My compact digital camera takes good pictures, but I want to upgrade for better performance, said Izumi, a 50-year-old designer, shopping for digital SLRs at electronics retailer Yodobashi Camera in Tokyos bustling Shinjuku district.
Digital SLRs are high-performance cameras that can be used with new interchangeable lenses or many of the millions originally sold for analogue SLRs. They generally offer more options than point and shoot models, which have a fixed lens.
Whether more consumers like Izumi upgrade to a digital SLR could have big implications for earnings at SLR producers such as Nikon Corp, whose profit margins have been battered by severe pricing pressure at the low end of the market.
It may even help tilt the digital camera war in favour of Nikon and Canon Inc over electronics-cum-camera makers like Sony Corp, which have done well in compacts but donT have the lenses to justify a push into the SLR realm.
Analysts estimate digital SLRs have the potential to yield gross profit margins up to four times those of compact models, whose prices have slumped 15 per cent over the past two years and are expected to drop further this year due to fierce competition.
Camera makers have been trying to stem price falls by launching new compact models offering better features and higher performance, but the effectiveness of this strategy is wearing thin, said Nomura Securities analyst Tetsuya Wadaki.
The digital SLR is the final segment of the market where such a value-added strategy is effective, he said, acknowledging that digital SLRs could be the industrys final sweet spot for juicy profit margins.
They are called single-lens reflex cameras because a single lens is used both to view and photograph the subject. A compact camera will typically place the view finder above the lens, which can result in parallax error, or an off-centre shot.
Targeted at professionals and serious amateurs, digital SLR shave grown steadily in recent years but have not achieved the volume expansion seen in the compact market where shipments nearly doubled to about 50 million units last year.
The biggest obstacle has been price. A typical digital SLR retailed for at least 200,000 yen ($1,875) in early 2003, about seven times the average price of an ordinary digital camera.
But Canon shot life into this high-end segment last September when it introduced its EOS Kiss model known as EOS 300D In Europe and EOS Digital Rebel in the Americas for 120,000 yen.
That undercut everyone and made it the first digital SLR cheap enough to achieve anything close to mass-market appeal.
Canon quickly captured 70 per cent of the market in 2003, leaving Nikon to wallow in second place with nothing in the Kiss price range.
Nikons counterpunch came six months later with its launch of the D70 On March 19. Like the Kiss, Nikons camera offers resolution just north of six megapixels, works with some old SLR lenses, and retails for about 120,000 yen.
Early indications are good for Nikons new digital SLR.
Electronics retailer Bic Cameras West Shinjuku outlet sold out of the D70 over the weekend. It said it would be unable to ship the camera by mail for two weeks and was unsure when its in-store stock would be replenished.
Pentax Corp, Olympus Corp and Fuji Photo Film have also launched digital SLRs, but analysts expect Canon and Nikon, which control about 60 per cent of the film SLR market, to remain dominant in the digital era as well.