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Nikon Q&A: low inventory, high profit margins, cost cutting, fewer models

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Extremely low DSLR inventory,  shift to new products that will have higher profit margins (that probably explains the Df price), cost cutting, achieve profitability by reducing the number of models - this is how Nikon describes the current situation and their plans for the rest of the current financial year ending March 31, 2014:

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

A: 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.

Q:What are the prospects for the interchangeable lens-type digital camera?

A: 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.

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

A: 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.

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  • Suck it up !

    ” High profit margins “. Therefore, in a recession, Nikon increases prices. We need to suck-up for Nikon to make high profits. Manufacturing costs are about 5-10% of the retail cost. The profit margins on the $1700 58mm Nikkor lens must be extremely high. The real manufacturing costs of the 58mm 1.4 are not much higher than the 50mm f/1.4. The price Nikon charges for a GPS receiver (GP-1A @ $280) is extremely high, as you can purchase a Nokia (LD-3W) GPS receiver on eBay for $25, with battery and charger. a GPS receiver does not cost $5 to add to a camera during manufacture, but the consumer needs to pay $280 if you want this feature in a DSLR camara. Nikon want to make an additional $300 from consumers of a $8000 D3x, as the $5 GPS receiver chip is a cost cutting method.

    • Sahaja

      Yes, sales are going down so they boost prices to maintain their income and profits.

      Who gets hit most? – their most loyal customers, many of whom cannot afford to switch to another camera brand

      • catinhat

        I think they will get burnt. Raising prices in a sluggish market is a recipe for fewer sales not more.Ultimately, the market will dictate the sustainable price. We’ve already seen a lot of discounts and promotions. I would expect many more in the future.

  • TomTom

    My 85mm AF-D 1.8 focus is scratchy (i.e. needs lubricant), I had to replace my 35mm 1.8D with a new one, due to recurring oil on the blades (common problem), my daughters lens was defective and had to be replaced. My old AI / AI-s lenses, which are used and abused much more, are still solid.

    I don’t know about other’s experiences, but I will not buy another Nikon product while I perceive their quality lacking. Consumer’s Reports shows more problems with Nikon’s than other brands. So, as I have decided to finally go digital, I am going to stick with Fuji or Olympus.

  • 103David

    Truth of the matter, the majority of people really don’t understand the balancing act that business entails. Developing a viable product, balancing profitability vs market share, aquiring, rewarding and retaining human resources, supply and inventory control, promotion and sales, and accountability. It’s a balancing act that has to have equal parts to work. It’s amazing the whole process even happens at all, and without it, we’d all still be gnawing bones around the campfire.
    And don’t think for one split second we wouldn’t be.
    I have neither the time nor inclination to educate anyone on basic economics, be resign yourself to possibly less access to Nikons, Canons and the like from your local Costco or Walmart. Overall, it’s probably a good thing.
    Get used to it. Get over it.

    • Mansgame

      Right…because we’re just idiots who somehow make enough money to buy $3000 cameras with $2000 lenses without knowing anything about how business works. our money just magically shows up in our wallets.

  • whisky

    nikon is restructuring. that’s a good thing because the status quo threatened their position and viability.

    the Dƒ is a collector’s piece, and targeted at bigger egos. Leica makes their bread and butter at this exclusively. why shouldn’t Nikon be allowed this indulgence?

    the D400 is a backward looking proposition. first of all, outside of north america, and pockets of europe, it would have a hard time competing with alternatives. especially a pro build D400 that’s likely to cost as much or more than a D610/600. for only some hundreds of dollars more, one can buy a top of the line D800 which is both an excellent Fx and Dx performer. so where would a D400 fit? it would be a limited niche product, possibly raising the cost of production even more.

    i could be wrong, but nikon and canon are typically much better at reading tea leaves than their customers. if they felt their was a future in a pro-line of Dx cameras, they would have probably acted by now.

    i do agree with their strategy of streamlining offerings, reducing inventory, releasing innovative new product — like the underwater Nikon 1, the 58mm “Noct like” lens, the Dƒ, or other announced product — and charging a premium for such limited niche appeal products where warranted. i’ve got a feeling we’re only seeing the tip of innovation, and a lot more niche appeal is possible — including a D400 — if nikon is convinced the market will pay a premium for niche appeal. JMO.

    • zoetmb

      You price the D400 exactly as the D300 was priced: at $1700, although because of how the D7100 and D610 are priced, $1600 would be more ideal. Nikon should be able to afford to do this because the USD$ has risen against the Yen 24% in the last fiscal year.
      That would give you in the mid-line:
      D7100: DX with amateur controls $1200 list, $1147 street
      D400: DX with pro body $1700 ($1600 ideal price)
      D610: FX with amateur controls $2000
      Df: Niche retro FX: $2747
      D800: FX with pro body $2800

      And actually, if you look at the above, Nikon could actually use a body at about $2400. What would that body be? Might be a modern, small, lightweight body with controls and construction somewhere between the D610 and the D800. You need to have something at every price point, or consumers look elsewhere if they happen to be at that point.

      And while you make margin in niche, you don’t necessarily make large earnings, by definition.

      • catinhat

        Df is not very likely to stay at $2747 for too long, so $2400 price point is probably where it will end up in a few months,

    • KnightPhoto

      Many of the prospective D400 buyers I know already have a D800. Some have a D4. It’s not about the price of the nearest FX (that is immaterial to this niche).

      And by all means if charging a couple three hundred more for a D400 due to it is a collapsing niche, go right ahead if that’s what it’s going to take. Just make it good.

  • Duncan Dimanche

    Sounds good to me as long as they make good bodies… wait they do !! so it’s fine :)

    What a pain for those Canon users with ALL those new bodies popping out everywhere !! M , 1000D , 70D, 700D, 7D, 6D 1ds, 1x 100c, 300c, 500c , slow it down !!!! make one good body that will last 2-3 years !

    ps juste bring video to your DF !!!! hhaha

    • Mansgame

      They do? Did the D600 not have oil issues? Was that just a dream that I sent my camera back to them 3 times?

  • Mike D

    Ironically, I see a lot of Nikon low end DSLRs at Costco. You don’t make money selling to Costco. I know, I work in a different industry and sell a lot of product to Costco. As a manufacturer, you sell to Costco to maintain production volume and hopefully make money on the higher margin, differentiated product you sell to more upscale retailers.

    • Can’t Believe It

      I just took a business class this summer and the authors of our textbook would be shocked to hear that. They say that you need to make money on everything. But reality doesn’t always work well in theory I guess.

      • PSAGuy

        Your biz professors should tell you that “making money” somethings means structuring a product line to not “lose money”. If your production runs cannot be supported by sales, you must keep loading up to keep incremental costs down.

        • Can’t Believe It

          Wow. It’s so rare to find someone with business sense in a photo forum…. so let me ask you another one. Should I apply that thinking to my freelance photo/writing business? IOW, should I take the break-even jobs (jobs that cover my costs but don’t make much of a profit) just to keep my costs for the year down? A lot of photographers boast that they NEVER take jobs that pay less than their day rate…. but is that stupid?

  • Sahaja

    “we expect a shift from older products to newer products that have higher profit margins.”

    In other words, we are going to raise our margins on new releases

    • Erik

      Better buy the D800 and D4 now. Newer versions will cost much more.

      • Rowdy Yates

        Yup. Sounds like they have no intention of competing with mirrorless, while all the baby-boomers with $$$$ to spend (and sore shoulders) have other ideas. Clueless.

  • Kaos

    So i guess soon we will see te D620 with a price hike and no real difference from the older D610 that is also the same as D600

    • Mansgame

      They’ll bring the dust back and call it “Pure photography”

  • Kaos

    Why not go the Leica way and make the Df black and white only and charge 7,000$ for it ?

    • Erik

      If it has interchangable focus screens (optimised for manual focusing) and a good monochrome sensor it could actually be quite interesting.

    • Rowdy Yates

      Good one. Compare Nex-7 files w/Leica’s M9 I.R. raw samples (convert to b/w). Me think the $7000 will see the magic (if told which was which first).

  • Dpablo undiltered

    I think people here react without thinking this much. Of course cost cutting is needed because people keep trying to release bottom end dslrs for a lower and lower price point. The Nikon 1 stuff is probably also having to compete at a lower price point. That’s not really a bad thing.
    They want to make fewer versions means probably that they want to make the 3000, 5000, and 7000 further apart. So maybe the new Nikon will be a 7200 and not a 9000. They also might be talking about compact cameras when they talk about cost cutting and fewer models. Remember we think of them from one perspective but that is only one of many perspectives they are dealing with.

  • joyless

    nikon sud definitely add a white cam in slr lineup to up the sales, burn

  • SpartanZero

    I think nikon is going to learn the hard way. Remember V1 pricing? That didn’t shift many units until fire sales. Now the Df. Waaayyyy too expensive and demand is low. If nikon keeps pricing their products like this then other companies( Sony et al) will see more customers and a bigger market share, whilst nikon will sell less units and will have to keep increasing prices to maintain profit margins. Not a bright rosy prospect.

    • anon

      That’s not for Nikon to learn, that’s for the early buyers. Nikon pricing policy is “price it high at lunch, discount big later”. The lesson is “Don’t be an early buyer”. Wait for the price drop. It will happen sooner than later.

  • 250ninja

    Nikon has disappointed me for the last 3 years. After shooting with Nikon bodies for 30 years (EM, 8008, 8008s, N90, N90S, F4, F5, D70, D100, D200, D300, D300s, D3200, D5100, D7000) I gave the Canon T2i a try due to the price, specs, and video capability. Since 2010 I have bought the T2i, T3i, 60D, 70D, 6D, and 5D3. I have reluctantly sold all my Nikon bodies and lenses over the last three years. What I’ve learned from this and what Nikon should know:

    Nikon body and lenses resale value is lower and secondary market is much smaller than Canon’s.

    Nikon has not released a compelling new camera to make me stay with their brand and buy new camera bodies after the D3200. I briefly considered getting a Df until I saw the price and thought, would the image quality be any better than my 6D or 5D3? No, so I won’t be buying one. Still a cool camera, but even me who has shot Nikon since 1980 never had a body with those dials! Even the 8008 had a lcd window and more modern ergonomics. My EM didn’t have shutter speed dials but had the ISO dial. I can’t imagine that the market for the Df will be very large which only makes me wonder if they would have put that effort into a D400 it would have been released years ago.

    I would have bought a D400 right away, but they never released it. I loved my D300s, but after using the T2i, I only shot with Nikon to try them out and ended up selling them (D3200, D5100, D7000).

    The way Nikon handled owners of D600’s with the sensor spot problem convinces me not to buy a new body. Nikon should have a trade in policy so the D600 owners with the sensor problem get a free D610

    I shoot video a lot now, probably 50% of the time and Nikon lagged behind Canon consistently the last 3 years. While Nikon has not innovated or even caught up to Canon, Canon has a whole line of Cinema cameras now.

    I wonder what will happen to Nikon. If they lost a loyal customer like me, they are in trouble. The compact market will shrink to almost nothing as smart phone cameras get better and better and DSLRs get small like the Canon SL1.

    I am very happy shooting my 70D and 6D though I hope Nikon will release a body compelling enough for me to buy it.

    • RBR

      Thanks for sharing your experience. There are probably more of us than can be imagined wondering what we will do if Nikon continues to disappoint us.

    • http://www.gradyphoto.com/ Pete Grady

      They’re just cameras. I took a workshop from W. Eugene Smith years ago. A young woman in the group came in one week with a new Nikon F3. She went up to Gene to show him, and his comment was “Oh, you got a new camera. Got any new ideas?”

    • MrSkelter

      Canon values are higher because Canon lenses on average cost more. There is also a larger market as Canon is #1.

      You have bought 6 bodies in three years. You’re so far out of the normal market you can’t see it. Though you clearly love photography your instincts about it are wrong. You have bought the cheapest bodies and the second from Canon’s top of the line.

      Before that you bought 15 Nikons in 30 years. That’s similarly unusual.

      As for the D600, if the problem was as large as those on the forums claim Nikon would have done more. They ignored it because they could. Much like Apple’s ‘Antennagate’ in reality, it’s a storm in a teacup. I’m not advocating the approach but the scandal and failure rate people here claim is a myth.

      Nikon aren’t a video camera company. That said in Hollywood (which I know very well indeed) Nikon lenses are the choice. Not Canon. Stanley Kubrick shot his movies through Nikon glass. If Nikon chose to make a camera for that market it would do very well.

      Meanwhile Canon are also in bad shape and many Canon switchers decry the lack of cameras with a photographic emphasis. Meanwhile the 5D3 is outperformed for video by m4/3 unless you hack the firmware.

      Nikon’s answer isn’t listening to people who buy three bodies a year (how many lenses do you own?) and won’t come from following Canon downhill.

      • RBR

        Sadly, Nikon glass is slipping from the scene in film/video as more of the cameras are configured for Canon glass. There are also other “T” lenses which are more optimized for use with film/video.

        I don’t know about the myths, but it is true that, in the internet age, even a comparatively small number of failures can generate an enormous volume of “reports.”

        P.S. “You’re holding it wrong!” ;-)

        Cheers

        • MrSkelter

          I’m writing from a movie set.

          The truth is that real movies – not tiny productions for the web – don’t shoot much Canon. Ever.

          RED is where it’s at for ‘cheap’ and that’s mounting professional glass. Remember it’s all rented and the actually cost is immaterial. Canon lenses aren’t anywhere close to Schneider, Leica and the real stuff. Nikon isn’t either in the modern world but the goodwill is there.

          Canon are used on the edges but when you get to professional environments they disappear unless you ned something to throw into a stunt and destroy.

          Even that will be in doubt when Panasonic’s GH4 arrives next year with 4K.

          Read the titles, they list the camera manufacturer at the very end. It’s not Canon. For digital Arri and RED are still killing it.

          That D600’s weren’t even recalled tells the size of the problem. It’s not that companies choose to do recalls that, damage their name, and cost money. They do it when they have to because the numbers add up. They never did for Nikon.

          We were holding it wrong and it happens on all phones. My IPhone 5 has an external antenna and there’s been no magic fix. We’re just being honest about the nature of the problem.

          However I agree. Nikon need to change. The answer isn’t a bigger chunk of a declining market. It’s a bigger, new, market.

          That means lots of stuff people here will hate (i.e. anything new).

      • Mansgame

        stop making excuses for Nikon, please. We’re having an adult conversation and your fanboyism is just non-sense.

        • MrSkelter

          Accusing me of fanboyism is an ad hominem attack. (You can also tell your English teacher that nonsense is one word son.)

          Canon are in trouble and the 5D3 does underperform the GH3 while running the factory firmware. People who buy three bodies a year are not the norm and the D600 problem was overblown.

          Find fault in that. I dare you – cretin.

          http://www.bloomberg.com/news/2013-10-24/canon-cuts-full-year-net-income-forecast-as-camera-sales-slow.html

          • Mansgame

            1. Canon has apologized when they made a mistake.
            2. Canon’s sales dip was only 6% while Nikon was 40% They are not in trouble, Nikon is.
            3. D600 still has dust.

            • MrSkelter

              1. You’re pretty sensitive huh? As I explained, corporations are motivated by money to make apologies. Not a sense of decency. Canon must have had something significant to apologize for. Nikon didn’t.
              2. Now you’re arguing with Bloomberg. Canon are at least a generation behind on sensor tech and can’t catch up unless they negotiate patents held by Sony and Nikon (the Nikon patents are why Nikon can force exclusive deals on Sony – Sony need Nikon tech). Additionally the low-end business that the phones are eating is much bigger for Canon than Nikon. Canon’s mirrorless situation is worse than Nikon too. Canon have plenty to worry about.
              3. Exactly – big whoop. It’s a problem, it’s unfortunate, it’s not the big deal people here pretend it is.

  • fjfjjj

    “when the economy turns bullish” LOL

  • PSAGuy

    A new D4 is in my plans right now. I was going to wait, but this announcement signals aggressive pricing ahead. Maybe it’s time to finally pull the trigger.

  • Enrique

    At the begining of the interview Nikon says that the DSLRs are expanding and by the end of the interview the market is shrinking. Which one is it, shrinking or expanding.

    Quotes:
    “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.”

    “We are adjusting production in accordance with the shrinking market.”

    • Captain Megaton

      Nikon logic: Expanding, so Nikon sells a lot of cameras outside of Japan, so sales become dependent on economic conditions outside of Japan, which in America and Europe are unfavorable, so Nikon sales are reduced accordingly.

      The English translation in the OP makes this hard to follow, but in a nutshell that’s what they are trying to say.

  • nukunukoo

    If they just release a D610 minus an AA with a wider AF range after the D7100 and then a pricier D400 instead of the Df (which could have been released next year), methinks they would have been on a roll…

    • T53

      Well said. My thoughts exactly!

  • dan

    rest in peace, unborn D400. Reading this I will not believe in you any more. And, Nikon, I will NOT buy a waterproof-multi-color-cased-Android-driven-whatever-thing instead.Sure not!

  • Smudger

    Last time around the way forward was to be more entry level gear…….now it’s bigger profit margins & cost cutting.

    Anyone else think that Nikon is lost in the woods?

    It aint that hard; make what folk want rather than telling folk that they want what you make and ignoring the folk who want what you won’t make.

    Oh, and if it’s not broken try to resist the urge to fix it.

    • http://www.gradyphoto.com/ Pete Grady

      It would be fair to assume that this blog would represent a good cross section of Nikon users. One could then assume that reading comments here would yield a fairly good sense of what Nikon users want. Well, I’ve been reading this blog for a while now and have concluded that…Nikon users want every conceivable feature in cameras. So, to state “make what folk want rather than telling folk what you make” is pretty naive. The marketplace for cameras is extremely dynamic and is influenced by many things. It’s not just Nikon that is grappling with this very complex and difficult situation.

  • MrSkelter

    If you want a D400 please stop.

    Your reasons for wanting one are fine but you must admit the market for expensive, pro, APS-C bodies is tiny. If not watch Pentax eat Nikon’s lunch because that’s what they’ve made with the (excellent by all accounts) K-3.

  • Dweeb

    Butthurt Nikon.

    Here’s where my money’s going next year, not on high margin backward D800s or what’s that new idiot retro camera they’re talking about regarding markup?

    http://blog.nicgranleese.com/2013/10/24/sony-a7r-review-for-architectural-photographers/

    Jap monopoly Idiots. Your lense mount means nothing to me.

    • dano

      Then why are you here? Idiot.

  • Mansgame

    You had someone from Nikon and those were the questions you asked?

    “Nikon, how can you sell a faulty product like the D600, never admit the camera had an issue, and you fix this non-issue with new D610 while ignoring all the thousands of people who spent $2100 on their faulty D610 and still expect customer loyalty?”

    THAT is what you should have asked.

  • Espen4u

    I AM | CLUELESS
    What does this mumbojumbo really say? More than they have to much inventory on hand, and that they hope to rise their margins in a even more competetive and shrinking market. CpA, Df and the 58 are all nice but at a pricepoint beyond what we as buyers expected, when compared to similiar products. They won’t save N’s bacons, because with high margins comes speckless performance (wich is left wanting by the way).

  • John

    They just really need to pull their finger out and listen. Stop pushing out stuff with “after thought” features.

  • John

    They just need to pull their finger out and listen, instead of pushing stuff out as an after thought

  • James

    I want a Nikon D400 already, scrap most of the other DX models and make that already!

  • jtan163

    Less models, less inventory and higher margins.
    If they want to try that shit, they might have to listen to the customers.
    I can’t see that working for Nikon.

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