Apple is now the 3rd largest music retailer in the country behind Wal-Mart and Best Buy. "With a 10% market share, Apple sits close behind #1 retailer Wal-mart (15.8%) and #2 Best Buy (13.8%). All findings were recently reported by NPD Group and are based upon their survey of 400,000 people age 13 and older." And thats a pretty sizable chunk I have to say considering around age 13 kids start flexing that consumer muscle.
Significant for several reasons-
1) RIP CD: Both of the top retailers mostly sell music in the CD format. Online store bestbuy.com has a 1.1 percent market share with sales of both CDs and digital music. iTunes is strictly digital. This signals a fairly significant shift in consumer behavior to the digital medium, but its one we have seen coming for quite some time. Will movies and videogames be headed this way? You betcha. Check out Xbox Live and you can already see it happening.
2) Death of Retail: consumers still aren't emtionally tied into online offerings. Very few online sites can really get people excited the way a sale, promotion, or retail experience can. Face it people like real-world connections. People visit BestBuy just to check out the products, not even buy anything and the brand has been smart to encourage it. Typically consumers prefer making purchases in person, and will always place a higher value on products they can see in person, but digital commodities such as movies, music, and games are changing that. Companies like Freshdirect have made it acceptable to use digital for everyday things outside of media. Look for this to expand in the future.
3) Product Power: Apple is a rare brand indeed that has been uniform in its messaging online and off. The iPod has become ubiquitous with many things beyond music, and purchasing one has extended iTunes to greater depth. Nothing like having the number 1 product in your category and getting consumers to switch to your service. Cingular is banking on this with the Jesus iPhone. Don't bet on it.
4) Uniform branding: Apple has a sizeable advantage on BestBuy and Walmart in its branding. Those two brands are retailers with many products, while Apple creates simple propositions for all of its own products. It has become synonymous with cool, music, and even more up the ladder, digital lifestyle. Apple has been working hard to bridge the gap between offline and on. Events in its stores which feature up-and-coming bands, are the smartest thing I have seen from them in awhile. As Apple grows, and digital music, consumers habits are clearing shift but their emotions will always lie within the physical space. Figuring out how to turn digital behavior into physical results could enhance itunes as well as Apple. Look for integration of iTunes in physical space to be the next powerplay for Apple. All made that much easier with a clear branding proposition.
Unless an iPod killer comes out of left-field look for Apple to take the top spot eventually, may take 5 years or so, but who even thought they would be here as of 2000? How did owning a mac become hip? Is this killing shopping, all this online purchasing? Not so much, if anything it is fragmenting how consumers actually make their purchases. One could argue though that is has hurt music in creating generations of folks who only purchase singles, forgoing b-sides after they hear a 30 clip they dont fancy. It will be interesting to see how consumer's emotional connection to digital shopping changes in this new era, and how brands will be forced to adopt retail to digital as well as vice-versa.
Big Bite Apple