Yesterday I visited the same electrical/electronics store as last October, when I posted the original China Kettle, Dryer and Scale, Inc. piece. This time I did a little more research on small appliances, casually strolling down the aisles...
The same conclusions apply as in the first post, with the added observation that MP3s are in a bubble all of their own. I noticed that the two most expensive models were iPods, whatever that means for competitive conditions in a sector so crucial for Apple.The price spread from low-to-high in each appliance category is roughly 1-to-10, excluding a few very top-end models that are not really comparable with the rest. Corollary: tapped-out consumers can trade down in their selections as never before; for example, why pay ten times more for the simple task of boiling water? Again, whatever this means for retail sales and profits...
Speaking of appliances, stainless steel demand is dropping, even in Asia. The region's largest steelmaker (by market value) announced lower sales and a 20% drop in profit, blaming less demand from appliance makers and builders. Other steelmakers in Asia are reporting similar trends. Decoupling, where art thou?
Logic follows that conclusions are derived from observation.
ReplyDeleteSometimes, logic follows that observations are derived from conclusions. Hence reasons (such as de-coupling) are constructed for the purpose of reinforcing a conclusion.
Still it is great to hear from both sides and it does seem that the verdict's pretty much out in the street, don't you think?
thanks for the update.
ReplyDeleteYour original "China Kettles.." article was my favourite.
Time to sell those Aussie miners too...hmmm
Given the insane # of choices this retailer is offering you, may I recommend, The Paradox of Choice: why less is more by Barry Schwartz. An excellent examination of what happens when consumers become overwhelmed because there's too much stuff to buy.
ReplyDeleteMy main comment is really about your iPod aside. Apologies for harping on a tangent, my intention is not to hijack. I just want to illustrate why not all subcategories of plastic crap from China with an AC adaptor are created equal. (Et j'adore AAPL)
All the non-iPod music players are cheap because nobody but rabid anti-Apple nuts will touch them. You can't give the damn things away (clearly). And it's not like you can't get an iPod nano for $149 or a Shuffle for $79. Most people have at least two iPods. They have a finite lifespan and will get replaced regularly. The iPhone actually expands the iPod market too. And did I mention that Mac market share has increased as a direct result of iTunes? Those are't cheap either.
Apple owns this category and distribution channel. They are rapidly moving to achieve similar ownership of movie and tv content distribution. And while it's possible to get around their proprietary restrictions, once you have all your content in iTunes, the barrier to change is too high for most end-users to bother with -- or for content providers to risk.
It's not long before large populations drop cable for tv but keep it as their (grossly overpriced) ISP. They won't need the tv because they'll just buy the entertainment content on demand, through Apple. The cool kids (under 30s) are doing this already. Go to the inevitable iMedia store in a few years and you'll be able to get any program ever produced, available any time you like. It won't necessarily be for everybody right away, but there will be room for a user-supported, zero advertising alternative to 500 channels with nothing on. I'll forgo my paeon to video podcasts and other user-generated content for now. [See Also: WGA strike, ongoing, demand for residuals from online distribution of content]
Shorter me: AAPL is really a media distribution juggarnaut with proprietary software and hardware constantly reinforcing its dominance. Companies that just rely on selling actual widgets are so 19th century. Alas, it was not to be, China Kettle, Dryer & mp3.
Wow! Eva must have really drank more than her fair share of the koolaid.
ReplyDelete--------
While other MP3 player unit sales were down 9%, that's probably equally attributable to market saturation as well as Apple's Ipod.
http://www.orbitcast.com/archives/holiday-sales-for-mp3-players-went-flat-and-music-is-down-is-there-an-opportunity-here.html
--------
Apple TV is failing.
http://arstechnica.com/journals/apple.ars/2007/12/24/apple-2007-best-year-ever
"While this has been a great year for Apple, there have been problems. Lackluster sales of the "sort of a new DVD player for the Internet age," as Steve Jobs awkwardly described the Apple TV, has ensured the furniture metaphor will not become a table anytime soon. However, worse than the failure of the Apple TV in 2007, was the inability of Apple to bring video content to the iTunes Store. The impasse with the movies studios and NBC abandoning the iTunes Store means 2007 saw a decrease in the number of video titles available. Still, even this problem is small when considered against the spectacularly successful transition of Apple Computer."
-------------
Amazon is now starting to increasingly gain MP3 download marketshare. Itunes has a real competitor now. Amazon has all the major labels DRM free. Additionally, they have variable pricing which allows lower (as well as higher) pricing than Itunes.
http://www.businessweek.com/technology/content/jan2008/tc2008017_337958.htm?chan=top+news_top+news+index_businessweek+exclusives
Guilty. As. Charged. On 8th day God created the Mac. Steve Jobs can walk across the choppy waters of San Francisco Bay, etc.
ReplyDeletePeople always discount Apple without fully appreciating that they are not selling commodity products like HP or Dell or China Consolidated Hair Dryer. Apple sells a lifestyle for which increasing numbers of consumers will gladly pay a high premium. There is value added, but it goes way beyond that.
Remember, most people seldom act rationally in their own economic self-interest. Present company excepted, naturally.
And if that means I like my kool-aid, so be it. I won't tempt myself to spill more by looking at this thread again for at least 24 hours. I hope we can now return to our kind host's broader topic.
Ms. Peron:
ReplyDeleteiTunes sells licenses. If you don't think that's a commodity then I suggest you look into the business models behind NASCAP, RIAA, etc.
As always with commodity items, the pressure is on getting the raw materials cheap (and/or controlling access to them) and modulating markup to keep the market your own.
Apple sells a lifestyle for which increasing numbers of consumers will gladly pay a high premium.
ReplyDeleteThis season's cool always becomes next season's passe. It will happen with Apple as sure as the sun will rise in the east.
man... I've been wanting to short Apple, and I think Eva's given me the courage to do it.
ReplyDeleteGreat post, Hellasious. Thanks!