Much is being made of the announcement from Olympus that they are getting out of the point and shoot market to focus on their higher end mirrorless lines such as the OM-D EM-5. There are multiple arguments for and against this decision, my take is that it is a smart move as increased specialization keeps resources aligned and allows for more targeted investment.

That plus the reality that the point and shoot marketplace is moving on to that great darkroom in the sky.  As it were.

Our smartphones today are very credible point and shoot cameras.  Other than Canon, most point and shoot builders have engaged in the megapixel arms race with the sad result that we end up with more dots in the same size sensor.  This does not result in better images because the smaller the dot, the less effective each dot is at light capture.  It does however look good to the uninformed in a Best Buy flyer.  If we take the snapshot maker and break that market into the four common demographics, point and shoots appeal primarily to the mid adult and senior adult market places.

Youth and young adult are very comfortable with the images from the smartphone.  Pictures are often disposable, so quality is less important than quantity and availability of apps to modify the image prior to sharing.

Senior adults may be less inclined to carry an app rich smartphone and only need decent snapshots.  Simple one button press that results in images easily turned into prints at a retail kiosk is a solution that works.

Mid adults are often very busy with jobs and with raising small children.  While smartphones can do a good job at making snapshots, we see and hear comments that by the time you get the phone out, unlock it, get the camera app loaded, and the picture snapped, the moment has passed.  This market finds the one button approach appealing and is more inclined to also like the embedded video. Again simplicity in making prints for grandparents at the retail kiosk is a strong driver.

The demographic without small children and before earning the tenure of senior is looking for snapshots, is already carrying a smartphone amongst other items and is happy with decent snapshots but is less inclined to print or to have images as keepsakes.  They may also have the time and financial position to engage more fully in photography via DSLR or DSLM "serious" cameras and for this market, the smartphone is an ideal complement.

Convergence is driving point and shoots either up into the price point of consumer DSLRs, with the Sony RX-100 as a good example or down into the smartphone realm such as Nikon's 800C, a camera that runs a smartphone OS and looks like a smartphone.  What used to be the wide and profitable middle market is compressing rapidly.  As market pressures force prices down, and with major manufacturers missing their business forecasts and margins eroding it makes sense to exit this market in favour of more profitable specialization.

Point and shoots can also dramatically impact brand loyalty.  A good point and shoot experience may drive a buyer to stay in brand when considering his or her next camera.  This was definitely true in the past and certainly Canon's excellent past track record in point and shoots has driven market share in their consumer DSLR cameras.  The contrary is also true as recent point and shoot issuances from all vendors at lower price (and margin) points has placed truly disposable junk in the market.  These cameras are not made by the major photographic vendors, they are made for them, with significantly reduced quality and longevity necessitated by the required much lower cost of production.  So I have personally seen customers looking to move into a DSLR or DSLM consciously avoid an entire brand because of recent point and shoot experiences with that "brand".  Olympus is only one vendor whose high end is unfairly tarnished by low quality low price products under the same "brand".

The classic point and shoot market is already dead.  It's chest is still heaving in galvanic response but it is dead.  Specialized offerings are not dead because they offer some differentiation outside the scope of the traditional marketplace.  These would include verticals such as the waterproof/shockproof market, the super zoom market and the big sensor - small device market.  Smart retailers will understand this and build customer awareness around the differentiation, maintaining minimal supply of the generics as loss leaders, but not the market focus.