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Coronavirus impact still emerging

Three weeks ago, when we first looked at the potential impact of Coronavirus on the photo industry, it was, as reflected in our headline, ‘hard to gauge’ whether there would actually be one or not. Now, with a worldwide pandemic declared, the critical question is, ‘how bad will it be?’

John Ralph coronavirus
Going viral: John Ralph Camera House has made lemonade out of lemons with this clever Facebook posting to customers: ‘Though we still have reasonable supply of cameras right now, we’re expecting panic buying to reach extreme levels by the weekend. As an added bonus if you spend over $250 in store this week you’ll receive one bonus roll of toilet paper… And we’re not talking single ply, we mean the good stuff! (Pic: Mike Ralph)

‘It’s still hard to gauge,’ John Ralph Camera House general manager, Mike Ralph replied to our enquiries. ‘In store we haven’t seen too much impact just yet. There is definitely some uncertainty about supply of particular items over the coming months – mainly smaller accessories and parts.

‘We have heard rumours that some of the Chinese brands like DJI may have longer delays on their products too. I think it’s primarily the economic impact that is currently of concern.’

That economic impact is already being felt on the street. In a Facebook post this week Alan Logue, (Hutt St Photos Adelaide) explained how it hit the small but successful retail business he operates with his wife, Catherine: ‘Today we had our first big loss as a result of the Coronavirus! We had a large job to be scanning of photos, slides and negatives around $3000 worth and today they pulled the pin due to the pressures on budgets due to the tourism numbers dropping. This was a major player in the SA tourism industry.

‘Please don’t believe this issue only affects large organisations,’ he urged.

There are two factors in play, each of them still to be quantified:
– the level of supply disruption for photographic hardware and printing consumables stalled with so much manufacture out of China, and now the virus also moving into Japan and South Korea, and;
– whether local consumers’ appetite for discretionary spending will diminish in the short to mid-term in the face of the economic uncertainty generated by the epidemic.

So far the camera companies have been largely silent both publicly and, according to our sources, in sharing information with their customers. Unfortunately, in this case, no news is NOT good news. It’s just not very good crisis management.

One business we spoke to which was able to confirm ‘business as usual’ was leading photo printing equipment and consumables supplier iPhoto, which remains ‘relatively unaffected’ and has a minimum three to four months warehoused stock to hopefully ride out the crisis. Among other lines, iPhoto distributes Kodak-branded film, paper, and chemistry sourced from China.

‘The only other thing we see are opportunist freight companies hiking the prices of international freight with excuses like “due to the current outbreak, positions are tight and the price is also high”,’ explained iPhoto managing director, Stuart Holmes.

If other manufacturers and distributors with supply chains into China were able to reassure customers that supply would not be constrained, basic business logic dictates they would do this rather than create uncertainty. The fact they are not so far doing this indicates they themselves don’t know what’s going on – or worse still, they would rather not say.

‘To be honest with you we have no details or data from suppliers or retailers,’ said  Camera House general manager Paul Rogers. ‘Suppliers have promised to keep us informed as and when they get information. I have read the same reports as you but I currently have no firm data.

He added that, on the local demand side, sales are a tad soft: ‘Retail sales have been softer than expected in February but that could be due to a combination of factors and not simply COVID-19.’

‘What we know at this stage is that most suppliers are estimating a 5-10 percent impact to supply from late March,’ said Nic Peasley, CEO of Ted’s Cameras. ‘They have indicated that it should be a short term problem and rectify by May. Having said that, it’s all estimations at this stage so nothing concrete.’

‘Sales have been impacted as traffic, particularly, in the shopping centres, has dropped significantly.

‘The last two weeks have been an improvement on the previous three, so it seems that the hysteria about this issue may be having less of an impact on people’s shopping intentions,’ he said.

When we last spoke to Jeff Servaas over at Protog, a professional photography lighting and accessories distributor which sources products extensively from China, he said that ‘it sounds like it will be back to normal within a few weeks.’

Things have changed: ‘We are experiencing unexpected delays coming from a range of different areas,’ he told Inside Imaging this week. ‘One supplier is having issues with something as simple as the custom-sized cardboard boxes to pack our products.

‘Several suppliers are operational, but short on staff, as many of their staff are self-quarantining for two weeks after returning from their home town. This staffing issue will pass next week. One supplier had our order ready to ship last week, but the shipping line schedule is disrupted, and they don’t have their usual weekly container leaving from that port this week, so we are having to road freight our order 400km to a different port, adding a week to the delivery time. Due to fewer planes being in the air, air freight costs have jumped significantly.

‘I also anticipate that we will see secondary delays in 1-2 months as our suppliers draw down on their stock of components, and find their suppliers’ can’t supply components within the normal lead time,’ he explained.

From the supply side
Reports from Japan, since confirmed by Canon Inc, state that it has closed three Japanese factories ‘due to the influence of the new coronavirus’ on the supply of parts from China. These factories manufacture DSLRs and lenses. The closure is scheduled to end on March 13. Whether it continues after that date will tell us something about the degree of disruption to the camera supply chain.

The same story in the Nikkei website also stated that Ricoh has extended suspension of some of its production lines at plants in Miyagi Prefecture, but only until the end of this week. Once again, if the suspension continues beyond that, we will have a better idea of the extent of disruption.

Fujifilm closed its Chinese factory until mid-February and it has been operating at reduced capacity since then, according to Amazon’s DPReview website. ‘This has caused disruption to the production of its popular X-T30 and X-T3 models, and the company cannot confirm when it will be able to ship the new X-T4,’ according to the website.

As we wrote in our first article on coronavirus, ‘Chinese manufacturing plays a huge role in the supply chain of almost every tech industry. While most major photo imaging companies are based in Japan, many rely on either assembling products in China or sourcing parts from the region.

‘Nikon, for instance, has operating plants in the Guangdong and Zhejiang Provinces that specialise in camera components. Numerous Nikon lenses are likely assembled at one of these two Chinese plants.’

Nikon has since confirmed it is experiencing manufacturing delays on some of its lenses. The Nikkor 70-200mm f/2.8 Z has been put back from the end of February to the end of March, while the Nikkor 120-300mm f/2.8E F-mount lens has also been delayed ‘as we determine the global impact of the novel coronavirus outbreak.’

Sony was first to connect the coronavirus with supply issues back in the first week of February, noting when it delivered its 2019 financial results that its image sensor and Playstation businesses could be ‘affected enormously’ as it has factories in China. It also manufactures cameras in its compact and mirrorless ranges in China.

But while Sony is the largest image sensor manufacturer in the world, the large, high-end image sensors for cameras are primarily if not exclusively manufactured in the Kumamoto province of Japan (to the best of Inside Imaging’s knowledge). As in most elements of this story, it remains to be seen whether the problems in China will impact this part of its business and, by extension, the other camera companies (Nikon, Pentax, Leica) which source their image sensors from Sony.

Drone manufacturer DJI, which is based close to Hong Kong in the Guandong Province of Shenzen told Inside Imaging: Following the Chinese Lunar New Year, production capacity is increasing stably, and we have enough stock to fulfil most of our orders. Due to the COVID-19 situation and traffic control measures, the shipment time of some orders may be delayed. We will continue to monitor the situation closely and adapt to developments accordingly.

Even companies with no manufacturing operations in China – such as Olympus, whose cameras are made in Vietnam, and lensmaker Sigma, which manufactures exclusively in Japan, are not entirely immune from the Chinese troubles. As Jeff Servaas noted above, the sourcing of something as basic as a cardboard box can hold up supply. And if the virus spreads extensively to other manufacturing centres in the Asian region such as Japan, Thailand, Malaysia, Taiwan or Vietnam, it’s probable that both of the factors in play – supply and local demand – will drop as the world comes to grips with this epidemic.
– Keith Shipton


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