June 6 (Bloomberg) -- Selling a $27,000 camera is no snap - - especially when the lens is sold separately.
For the camera’s maker, Leica Camera AG, the challenge is compounded by the fact that it has lost more than a third of its U.S. dealers to competition from the likes of Best Buy Co. and Costco Wholesale Corp. So, at a time when many brands are moving online, the German camera maker is opening stores.
The first U.S. location debuted in Washington last month, and Leica plans one each in Miami and New York this summer. By March, 2016, the company says its current roster of 37 stores will have grown to 200 worldwide. They stock a range of models from the entry-level $700 V-Lux 40 point-and-shoot to the top-of-the-line $27,000 S2.
“It is a high-risk strategy,” Walter Loeb, president of Loeb Associates Inc., a New York-based retail consulting firm, said in a telephone interview. “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 because many are using phones such as Apple Inc.’s iPhone to take photos. 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 market, while Canon Inc. and Nikon Corp. command 42 percent between them, according Mintel, a research firm based in London.
The store rollout is part of Chief Executive Officer Alfred Schopf’s efforts to turn around the Solms, Germany-based company, which was slow to embrace digital technology. In 2004, the company dodged bankruptcy; two years later, French luxury handbag maker Hermes International SCA sold its 36 percent stake in Leica, ending a relationship that began in 2000. Since then sales have recovered, in part because Leica managed to merge its engineering prowess with new digital technology.
The shares have jumped 82 percent in the past 12 months.
The maker of photo equipment, hunting lenses and nature-watching products has been developing its new store design for more than three years. It includes 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 didn’t want it to be seen like an average store with Japan brand 1 and Japan brand 2 and Korean brand 1 and Korean brand 2,” Schopf, 53, said in an interview in Washington. “We stand for a certain image of quality and this is something we wanted to show in this environment. We are showing a dedication to the quality of photography.”
He wouldn’t say how much Leica is spending on the stores.
Leica chose the U.S. capital as its first U.S. location because the area’s economy has been thriving during the uneven U.S. recovery, has strong unmet local demand, and has a rich history of photojournalism, said Roland Wolff, director of corporate retail for Leica’s U.S. arm.
The stores -- some operated by Leica; some by authorized dealers under a joint investment arrangement -- are luxurious and minimalist like the cameras. They feature black leather furniture from Germany and gray tiles from Italy. The sole color accent: the red of the Leica logo.
Leica’s compact cameras, introduced in the 1920s, revolutionized photography. They were developed by German optical engineer Oskar Barnack, who had worked in microscope research and was employed by an optician called Ernst Leitz in Wetzlar, Germany.
Barnack was an avid photographer who suffered from asthma and wanted equipment for outdoor photography that was easier to use than the heavy plate cameras of the day. He introduced a small-format 35mm-camera in 1925, using a brand name that was a combination of the name Leitz and the word “camera.”
In 1932, about 90,000 Leicas were in use; by 1961, a million. Milestones include the rangefinder cameras such as the Leica M3 introduced in 1954 and the M6 in 1984. The R-System debuted in 1976 with the R3, which was the company’s first electronic model. Leica cameras have captured many an indelible image, from Alberto Korda’s portrait of Che Guevara to Huynh Cong Ut’s “Napalm Girl” to Jim Marshall’s photo of Janis Joplin with a bottle of Southern Comfort.
In 1998, the company introduced the Digilux, its first digital compact camera. By then, however, Leica had lost customers to Canon and Nikon.
Sales rallied after it introduced digital versions of its iconic 1950s-era M camera. The M series is the “best tool” for photojournalists because it’s quiet -- making it ideal for close-up, candid shots -- and highly durable, Wolff said. The company still makes film cameras, though digital models generate more than 90 percent of sales.
Sales surged 57 percent to 248.8 million euros ($309.7 million) in Leica’s most recent year, and the company’s improving prospects prompted Blackstone Group LP to take an indirect 44 percent stake. In the year ended March 2011, consolidated income grew more than tenfold to 36.3 million euros ($45.2 million).
While revenue doubled in the past two years, it will rise just 10 percent this year because demand is outstripping manufacturing capacity, according to Schopf. The company is working to expand output, he said. On April 25, Leica broke ground on a new headquarters in Wetzlar, where visiting Leica buffs will be able to watch the cameras being made.
Besides opening its own stores, Leica also has built 54 boutiques inside authorized dealers.
“It is a way to make sure your brand is presented the way you want,” Wolff said. “We want to offer more than just product. We want to inspire with the photographs, we want to share what people can do with the product.”
For some Leica aficionados that means taking photos the old-fashioned way. The first camera sold at the new Washington store: one that uses film.
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