What has been Canons retail strategy in a rapidly changing Indian marketplace
We recently launched our 100th Canon Image Square (CIS) outlet in Bangalore that will provide our customers an interactive and informative buying experience. Now we are looking at a format that can fit into smaller cities. The bigger thing for us is how do we rejuvenate, revitalise and reconfigure this whole indulgence of photography in the current times. The digitisation change has been so rapid that smart phones have similar capability. The biggest thing is to provide customer experience with any new technology or application.
That was the idea with CIS when we started 29 months ago. Today, it garners a revenue of R172 crore contributing about 17% of our camera business and by 2016 we expect this number will double to R340 crore. One of major payoffs has been that we have been able to get higher value creation and secondly the products are sold at higher average selling price. For example in the digital SLR category, the selling price is 21% higher than other retail formats while in compact cameras segment it is 34%. This does not mean that the products are priced higher at the these stores but customers are buying more high end products.
How is this retail strategy helping Canon
These platforms are built to create future opportunity for Canon. One of the greatest thing about photography is that it builds creativity. We are now trying to create things like how we can create special effects and differentiate from capturing photos through phones. The camera industry in India is about R4,000 crore per annum with R2,000 crore being digital SLR and the rest the compact category. The digital SLR is growing at 15% while R1,000-crore functional camera category is growing at 20%. However, the entry level camera segment is declining. So, we have increase the speed of reconfiguring. Though, I must say that 2013 will not be a pleasant year with consumer sentiment having fallen due to macro issues, but we are building the foundation blocks for future opportunities.
What impact will technologies like smartphones, broadband, social networking have on the camera market
Earlier photography had only one dimension: capture, print, see, show and store. This underwent a sea change when digital era came into being. Today with advent of smartphones, social networking, higher youth consumption, infrastructure like wifi, broadband, 3G, every part of business is reconfiguring. It has created a new dimension where capturing and sharing of photos has been taken over by smartphones.
Other dimension of photography like better devices, optical zooms, video clips, which requires medium and high-end cameras has also been growing at 15%. This is the kind of opportunities Canon will be looking at. Today, people in major cities are buying equipment costing up to R4 lakh where they are not just capturing photos. We are not so scared about what is happening with smartphones, they have created some jolt, but we are reconfiguring. This is the market reality but we will redefine our proposition to the customers.
What about Canon Indias expansion plan
There will be higher growth in tier 2 and tier 3 cities. Today with the 100 CIS stores, 50% of our business is coming from top five metros, rest from tier 2 towns but this is shifting. We now plan touch 150 stores by this year end and add another 250 next year. There is a strong latent demand in the tier 2 cities where photography besides being a hobby it is also being used as a source of livelihood.
What investments will Canon make in India
Our biggest component of investment is in R&D. In the last 10 years, there has been rapid changes in technology and we have to make a compelling proposition to the customers which is irresistible. Our second biggest investment is marketing and mass communication and lastly we want to create a definite last mile experience at our retail outlets.