It was in 2007 that Japanese imaging giant Nikon set up its India operations, which currently contributes to 1 per cent of Nikon Corporation’s global sales. While the brand has a strong presence in the D-SLR (digital single lens reflex) segment, in the point-and-shoot (compact) camera segment, Nikon trails market leader Sony. To click better with consumers this year, the Rs 450-crore Indian operation has lined up a slew of affordable product offerings and hopes to improve its service network. In conversation with Preeti Khicha, Ichiro Terato, executive vice-president and CFO, Nikon Corporation, and Managing Director Nikon India Hiroshi Takashina share their plans for India. Edited excerpts.
According to IDC estimates, the overall Indian digital camera market in 2010 was 2.68 million units. Within this, the D-SLR segment is still small — 0.13 million units. As segment leader (55 per cent market share) how do you plan to grow this segment in India?
Terato: Compared to markets such as the US, Japan and Europe, the D-SLR segment in India is rather small — less than 5 per cent of the overall market. Globally, this segment contributes around 10 per cent. So we strongly believe that there is a lot of opportunity and we are taking necessary steps to grow the business.
First, we are doubling our advertising and promotion budget from the Rs 62 crore we invested in 2010. Second — and this is something we kicked off in 2009 — we have set up D-SLR zones where customers can touch and feel our products and understand the strengths of a D-SLR camera. Going forward, this will help grow the segment as a whole as customers become familiar with the product. Third, given that many people do not know how to use a D-SLR camera, we opened a Nikon school in Gurgaon (near Delhi) in September 2010 to impart quality education in photography. In March this year, we commenced operations of the school in Mumbai.
In the point-and-shoot (compact camera) segment, you are second to the leader Sony which has 25 per cent market share. If you say India is important to you and if it is largely a compact camera country then you would need to take some bold steps to make your presence felt in the segment…
Terato: In markets like the US, Italy and Spain we are the leader in the compact camera segment and we hope to attain the No. 1 position in that segment in India as well. To reach there, we are undertaking several steps. As mentioned earlier, we have doubled our marketing budget and we will aggressively promote the Coolpix range in India.
Also, we are focused on improving the quality of after-sales service which we believe will help boost camera sales. Currently, we have four service branches — at Gurgaon, Bangalore, Kolkata and Mumbai — which we will not expand for the time being. We have also established 20 service centres — four our own and 16 associated authorised service centres. Technical training of our associates is done by the company and they use the same equipment used by the company. We will expand our network of service centres to 25 this year.
To cater to customers in Tier 2 and Tier 3 cities, we’ve started collection centres, where consumers can deliver their products for repair. By the end of March 2011, we’ll have 21 collection centres and propose to increase the number to 40 by end of next fiscal. We also plan to increase our market share through the introduction of better products. Since India is an important country for us, we’ll introduce products in line with consumer requirements.
How would you assess the performance of the camera market in India this year?
Terato: In fiscal year 2011, we believe there will be more than 50 per cent growth over last year. For the compact camera segment, the expansion will be 30-40 per cent and in D-SLR we predict it will be more than 50 per cent. Compare this to fiscal year 2010, when there was a 40 per cent growth in the compact camera segment and 100 per cent in D-SLR over the previous year. This growth is in line with the growth of the economy.
You said earlier that India being an important country for Nikon, you will introduce products in line with consumer requirements. Are you developing products specifically for the Indian market? Have you incorporated any insights gathered from Indian consumers for your global line-up?
Terato: We do not have any region-specific models; however, we are studying what kind of products Indian consumers want. In our current line-up, we have the entry-level L21, which is a reasonably priced camera — in fact, the first camera introduced by Nikon at a price point below Rs 5,000. We introduced this price range as many Indian customers who are first-time buyers look for an affordable product. Also, India is a colourful country and Indian consumers like to own colourful cameras. Hence, in our current line-up of Coolpix S-3000, we have eight colours, the largest colour range offered by any camera company.
What have been your learnings from the Indian market?
Takashina: I have been in India for two years and before I came here I was told that India is a very price-conscious market. However, I was surprised to see that Indians very strongly value the image output quality. Indian people love photography and this was way beyond my expectations.
With the growth of smart phones and sophisticated cameras on cell phones, do you perceive a threat to the market for point and shoot cameras?
Terato: Ten years ago when the trend started, we were a little worried. Today, the data clearly shows that both segments are growing and there is no effect of mobile phone expansion on the growth of compact cameras. The usage of photography is different for mobile phones and compact cameras. People use mobile phones for instant use. In compact cameras, the image quality is different. In mobile phones, the image sensor is very small; so the picture quality is compromised. In fact, mobile phones are actually supporting the growth of our market. If people start enjoying shooting from smartphone cameras they will surely upgrade to a compact camera over a period of time.
Is the fight in India still limited to the mega-pixel level? Are you doing anything to educate consumers to go beyond the ‘mega-pixel’?
Terato: Yes until now, most competitors have been upgrading the mega-pixel level of the cameras. Globally, and more so in India, many consumers still believe that higher mega-pixel means a better camera. This is a myth. Picture quality is not in line with mega-pixels and depends on the total development of a camera, including the image sensor, lens and software. A lot of customers do not understand this and we need to educate such consumers.
What sort of impact does image sharing on the internet have on camera manufacturers like Nikon? As a manufacturer are you doing anything to facilitate sharing of images or making cameras a part of that ecosystem?
Terato: We understand that the form of photography is changing. Earlier people took prints, now with digital cameras, people prefer to view photographs on a computer screen or even on television. We are open to coordinating with new media.
You had introduced cameras with the wi-fi facility. How has that product fared?
Terato: We were pioneers of wi-fi in cameras. However, we have discontinued the feature from our current line-up. When we introduced it five years ago, it was too early and was not appreciated. That is why we are postponing the wi-fi feature in any of our new models. The functions that you can put in a product are limited and hence we removed it due to priority issues. In the future, if we see a demand for wi-fi we might bring it back in our cameras.
Backup of images is a concern for many users. Will you bring the image sharing and storage service, my Picturetown, to India?
Terato: We do not have immediate plans to introduce this facility in India.
The “prosumer” category is a priority segment for most camera manufacturers. What are your plans for this segment?
Terato: The prosumer or high amateurs market in India is growing. We are currently targeting this market through our P-series in compact cameras. This year we have expanded the P-Series line-up. Last year, we had P6000, P7000 and P100. We recently announced P500 and we will be announcing the P300 shortly after March. Simultaneously, we are also focused on inviting prosumers to upgrade to our D-SLR cameras. People often perceive D-SLRs as heavy and expensive. We want to change that perception and our communication will be focused on that.
In 2009, you went from two national distributors to 30 regional distributors? How has that affected overall sales? Going forward, what will be your distribution strategy to penetrate deeper into the Indian market?
Takashina: We strongly believe this was the right decision and our market share has grown considerably. We do not plan to change the current distribution system in the near term. We already have 30 distributors with presence in all states in India.
Last year we established 40 touch-and-feel zones: 15 D-SLR zones and 25 Coolpix zones. By end of March, we are planning to expand this to 80 — 28 D-SLR zones and 52 Coolpix zones. This is a shop-in-shop concept where we tie up with photo dealers or consumer electronic dealers. We haven’t yet introduced this concept in large format retailer chains like Croma.
What about exclusive stores?
Terato: Not only for India, but also globally, Nikon does not have a policy of exclusive stores. We prefer to be in multi-brand outlets where we can strongly differentiate our strengths, where customers can compare our products with others. However, in Japan, we have started antenna shops, which are directly handled by Nikon. We have three antenna stores and it allows us to learn first-hand about customer requirements. We do not have plans to expand such direct shops in other countries.
You have dominated the lower and mid-market segment in India. Is it a matter of policy? Going forward, will you introduce your bleeding edge products that are right at the top end of the market?
Terato: We have no intention to only stress on entry-level models. But we continue to stress on cost reduction because that will ultimately benefit the end consumer. Even in D-SLRs we have introduced affordable models.
Currently, all your products are imported. When will you set up a manufacturing unit in India?
Terato: Yes, not all major components are sourced from India. We do not have any partnership currently but we are studying the possibility of tie-up with an Indian software house. In the case of manufacturing, if the market expands and we believe it is better to produce in India, we might consider it.
What is your strategy to tackle the huge grey market and how much does it affect your sales?
Takashina: We are taking measures against small importers. We have just reduced our prices to minimise the gap between grey products and off-the-shelf products. To give more benefits for off-the-shelf products, we are offering free SD (secure digital) memory cards and camera cases. We also offer two-year warranty on our products which grey market products do not have. With these initiatives competition from grey products has fallen drastically.
