There has been a lot of commentary on Ricoh Imaging’s announcement that they are focusing on online sales in Japan, but almost all of it has been ill-informed and some of it downright misleading. I want to explain some of the context and why I think it is a confident decision, not a sign of weakness.
I can’t keep this brief, so get ready for a bit of a long read if you have the stomach for it.
The Japanese retail environment
Asahiman on the other site made a brief comment that the retail business is Japan is about 20 years in the past. I know what he means. In the past 20-30 years it has been dominated by some giant chain stores, the most notable are Yodobashi Camera, Bic Camera and Yamada Denki, but there are more. These stores put most of the smaller electronics stores out of business in the 1980s and 90s. It seems their time may be coming too, as the internet takes over.
The relationship manufacturers have with retailers is very one-sided as far as I can see. Retailers take their margin (of course - nothing unique there), but they also seem to insist on undercutting the manufacturer’s direct sale price by 10%, even with the margin. By acquiescing to that, all it does is get some space on the shelves, but to get a prominent position in the store there must be some extra incentive (Olympus/OMDS always have prime location, and there is no way they deserve better placement than Canon on sales). The manufacturers also employ sales people and sales assistants to man the sales aisles so the store doesn’t have to. So the stores get a ton of concessions and at the same time make sure that the maker cannot offer a competitive price. The retailers have their cake and eat it. Of course, Ricoh is not in a position to talk about this publicly, but I’m sure it has been a thorn in their side and all manufacturers for decades.
Recently, Ricoh and other makers have been trying to get around this by offering other incentives on their own stores, such as longer warranties and loyalty points to make it more attractive, but the basic price has to remain without discount. Another way Ricoh tries to get around this by selling items as “outlet”, which is refurbished or where the package is spoiled in some way, but they sell without any warranty. It’s the ridiculous game they have to play to sell at a competitive price.
What is happening now is the game is changing:
- The overall sales are falling and cameras have less space in the stores. It’s very obvious that the number of people looking at cameras in those storers has dramatically fallen and the space they devote to cameras has shrunk.
- Internet sales channels have been increasing for a long time, but until now there were still a lot of Japanese people who preferred not to shop online. That’s partly because people tend to live close to physical stores for anything they could want.
- COVID has forced almost everyone to start shopping online and now almost everyone is happy buying from eCommerce sites.
- Ricoh has had some luck with their improved store and direct contact with customers online, but they re restricted, as I mentioned above.
- Ricoh is now quite specialized and differentiated. Customers who want Pentax or GR are going to seek out the places where they can buy them. These are not the kind of cameras that random customers are talked into buying by a salesperson.
So I don’t think the point is to “become Leica” or raise prices above what competitors charge. It is to offer things at a competitive price, while maintaining their own margin. I also don’t think it means their business will shrink because the old model isn’t working for them anyway.
Nonsense estimations of sales
I’ve mentioned this before in other threads, but you see a lot of crazy sales estimates based on different data sources. The most silly one is the BCN market research company. This company collates data from a number electronics stores, but many of them don’t even sell cameras in the first place. Those that do are mostly local electronics stores that only sell a few brands, certainly not Pentax/Ricoh. Then there is Bic Camera, and I’m pretty sure that when you see the 5.8% Ricoh share of DSLRs, that is almost all Bic. Remember that BCN talks up their coverage and only puts these numbers out to drum up business for their paid market research services.
I’m not saying that Pentax/Ricoh has massive sales in Japan, but it is much better than it is in other countries. The point is customers buy Pentax/Ricoh where they are sold, and the sales would show up there, not in the BCN ranking.
Customized cameras
This is a very interesting and creative part of the plan. If they take orders directly, then they can do some unique things for customers. We don’t know how this will work, but I believe this will work something like configuring a computer at Apple.
Again, this is an extension of things Ricoh/Pentax has done before, so they know that they have customers who are interested in it.
- They have offered custom colors (e.g. K-x, K-r)
- They have done custom grip shapes (K20D)
- They have done adjustments to the shutter button (GR Digital)
- They have done versions of cameras with different sensor filters (K-5 II, K-5 IIs, 645 IR models)
- They have done upgraded electronics (K-1 conversion service)
- They have done interchangeable grips (KP)
- They have done extreme tricked out models (J-Limited)
- They have explained some more ideas for customisation (the 6 proposed versions of the K-3 III)
So they certainly have a lot of ideas they could implement, which would be difficult with the old retail model. I’m truly interesting to see how unique a camera you could order with this.
Ricoh stores in “malls”
This part of the announcement is a bit unclear to me. Certainly, they will set up brand stores within popular eCommerce platform like Amazon, Rakuten and Yahoo!. What is not clear is how people will get their hands on the products to try. Based on past practice, I guess they will have some kind of events around Japan or pop-up stores in actual physical retail malls. If they are sending fewer salespeople out to stores, they may be able to do more spot events.
Work/Studio/Atelier style production
I think this is really being misinterpreted. There is an image in Japan of a kind of manufacturing known as “monozukuri”. This typically means something that is created with a high level of craftsmanship and pride - usually at a smaller scale. I think they are trying to channel this kind of image and the idea that they will make something customized for the individual.
In reality, they already have a lot of products that are made in small batches with a lot of manual work. A good example is the Limited lens series, which has never been mass produced. Again, they have done this with success in the past, so it is just focusing in on what they do well. Let’s face it. When Pentax refers to “mass” production, it hasn’t been a very massive mass for a long time.
Only for Japan
Hopefully, what I’ve written will make it clear why the sales channel change is mostly not relevant to other markets. Japan has this unique retail environment and it’s been holding them back. It will be very interesting to see whether other manufacturers follow where Ricoh leads. It seems to me that Nikon, OMDS, Sigma or Tamron might be interested in this if it works. The others would face more hurdles.
Also, I think the customization model might be difficult to adopt overseas. Japan has a very seller-friendly returns policy. Once you buy something, you’re basically stuck with it unless it’s faulty. In the US, it seems you can basically send it back if you change your mind about the purchase. I’m sure Apple can easily sell a returned MacBook with upgraded RAM and SSD in their refurb store, but could Ricoh sell a Scarlet Rouge K-3 III with a monochrome sensor, a wood grip and a customized shutter button? I think it would be a problematic model in the US.
So I expect that Ricoh might just look at what the most popular customizations are in Japan, and sell them selectively as additional models, but without the same level of customization.
Conclusion
What I’ve written above is obviously just my take on the matter. I don’t have any inside knowledge and could well be wrong in some areas. However, I hope I have explained in sufficient detail to convince some readers that the sky is not falling. Most of the commentary on other sites is based on half-understood statistics and no knowledge of the Japan market. The DPR writer admitted he had just put the announcement through Google Translate, and his “solution” was to put it through another online translator.
You can say that Ricoh should have anticipated this and the announcement was badly written. But honestly, they probably believe this is a bold and proactive business strategy. They just didn’t understand the mentality of sites that see every move they make through the filter of “So when are they going bankrupt? Ha Ha Ha!” I’m still astonished by the incredible amateurishness, cynicism and negativity of the online camera press, and the willingness of people to accept it without question.
Personally, I’m really looking forward to seeing what happens on April 1. Don’t you think that if you had a new business model starting, you’d want to have some new products to sell? It might be an opportune time to release a new camera or lens.
