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Canon: ‘We’re in this together’

September 29, 2011: ‘If history is any determinant of the future then we have been a loyal supplier for the photo specialty channel and we will continue to try to drive value locally,’ said Canon Australia director, Consumer Imaging, Jason McLean, responding to retailers queries on its move to establish an online Canon Store in Australia.

Mr McLean (pictured left, courtesy John Ralph) was speaking at the PMA-organised industry event at the North Ryde RSL last Tuesday, September 27.

He said that the greatest challenge for local suppliers and retailers in the newly globalised retail world was to remain relevant.

‘The approach we take is to talk about the consumer and how they are changing, and how we as a supplier and industry have to meet their needs,’ he said.

‘And I think the key focus we are all going to have to tackle over the next two years is, “how do we keep them choosing us?”’

Perhaps to emphasise that Canon’s move to online was not taken lightly – and the possible consequences of a globalised retail marketplace – he added that the issue of relevance extended to Canon Australia being relevant to its parent company – with the alternative being a Canon operation servicing Australia from somewhere else in the world.

‘We have to remain relevant not only to you but to our parent company,’ he said. The temptation from a Tokyo head office point of view was, instead of an Australian operation employing local people, to cut cost by warehousing and even running retailer support out of somewhere like Hong Kong.

‘The two things we are grappling with is the speed to globalisation in this market we are dealing in – and we have struggled – and I think it’s fair to say that from a Canon perspective, Canon as a global company has had to come to terms quickly about managing in a global economy.’

He said Australian retailers and suppliers no longer had the luxury of a captive mass of consumers confined within borders with no alternative source of supply.

Two factors that have come into play recently to strengthen the global online channel are that the nervousness has gone from buying online ‘and that’s a big thing’ and ‘the aggressiveness of the retail market around the world.’

Locally, he said the biggest issue around grey marketing outside of pricing is ‘to the consumer it’s not Canon Australia, or Canon Hong Kong, or Canon Singapore. It’s Canon.’

He said that while Canon Australia and its retail partners provide the benefits of local warranty and after-sales service when buying from an authorised Canon reseller, ‘the consumer will buy from whomever they want and expect the same conditions.’

New consumer laws

In this context, the new consumer laws which came into effect on January 1 haven’t been tested yet.
‘I think that in the near future one of us companies or a retailer is going to be caught in a test where a consumer’s actually bought a product which doesn’t fit within the local guidelines because its bought from Hong Kong, and that’s going to test the market,’ he said.

‘We are actually trying to get ourselves ready for managing that because ultimately, the consumer sees Canon.’

He identified the recent move by online maverick Kogan to parallel import Canon and Nikon cameras from Hong Kong as another challenge as ‘every piece he brings in is under the $1000 threshold.

‘If you think about being competitive, we’re already 10 percent off straight away.’

He said to match Kogan on price, Canon Australia’s cost of doing business would rise from 40 percent to 50 percent.

‘And you guys [retailers] are the same – you have a high cost of doing business. So as an industry that’s one of our challenges, but our number one priority has to be giving that message about buying locally.’

He said that meant being competitive on price ‘when they go into store and pull it up on their smartphone.’ He said this was why Canon had reduced prices earlier in the year.

He said the market had changed dramatically in the last decade. In 2004 it was all about managing demand. By 2007 ‘everyone’s on the bandwagon’ so it became a matter of managing average selling price. In 2009 helped along by the Federal government’s economic stimulus money, digital imaging became mainstream, and in 2011 ‘it’s all about consumer choice’. – The first choice being whether to buy local or from an offshore online retailer.

‘So it’s really attracting that consumer choice and making them feel that the offer they are getting from us is the widest and best.

‘I don’t think there is any short answer to globalisation. That’s here and now. We have to make sure we invest locally to attract the consumer.’

He noted that predictions of the demise of the photo specialty channel were way wide of the mark from Canon’s perspective. ‘The reality is that photo specialty has grown as much as our mass customers over the last 10 years.’

He said Canon had a particular connection with the photo specialty channel as photography was part of the corporation’s heritage.

‘We are in this together and think there’s a lot of energy spilt around looking over our shoulders and not being focussed on the fact that the consumer is changing around us.

‘We want to continue to work with photo specialty. The reason you guys have been so successful is you stand for something that can’t be replicated . Your stores are around an experience-of-service encounter, and staff that know what they are doing.’

‘What we need to do is understand that photo specialty is different and make the effort to continue to stand out.

Directly addressing the Canon move to online, Mr McLean said, ‘I think the reality is the online channel is a distinct channel, whether we like it or not. As CE is, as mass is, and as photo specialty is.

‘So Canon’s position has always been we need to be where the consumer is. The difference is that this channel is direct to consumer.

He said he didn’t see the Canon Store as a threat to photo specialist retailers.

‘The way you manage your consumer from an in-store experience, your knowledge, your know how – the reality is there is no reason they [photo specialist customers] would buy from Canon.’

He said that pricing on the Canon Store would not influence photo specialist customers.

‘Our pricing is not that exciting to a consumer that wants to go and get knowledge from an in-store experience.’

He did, however, identify a specific type of consumer who simply wants to buy from Canon.

‘There’s no rational reason why that’s the case. They don’t get any better pricing, any better warranty or any better support . That’s one of the things we are grappling with.’

He pointed to the US experience, where Canon has been online for 3 – 4 years now and restated that the share of that market represented only 2 – 3 percent of turnover.

He said that the Australian Canon Store had a more limited offering and a different pricing structure, but conceded that the range in Australia was liable to expand in the future.

‘We will expand the range at some time in the future. But with hand on heart I couldn’t see us selling L series lenses – we don’t have a mass distribution strategy on that.’

He acknowledged that Canon did have a full range of accessories and consumables online and said there was a ‘service element’ to this to ensure these categories of product were readily accessible to consumers.

On several occasions during his speech he alluded to Canon’s concern that consumers were being ‘switched’ in store. That is, coming in to purchase a Canon product and being persuaded to change their purchase decision at the counter. The inference was that this was also part of Canon’s motivation for going direct online.

‘One of the things the industry needs to understand is they [the consumer] know they are getting switched instore. One in three people know when they walk in with a research plan they realise they can be switched. He said this was driving consumers online.

He said this was not such a serious issue in the photo specialty channel as in mass merchants and CE, but ‘nonetheless there is a quid pro quo in the relationship.’

To questions from a leading Sydney retailer in the audience about why he should continue to support Canon, Mr McLean said: ‘We plan to create a different price environment in the market to attract consumers, but ultimately if Tom Saade Parramatta is doing a great job and we do good business together, why would you change?

Concluding, he said there were reasons to be positive with Christmas looming, with interest rates more likely to fall than rise. He said that people have cash, they are just holding on to it at the moment.

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