Digital cameras have found their groove. After several years of fits and starts, digital camera technology has finally hit the sweet spot of price and quality necessary for it to really take off. The bad news is that the intense pricing pressure already has begun siphoning profits from this emerging category.

One consumer electronics industry insider confided to DSN Retailing Today that manufacturers are beginning to complain about digital camcorders and cameras selling below cost. Not the outdated models, but new ones packed with the latest features, proving once again the industry's propensity to commoditize itself right out of the profitable early adopter arena and into the low-margin mass market.

Companies at the Photo Marketing Association's annual convention last month showcased new digital cameras for 2002 that go up to four mega-pixels and will sell for $400 or less.

Digital cameras are now sporting additional features that make it easier to get images out of the camera and into a computer or onto photo-quality paper. Kodak's new Easy Share even offers onetouch transferring and, at $399, goes directly to a mass-market audience.

Even Canon is getting more aggressive in its quest to capture market share, with four digital models positioned to "strengthen Canon's presence with entry-level digital cameras," explained Chuck Westfall, assistant director of the technical information department. To this end, Canon is launching four new full-featured, high-resolution digital models for less than $299. The A100 Power Shot will debut for approximately $200, the first time Canon has offered a unit in this price range.

With such an array of product clearly targeted to the mass market, it should come as no surprise that retailers are responding en masse. Wal-Mart has been selling low-resolution digital cameras since the early days of digital imaging. Target was slower to get into the game, but once it did, the retailer went after this market full throttle--not only stocking a full selection of digital cameras and camcorders, but expanding accessories, components and related home office and printing devices, as well.

A visit to one of Target's newest stores, opened earlier this month, revealed even more extensive participation in this category. The CE department has expanded well beyond the corner it once occupied and now extends to nearly the center of the store, with some related home office equipment and supplies running parallel across the aisle.