer I’ve talked to would love to just tell the camera makers to go shove it, but of course, they’ve got thousands of dollars tied up in future credits that they’ll never get if they do that.
The general economy has all kinds of these warts in it where the institution with leverage (camera makers) uses it to their advantage and it squeezes the littler guy with no leverage (camera dealers) to the brink (and often past). We’ve gotten into a loopy, somewhat stagnant overall economy, but the rich/big seem to have less trouble with that than the poor/small because they keep leveraging all those under them.
Our problem as photographers is that the digital camera buying craze is over and the sales numbers just plummet every time you look, putting more pressure on those dealers. We now have four months of CIPA data for 2016. Look at these numbers:
- Compact camera shipments down 34%
- Mirrorless camera shipments up 2.3%
- DSLR camera shipments down 10.1%
- Lens shipments down 10.5%
That’s year-to-year for the first four months of the year. How many new cameras does that dealer want to order and stock?
If we look at the dollar value of those shipments we get:
- Compact camera value down 30.8%
- Mirrorless camera value up 28.9%
- DSLR camera value down 16.6%
- Lens value down 12.8%
Obviously, higher end compact and mirrorless are being pushed, and some critical aspect of the DSLR product lineup is collapsing.
But on top of all this, we now have to add another factor: fewer cameras being shipped in the near future period due to the quake in Japan and all the dominoes that then got knocked over in camera company production schedules.
However, here’s where I’m at: the camera makers may be killing the golden goose. All that pressure on dealers is going to see more of them close shop in the coming months, I think. I really don’t think dealers are going to be able to handle the quake slowdown as well as the camera companies.
That would mean that really only the truly big would be left to sell cameras (here in the US: e.g. Amazon, Best Buy, B&H/Adorama, QVC, and maybe a handful of regional camera dealers with sustainable volume such as Roberts, Samys, etc.). Now those leftovers will have more negotiation clout with the camera makers because they’re not buying onesies, and I’m sure they’ll use that clout any chance they get.
I’ve watched this same retail cycle happen in multiple tech areas—one of my earliest jobs was managing a computer store—and the solution is always the same, plus the manufacturers always regret their actions eventually.
In the run-up of digital camera sales, NikonUSA was actually pretty good in terms of doing what dealers needed: they tended to push customers in the door of a dealership with various promotions and lots of visibility of them (all those newspaper flyers, for example). Now, it’s basically “what’s this month’s rebate going to be” and let the Internet get that word out. Of course, the Internet wants its cut, so Web sites push any rebate via affiliate links, not trying to get you into a camera store.
The bottom line is that Canon and Nikon especially, but really all the camera makers, need to do something to help the local camera dealers, and soon. They need to get people walking into the doors of the dealerships asking about the latest and greatest, and those dealers need more and better marketing support to help them get the right message over to the customer.