MP3 Accessory Market = Small Country GDP

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by Josh Ray on August 02 '06

Seems the iPod and MP3 player accessory market has gone from a $50 million a year biz in 2001 to a $2 billion juggernaut today. Over 200 manufacturers have jumped on the shiny white bandwagon thus far. Interestingly, the majority of purchasing seems to happen between the ages of 18-34 which, incidentally, is right where the high-end audio demographic begins.

More interesting for the electronics and audio industries is the brick and mortar's continued dominance in the segment. From the Research and Markets Report:

Retail competition is fierce as mass merchandisers fight for a larger share of the consumer electronics market, but electronics stores still seem to be the most likely place for consumers to purchase MP3 players and accessories. When respondents to the consumer survey were asked where they bought their last MP3 player, 49% did so at a store, compared to 27% who made their purchase online. This is probably due to a desire to interact with products before purchase, and a preference for immediate gratification rather than waiting for delivery. Best Buy, the largest electronics store in the U.S., is also the retailer most popular with respondents, since 22% purchased their last MP3 player there. The company has stated that MP3 products are driving average ticket prices, and it merchandises Napster subscriptions and iTunes gift cards alongside MP3 players.

There ya go, interact with products before purchasing. If it's critical for the iPod market, which one wouldn't think would be the case, then it's absolutely critical for the hi-fi world. Near every product in existence has a great review by some publication or other, but that doesn't mean one can purchase a whole bevy of equipment from around the net and put together a great sounding system. Is internet purchasing (both new and used) not only hurting retailers but also hurting the overall quality of sound systems?


Another factor not mentioned: Best Buy (and their ilk) benefit from Internet merchants who advertise and promote MP-3 players to customers who say, "That looks pretty cool. I'll go down to Best Buy and check it out." That's free advertising that has to be worth millions -- as if Best Buy needed free promotion to go with the millions they already wrangle out of suppliers. As for your question, certainly it lowers average quality by percentage. But how many additional stereo customers does it bring to the table? My guess is plenty -- particularly if somebody gets started with an auction-site deal they can't pass up and then decide to upgrade everything else too. So my answer is (like most things): yes and no.