With the entry of new players markedly diluting the once profitable Middle East DSC market, the industry’s dominant vendor, Canon, is looking to the future with a string of new product releases targeting core and peripheral markets.
The Middle East ranks as one of the company’s top territories worldwide in terms of commercial potential, according to Canon’s regional GM of Sales and Marketing, Anurag Agrawal, a fact reflected by the scale of its assault on last November’s GITEX exhibition in Dubai.
Among Canon’s traditional showcase of enterprise printing, scanning and copier solutions lay the secret to its commercial ambitions in the region – its massively revamped range of consumer compact DSCs, digital- SLR (D-SLR) cameras, high definition (HD) camcorders and home printing solutions. The company showcased 50 new products at the event, of which 33 items were targeted specifically at consumers.
Agrawal says Canon’s foray at GITEX reflected the company’s aggressive strategy for expanding its presence in the lucrative consumer markets of the Middle East.
“We established a local sales office in Dubai servicing the Middle East market in 1998, and our business has grown exponentially each year since,” he says.
“Our presence at GITEX 2006 reflected the culmination of our recent efforts to considerably expand our presence in peripheral product sectors.”
Agrawal says that since 2000, the company has achieved remarkable growth in the markets of the Middle East and Africa, a situation he attributes to the company’s go-to market strategy in both regions.
“The growth in demand for our products in the region from 2000 onwards prompted us to establish a dedicated regional headquarters supporting our channel partners,” he explains. “We soon realised this market demanded a dedicated operation, so we brought the regional sales, marketing and distribution functions under the control of Canon Middle East in July 2001. Our Dubai office became a sales subsidiary and a regional headquarters for the Middle East at this time.”
From an initial base of 12 countries, Agrawal and his team were soon tasked with managing the company’s operations in Iraq, Sudan and Libya. Toward the end of 2004, 21 French-speaking countries in North and West Africa were also cast into the mix, providing a fresh challenge for Agrawal and new opportunities for expansion for Canon.
The headquarters currently manages Canon’s core Business Solutions and Consumer Imaging divisions targeting each of the 36 markets, in conjunction with its country-based distribution partners.
Agrawal says Canon has in the past adopted a “traditional approach” to channel distribution in the Middle East, appointing individual tier one distributors in each country, which have managed the company’s enterprise and consumer product portfolio.
“Our Consumer Imaging product portfolio includes our DSC and camcorder ranges, in addition to printers and scanners, while the Business Solutions range consists of analogue and digital copiers and multi-function devices,” he explains.
“We have strong partnerships with distribution partners servicing each country, which handle both product ranges. However, with the expansion of our photo-video product portfolio, we have increasingly looked to appoint additional partners in certain markets.
“We are now looking at various avenues for enhancing our channel distribution strategy. We admit that we have approached the sector from a very traditional viewpoint in the past, while our competitors have taken a more dynamic approach and quickly penetrated the market as a result. At the end of the day we have to deliver a product to end-users at a certain price. Some of our competitors deliver their products via regional offices based in each country. In our case, we prefer to deal with country partners and provide them with service support and staff training.
“We are committed to providing our tier one distribution partners with quality support, however we also recognise the need in the photo-video market to embrace new channel strategies to compete with our rivals.”
Agruwal says Canon plans to expand on its new partner support programmes, starting with the Canon Partner Programme (CPP) targeting its enterprise distributors and the Channel Marketing Programme (CMP) supporting tier two channel players.
“We launched the CPP last year and are in the process of establishing CPP,” he explains.
“Given the burgeoning competition in the retail sector, particularly in the GCC, we are looking to provide various incentives to our tier two partners, particularly in terms of training and after-sales service support.”
Agruwal says Canon plans to take a qualitative approach when assessing its CMP-endorsed channel partners, classifying them either silver or gold partners according to their sales results and the relative size of the markets they operate in.
“We will award points based on these factors, which they can use to redeem corporate rewards, such as accommodation and travel expenses to attend Canon retail training programmes in Dubai,” he explains.
Canon has taken a proactive approach to expanding its distribution reach in the Middle East and Africa, Agruwal says, adding that this has at times strained relationships with existing partners.
“We have opened up the distribution channels for our consumer products in the UAE and most recently Egypt. We have forged alliances with partners in Iran, and we are now looking to do the same in Saudi Arabia,” he explains. “We are currently negotiating with our Saudi partner (Ali Zaid Al Quraishi) in a bid to enable us to deal with additional distributors in the market. We are committed to ensuring that our existing partners are not adversely impacted by these deals. We put terms and conditions on these deals to ensure our core channel partner benefits from this deal. These include preferential pricing, or a percentage of the profits generated in a particular market.
“However, in other cases we leave it to market forces to determine our channel distribution strategy. It is easier said than done, and we have faced conflict with partners in certain markets, but it’s the role of our Dubai office to mediate these issues.”
Canon recently took this strategy one step further in the UAE by appointing Dubai-based GIBCA as its official Business Solutions partner.
The partnership aims to consolidate Canon’s position in the region through an integrated structure and dedicated sales force, which will manage the company’s enterprise business in the country.
Ultimately, given Canon’s aggressive product development strategy, Agrawal believes every one of its Middle East and African partners stand to benefit. He largely attributes the company’s ability to implement this strategy to the rapid development of digital technology, which has created massive commercial opportunities in the company’s traditional domains of imaging and printing.
Long recognised as one of the analogue camera industry’s biggest names, Canon has capitalised on its brand heritage and consumer recognition and successfully established itself as the leading player in the burgeoning digital imaging sector. Of the company’s best-known product ranges, Agrawal says consumer demand for its PowerShot and Elph DSC and Eos D-SLR models is booming. However, he does concede that the DSC and D-SLR markets are dynamically disparate.
“Sales volumes are obviously larger in the DSC market, but sales growth has eased in recent years, which has impacted profi t margins,” explains Agrawal.
“We maintain a dominant position in the D-SLR market, which is booming by comparison. The market also provides healthier margins. Our own research suggests the D-SLR market is growing at a rate of 50% annually.
“However, competition is rapidly increasing in this sector with the entrance of new players such as Sony and Panasonic. We believe competition is healthy, but we also believe that our brand heritage, reputation for quality and extensive product range puts us in an enviable position when compared to these rivals.”
Agrawal dismisses any purported threat posed by entry- level competitors, claiming that Canon prefers to promote the feature specifications and competitive pricing that encapsulate its PowerShot and Elph DSC ranges.
“Consumers demand fast processors, large LCD screens, high-megapixel resolution and image stabilisation technologies, which these models deliver,” he says.
He also welcomes the market proliferation of new high-megapixel camera-equipped mobile handsets, claiming that the popularity of such devices is driving demand for Canon’s home printing solutions.
“Cameraphone sales are booming in contrast to the DSC market, which has peaked in recent years,” Agrawal says.
“We expect the cameraphone market to outgrow the DSC sector in terms of units sold, but this in no way suggests that the market for DSCs will be significantly eroded. Cameraphones might feature good quality lenses, but they can’t compete with DSCs in terms of feature specifications.
“In terms of future growth, we are tying our ambitions to the home printing market. Consumer demand for home printing solutions is growing at a phenomenal rate as a result of DSC sales, which has seen the entrance of a new raft of players such as HP, Samsung and ourselves.
“We believe we are in an ideal position to tap this market, as we have the core technologies of printers, scanners and copiers, and the brand recognition with consumers in the marketplace.”
Agrawal confirms the vendor is also working hard to confront grey market trade of its products in the Middle East and Africa, in conjunction with its distribution partners.
“It’s an economic reality,” he says. “Every market is impacted, however for vendors it is not always a bad thing. It means there is demand for your products and you are also increasing your market share.
“The challenge ultimately lies in ensuring this trade doesn’t overtly impact your channel partners. We have implemented a range of initiatives including a warranty service arrangement in conjunction with our channel partners and we are concentrating on developing region- specific solutions, such as an Arabic-language settings menu and GUI on our DSC range.
“We cannot stop parallel imports, but if we can minimise the impact on our channel partners, then its only a mild irritation rather than major problem for our business in the region.”
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