Market Share Versus Profit

BCN+R—a Japanese retail sales tracking company—presented its 2020 numbers for cameras, and as usual people are jumping on the market share data and many are making proclamations that are misleading. 

In particular, the "Olympus is doing great" sentiment (23.4% of mirrorless market) and the the "Nikon is failing" claims due to it's 4.6% market share of mirrorless in Japan) seem to be the most vocal. I haven't seen anyone bother to try to plot out the total ILC market shares (Nikon holds 44.8% of the DSLR market in Japan). Update: after I originally wrote this over the weekend, RC Jenkins did something similar to that on NikonRumors.

Indeed, the market share numbers look a little different than you're seeing from other "news" sites if you consider all ILC in Japan:

  • Canon — 31.1%
  • Sony — 20.2%
  • Olympus — 17.2%
  • Nikon — 11.8%
  • Fujifilm — 8.8%

Still not great for Nikon. But not really great for anyone ;~).

But there are two other things that have to be considered in all this: average selling price and regional distribution. 

Nikon has mostly concentrated on selling high priced models lately, and for good reason, the margins are better. Moreover, the low cost DSLR market is the one type of camera sale that is collapsing, and Nikon, like Canon, built a huge volume there. Despite the unit volume collapse, Nikon executives have pointed out that Nikon Imaging has returned to profitability on an operational basis, and I believe that's due to pushing higher end models over lower cost ones. Meanwhile, Nikon also appears to be distributing more of that high-end product into the markets whose sales ticked up faster after the initial pandemic-induced drop. 

As it turns out, both those things were probably a lucky choice on Nikon's part. A number of electronic parts used in digital cameras are in short supply now and constraining production for everyone, not just Nikon. So, which would you rather do: (a) use the few parts you have on hand for higher priced models that are selling well, or (b) use up all your parts quickly trying to chase market share?

Personally, I'm not worried about Olympus or Nikon. The market has forced them to reevaluate and focus. Both have jettisoned non-performing assets and tightened their belts, and Olympus Imaging, in particular, seems to have appropriate capitalization for its size for a change (Nikon always has). 

Canon is the one that's still trying to work through things, in my opinion. They are undergoing the same consumer DSLR collapse as Nikon, but they also have incompatible mirrorless offerings that long term must be resolved. The RP versus R5 introductions were almost the marketing equivalent to whiplash, and I'm not sure either is quite the product that Canon needs in that position. 

Sony's growth spurt is basically over now that everyone is playing in the mirrorless pond. And I still don't understand Fujifilm's model strategy; it's getting quite confusing, actually. 

Personally, I think the future for all the camera manufacturers lies in getting their product lines in order. You need a range of models—probably no more than six—and you need to have them reasonably differentiated in both features/performance as well as price. I don't think the <US$1000 market is sustainable, yet much of the current volume, particularly from Canon, is under that. Multiple mounts is not really sustainable. Multiple formats is not sustainable unless one is really high end (e.g. Fujifilm's APS-C and MF split is probably okay).

Call it this (using full frame):

  • Entry US$1000 — examples: Canon RP followup, Nikon Z5 eventual price
  • Performance Entry US$1500 — examples: Sony A7, Nikon Z6
  • Mid-range US$2000-2500 — examples: Canon R6
  • Pixel-density mid-range US$2500-3500 — examples: Nikon Z7, Sony A7R
  • Pixel-density high-range US$3500-4500 — examples: Canon R5?
  • High end flagship US$6000+ — examples, Nikon Z9, Sony A1

Hook someone low, eventually get them to move up. 

The problem with doing more models than six is simple: volume isn't particularly high for any remaining niches. When you make a specialized camera, say the Sony A7S, the problem is that you may not generate enough new volume to justify the ROI. That said, the two companies that can most easily justify such cameras would be Canon and Sony, as they are major video players who might attract crossover customers. Likewise, higher end DSLRs would be another short-term niche that two companies might be able to justify making a model or two for (e.g. Canon and Nikon). 

____________

Bonus: nothing has changed in my opinion of what Nikon, for example, should do. They're the only ones positioned to be able to still profit off a camera like a D500 or D850 followup, however minor such an update might be. I'm pretty sure they should create such followups just to milk the high-end DSLR market a little longer while the mirrorless line gets fully fleshed out. And I still believe Nikon should make Z DX, though not below the Z50 level. What's needed is the D500 equivalent (DX version of the flagship, which now would be the Z9, so call it the Z90), plus maybe four or five key lenses (wide angle and mid-range zoom, basically).  

One final thought... Much of vitriol and exaggerated speech on the Internet about success/failure in the camera business is just misdirected anger. People are artificially trying to put "good" versus "evil" labels on everything these days, and that has spilled over to all debate. Reality is much more nuanced. The economics currently say that all of the top six or so camera companies will survive, though almost none of them will be the same size as before. Certainly the economic situation could change, but today, as I write this, neither Nikon nor Olympus (cough OM Digital Systems) is going to go away. 


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