Why Leica Is Opening So Many Stores

The Why Leica Is Opening So Many Stores article in Businessweek provides further insight into why Leica Shuns Online in Favor of Physical Stores (an article we posted just a few days ago). Interesting time for specialty "boutique" stores - especially camera makers in light of competition from smartphones and other P&S cameras, a market which is essentially saturated by big box stores such as Best Buy. Looking to copy the success of high-end clothing and Apple Stores perhaps?

Selling a $27,000 camera is no snap—especially when that hefty price doesn’t even include the lens. For Leica Camera, the challenge is compounded by the fact that it has lost more than a third of its U.S. dealers, who have fallen victim to competition from the likes of Best Buy (BBY) and Costco Wholesale (COST). So at a time when an increasing number of brands are bolstering their ability to sell online, the German camera maker is rolling out its own stores to woo serious photography buffs.

Leica’s first U.S. outlet opened in Washington, D.C., last month, and the company is rolling out two more stores in Miami and New York this summer. By March 2016, Leica says its current roster of 37 stores will have grown to 200 worldwide. They’ll stock a range of models from the entry-level $700 V-Lux 40 point-and-shoot camera to the top-of-the-line $27,000 S2. “It is a high-risk strategy,” says Walter Loeb, president of retail consulting firm Loeb Associates. “Leica needs to establish itself more directly in the U.S., but it’s a small market for high-priced cameras, and it’s highly competitive.”

Leica is opening stores at a time when U.S. consumers are buying fewer cameras, given the quality and convenience of taking photos with smartphones such as Apple (AAPL)’s iPhone. Last year, Americans spent $6.2 billion on cameras, down 8.3 percent from 2010, the Consumer Electronics Association estimates. The average price per camera was $173. Leica says it has less than 1 percent of the U.S. market, while Canon (CAJ) and Nikon together command 42 percent, says researcher Mintel.

The original Leica, in 1925, was far smaller than the bulky shooters of its timePhotograph by SSPL/Getty ImagesThe original Leica, in 1925, was far smaller than the bulky shooters of its time

The retail rollout is the latest step in Chief Executive Officer Alfred Schopf’s turnaround strategy for the Solms (Germany)-based company. In 2004 the company dodged bankruptcy; two years later, French luxury handbag maker Hermès International (RMS)sold its 36 percent stake. Sales have since recovered, as Leica managed to merge its engineering prowess with new digital technology.

Leica’s new stores are luxurious and minimalist, like its cameras. The outlets feature black leather furniture from Germany and gray tiles from Italy. The sole color accent: the red featured in the Leica logo. Stores include a retail space, a studio area to demonstrate products, and a gallery—to exhibit photographs shot with Leica cameras—that can be converted into a lecture room for the company’s Leica Akademie photography courses. “We stand for a certain image of quality, and this is something we wanted to show in this environment,” says Schopf, who wouldn’t say how much Leica is spending on the stores. “We are showing a dedication to the quality of photography.”

Leica’s compact cameras, introduced in 1925, were revolutionary compared with the heavy plate cameras of the day. In 1932, about 90,000 Leicas were in use; by 1961, a million. Leica cameras, popular with photojournalists, went on to capture many an indelible image, from Alberto Korda’s portrait of Che Guevara to Huynh Cong Ut’s “Napalm Girl” to Jim Marshall’s iconic photo of Janis Joplin with a bottle of Southern Comfort.

By the time it introduced its first digital compact in 1998, Leica had lost customers to Canon and Nikon. Sales rallied after it introduced digital versions of its 1950s-era M camera, and today digital models bring more than 90 percent of sales. Revenues last year surged 57 percent, to €248.8 million ($309.7 million), while income leapt tenfold. Managers says the stores will draw more customers. Says Roland Wolff, director of corporate retail for Leica’s U.S. arm: “We want to share what people can do with the product.”

The bottom line: Mimicking luxury clothing designers, pricey camera maker Leica will open 160 of its own stores by 2016 to sell the allure of photography.