The launch of the Nikon DL series of cameras has caused a significant amount of angst among many Nikon 1 owners. Many internet chat rooms seem to be brimming with opinions on why the Nikon DL product line will replace the Nikon 1 system. Many of these viewpoints are expressed from a photographer’s perspective in terms of specific camera features and potential image quality. Putting all of that aside, if we look at recent CIPA statistics and market segmentation, the idea that the Nikon DL series will replace the Nikon 1 system appears illogical.
To put this article in context it is important to note that there is only so much that can be done with statistics that are available to the general public. No doubt the various camera companies have a wealth of proprietary consumer research that they use in their strategic planning…but let’s at least look at what the CIPA information that is accessible can tell us.
The first issue is that built-in lens cameras are defined by camera manufacturers through CIPA as a completely different product category from Nikon 1 which is an interchangeable lens camera system. These definitions are likely based on customer segmentation research done by various camera manufacturers and some concurrence among them that these are different market segments with discernible attributes. In fact, CIPA has 4 different sub-categories in the built-in lens camera market segment:
- less than 6X zoom
- 6X to 10X zoom
- 10X to 20X zoom
- more than 20X zoom
With many competitors like Panasonic, Sony and others already marketing higher end cameras in the built-in lens camera segment one could justifiably view the Nikon DL series as the company’s response to those competitors.
Nikon’s initial pricing on the DL series appears to be about $50 to $200 below similar competitive built-in lens camera models. This looks like penetration pricing targeted at a specific market segment where Nikon was not well represented in the past… i.e. the built-in lens camera market.
NOTE: Click on graphics to enlarge.
When we look at the average unit shipment value of built-in lens cameras we see a significant per unit rise in value starting in 2012. This coincides with the introduction of higher end cameras into this segment by Sony, Panasonic and others. Logically it makes more sense to judge Nikon’s launch of the DL as the company’s foray into the premium end of the built-in lens market, than as a replacement for Nikon 1.
In some recent interviews with Nikon executives by the camera press, they have stated that the DL series is targeted at DSLR owners. This makes sense when we look at the compatibility DL cameras have with Nikon Speedlights, and the fast f/1.8-2.8 zoom lenses integrated into the DL18-50 and DL24-85. The use of standard SD cards also supports this targeting.
I know that many Nikon 1 owners take their photography seriously and have been clamouring for more 1 Nikon fast prime lenses and the kind of flash compatibility now offered by DL models. I received some of these types of recommendations from readers when I solicited their views some months ago. We need to remember that enthusiasts, semi-pro and pro shooters represent only a small portion of the entire camera market and the needs of these specific photographer niches are often very different from broader consumer markets.
Let’s have a look at the composition of the 35 mm (full frame) and smaller sensor lens markets with some CIPA data for 2015.
As we can see from the above graphic, the actual use of prime lenses by owners of smaller sensor cameras (i.e. smaller than 35 mm format) is quite minimal at only 6% of units. This compares to 36% prime lens penetration with users of 35 mm (full frame) format cameras.
The chart above clearly shows that owners of smaller sensor cameras prefer zoom lenses by a very wide margin. In fact, 57% of smaller sensor lenses fall into the ‘standard zoom’ category…basically kit zoom lenses.
Based on worldwide camera industry statistics it is perfectly understandable why Nikon only has a limited number of prime lenses available for the Nikon 1 system. The buyers in the small sensor camera segment exhibit very different buying preferences than folks who own 35 mm (full frame) format cameras.
I appreciate that many readers may be thinking that cropped sensor camera owners could be buying full frame prime lenses and using them on their cropped sensor bodies. So, let’s look at the entire lens market and how it splits up between prime lenses and zoom lenses with CIPA data.
Once again we see that when it comes to the purchase of interchangeable lenses the market for zoom lenses dwarfs that of prime lenses by a ratio of about 5.6:1. Roughly 85% of the entire, worldwide interchangeable lens market is comprised of zoom lenses.
The thought that introducing a plethora of fast, prime lenses will somehow help the sale of Nikon 1 cameras does not have any statistical foundation.
Buyers in the smaller sensor camera category act differently than those in the 35 mm (full frame) market. They prefer zoom lenses 93% of the time. Pushing prime lenses on this market is basically trying to force-fit a full frame buyer’s mentality onto a completely different market segment.
It would be far more logical for Nikon to give their full frame owners a DL product that provides them with the flash compatibility and the prime-like fast glass they want, than it would be to waste R&D dollars producing more primes for Nikon 1. Especially when one considers that the small sensor camera market buys zoom lenses 93% of the time.
We all know that the digital camera market has been in a significant decline since 2012 in terms of overall unit volumes.
Let’s think about the chart above for a moment. We can see a precipitous drop in the built-in lens camera market and a much more stable unit sales curve for the interchangeable lens market.
How logical is it that Nikon would deliberately launch the DL into a declining market segment (built-in lens cameras) with the express intent on cannibalizing Nikon 1 sales in the reasonably stable interchangeable lens camera segment?
Let’s look at the camera market a bit closer.
We can see that the non-SLR (mirror-less) segment has more than doubled since 2012 in terms of a percentage of total unit sales, ending 2015 at 9.5% penetration. Now let’s look at shipment value.
The chart above shows that the non-SLR (mirror-less) camera segment represents almost 17% of shipment value and has been steadily growing.
Again, is it logical that Nikon would abandon an existing product line that is positioned in a growing market segment? Would it be logical for Nikon to then deliberately try to migrate those customers into the declining built-in lens camera segment? Especially when that declining segment is also shrinking in terms of its relative share of shipment value?
Let’s now consider cross selling opportunities.
The past decade has seen a very dramatic shift in the composition of the digital camera market. Where the built-in lens camera market used to comprise the lion’s share of shipment value (almost 73% in 2006) it collapsed to only 23% by 2015. Interchangeable lens cameras are now over 43% of shipment value and interchangeable lenses are at almost 34%.
Would you kill a product line like Nikon 1 that is in a segment that is growing its share of available revenue (i.e. interchangeable lens cameras) and also provides you with cross selling opportunities in the interchangeable lens market? Especially if you don’t have any other product currently available in that segment?
Or, would it be more logical to enhance the Nikon 1 product, improve marketing, and try to better capitalize on the opportunities in two market segments that are growing in terms of shipment value importance?
Ultimately only time will tell us which way Nikon is going.
Much will depend on the unit volumes they can achieve, and ultimately if they can make money selling Nikon 1 products…or DL products for that matter.
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