Lies That Live On

Virtually every camera maker has at one time or another made a proclamation that they were going to concentrate more on higher-end, higher-priced products. And yet, here we are talking about Fujifilm X-E4, Olympus E-P7, and upcoming Nikon Z30/Zfc and Sony ZV-E10, plus other lower-end products. 

The problem—from the camera maker perspective—is that every time they push harder on the upper end products, they lose volume. Every one of these companies was built for producing volume, which is one reason why you’ve seen Nikon and Olympus have to do massive write-downs of non-performing assets as their sales volumes slipped. Those won’t be the last write-downs we see, I suspect. Stated simply: the camera maker manufacturing plants were designed for building millions of units, and the companies are currently only selling hundreds of thousands. 

Moreover, everyone has now realized what I wrote a number of years ago about trying to move upscale (i.e. sell fewer units at higher prices). It’s not just price elasticity of demand that starts to get in your way, it’s that you no longer generate new low-end customers for later up-sell. Which means that, over time, your unit volume will continue to reduce. Producing only higher-priced products and trying to push your existing customer base into them is typically a short-term win, but a long-term loss. Some camera makers are already at the tail end of their short-term win.

Thus, every camera company needs a “how do we attract new customers” strategy. Right now, some of the brands seem to concentrate on stealing customers from another brand. Okay, but that’s basically a zero sum game. Once stolen, you become the biggest target ;~). 

Technically, there should be a clear migration path for people who like to take photos: mobile device users discover limitations of their small camera(s), and want to move up (preferably to something compatible with their workflow). They buy a dedicated camera, but eventually outgrow that and want something even more sophisticated. This creates a wide pyramid of customers, with the bottom (and by far biggest area) being mobile device users, the top (smallest area) being the high-end ILC users, and a largish area in between that doesn’t necessarily have to be all ILC. 

The pyramid

The camera companies have been telling the lie for some time that they want to get out of (most of) that middle group. It’s easy to market a high-end camera that’s well differentiated from what can be done with a mobile device, but it gets harder to differentiate the closer you get to that bottom of the pyramid. 

Nevertheless, the camera makers are lying to themselves if they think they can abandon that middle ground that includes low-end cameras. Doing so means that you have to sustain on very low volumes, and over time that reduces the number of customers you have that you can up-sell later. 

Meanwhile, the camera companies also still use the old Japanese CES product line formula. That means that yes, you create lower-end products, but you arbitrarily remove features from them (fewer controls, fewer choices, fewer options, etc.). Except that doing that will make the task of getting a mobile device user to buy a low-end dedicated camera (i.e. move up the pyramid) even more difficult. For virtually every camera maker I can point to arbitrary feature/performance limitations in their low-end products that shouldn’t have been made, because it makes the task of attracting that middle pyramid dweller more difficult. 

Worse still, Canon and Nikon have been strongly reducing options for lower end cameras, in particular, lenses. EF-S, DX, and M are all distinguished by “we won’t make a lot of lenses because if that customer wants more choice, we’ll just up-sell them to EF, FX, RF.”

Unfortunately, one of the reasons why the camera makers limit functions, features, and options in the lower models is to keep someone they might be able to sell a higher-priced product to from picking the lower-cost one. I’d argue that these companies haven’t been fully rationalizing their product lines in order to do that correctly, and that the first and most important job they have is to make a sale in the first place. If you can push that sale up to a higher level, great, but you can’t do things that make the sale less likely to happen. Yet that's exactly what Canon and Nikon have done, and others are doing it, too.

So yes, sub-US$1000 crop sensor cameras is a product area that every camera company needs to pursue. None are doing it particularly well in my opinion, though Fujifilm has certainly been very active in this area lately. 

Do camera companies need a lot of choice, features, and options in their low-cost product line? No, but it has to the right set of things to come close to optimized sales. 

I have no idea yet what Canon is doing, as they’re all over the place still. Sony seemed to have this figured out at the start of the A5000/A6000 era, but now is making me scratch my head trying to figure out what they’re doing now. Nikon is weening itself from consumer DSLRs but not yet clear as to what will happen with consumer mirrorless (one crop sensor camera and two lenses are not a product line, per se). So Nikon’s done a toe-dip back into the low-end water, but nothing more so far. Fujifilm has been all over the low-end with the X-A#, X-T#00, X-E# and now X-S10 models providing a lot of options, but frankly, I'm confused as to which model they really want me to buy and why.

The camera companies need to come clean: they need to attract middle-of-the-pyramid customers and they don't know how to do that any more. Meanwhile, they lie to the investment community ("pursuing high-end customers"), they lie to customers ("our APS-C products are a full line") and they lie to themselves ("we've got this figured out."). It's time to stop the lying. 

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