The explosion of the digital camera market is changing the way the UK takes photos. While in the past many consumers have been disappointed by out-of-focus snaps or heads chopped off, digital cameras have changed everything by allowing users to check their shots before the moment has passed.
The digital camera market has seen rapid growth over the past two years, with the second half of 2003 in particular proving to be one of the most significant periods in its development so far. The growing popularity of digital cameras is mostly attributed to falling prices. When the first products were launched they were expensive and geared to the needs of the professional and semi-professional markets. However, models capable of acceptable prints can be bought for under £100.
Innovation has also played its part in driving sales, particularly within the compact segment of the market. Equally, the growing ease with which digital images can be transferred and printed is significant, with the growth in home PC usage and high street facilities of note here.
Both volume and value sales have been rising since the beginning of the decade. Mintel places market volumes for 2003 at 3.2 million units, which is equivalent to £512m of value sales. This is up from 1.7 million units and £323m in 2002 . In the context of the whole camera market, including single use cameras (SUC), digital cameras accounted for 70 per cent of value sales in 2003. This compares to 41.4 per cent in 2001 and shows that it is the most important product group in the overall market.
The digital camera market can be broadly split into three formats: compact, single-lens reflex (SLR) and toy. Both compact and SLR digital cameras are similar in design to their counterparts in the film market, with the toy digital camera a low-cost unit typified by its ultra small size and basic features. Compact units, as in the film sector, are proving most popular with consumers, accounting for more than 90 per cent of volume sales in 2003.
The market can also be segmented in terms of the imaging or mega-pixel capabilities of the camera. The market has seen a large amount of product innovation, which means that cameras that are capable of high-quality images (with more mega-pixels) are now available at affordable prices. In 2003, cameras with two or three mega-pixels accounted for about a third of volumes, making them the largest segment. However, it is the four mega-pixel segment that is seeing most growth, as this area is experiencing the biggest reduction in prices.
Unlike the wider camera market, the market for digital cameras supports a wider range of companies. These include both traditional photography manufacturers and companies that compete elsewhere in the consumer electronics or computing sectors. The traditional camera manufacturers claim the top positions in the market with Canon, Fuji, Kodak and Olympus leading the way.
Alongside these are a large number of consumer electronics companies; the most important in terms of sales is Sony. Whereas traditional camera manufacturers have their strengths in the digital SLR market, consumer electronics are better-placed in the compact and toy segments of the market.
In the early days of digital cameras, users were most likely to be young and male, but as the market has become mainstream, ownership among families and women has increased. This means that convincing older consumers to accept digital photography is the next big challenge for manufacturers and retailers.
Mintel predicts further expansion in the digital camera market over the coming years as the technology becomes more widely accepted by consumers. It also predicts that the volume sales will continue to grow and this will push up the value of the sector. Prices will continue to fall, although the specification of cameras will increase with higher mega-pixel capabilities and more feature being incorporated, which is likely to hit the margins of both retailers and manufacturers.
There are some possible threats to the future success of the market, such as the increased availability of mobile phones that have built-in digital cameras. Over the next decade, the technology will improve and picture quality will dramatically improve.
While such cameras are unlikely to possess the features of dedicated digital cameras, they should be able to compete effectively with cameras positioned at the entry-level market where intense competition on price can be expected. However, if digital SUCs are launched, as they have been in the US, these are likely to add a further dimension to the market.
The use of both dedicated digital cameras and hybrid cameras contained in phones and other portable devices for informal photo opportunities is forecast to grow. This trend will have a direct impact on the demands from consumers in the form of camera design and specification.
Compact units will continue to dominate the market in the short term at the expense of toy and SLR models. Digital disposable SUCs are likely to take a significant share, as they have in the film sector, once they are launched and become acceptable to consumers as a disposable alternative.