In its second-largest acquisition, Amazon buys the company for $970 million.
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ITunes’ retailing prowess was clearly evident in the weeks immediately after it began offering videos in mid-October. By November, Apple announced more than 1 million videos had been downloaded from the store.
Overall, music fans have downloaded more than 300 million songs from iTunes since its launched in April 2003. The store has also become an international brand with a presence in 19 countries and reaches more than 70% of the global music market.
Beyond its prowess as a music retailer, iTunes has even helped bring viability to micropayments on the web through its iTunes gift card, which is aggressively marketed online and offline. With single songs sold for 99 cents, videos for $1.99 and CDs starting at $9.99, the card has proven to be a popular, low-cost alternative to accepting credit cards for transactions of $2 or less.
“ITunes has created a seamless and easy-to-navigate environment for consumers to buy digital entertainment,” says Geoff Wissman, vice president of Retail Forward Inc.
Which has made the retailer a popular culture icon in its own right.
Hollywood couldn’t write a better script. A tiny upstart launches a market that takes the establishment by surprise and thrives against huge rivals. Despite the odds, the upstart takes one of its biggest rivals under its wing.
The star of this story is, of course, Netflix Inc., the brainchild of movie buff founder and CEO Reed Hastings, who in 1999 changed movie rentals by launching an online service with no late fees. Netflix.com grew quickly, attracting the attention of Blockbuster Inc, the king of video store rentals, and price-cutter Wal-Mart Stores Inc.
Despite having to fight off aggressive moves from Blockbuster to offer consumers a mixture of online and in-store rental services, Netflix continues to excel at pleasing customers. In a study of the 40 largest retail web sites this year by ForeSee Results and FGI Research-in which a score of 82 out of 100 was considered superior-Netflix scored 85, the highest of the bunch. Why? Because it exceeds customers’ expectations, the study found.
Netflix’s ability to provide useful online information about movies and deliver them quickly to customers continues to pay off in dollars as well. Its third-quarter revenue rose 23% year-over-year to $174.3 million, as its number of subscribers swelled to 3.6 million.
“Netflix continues to shine as the leader in online DVD rentals with its exclusive new feature profiles, which allow a family to tailor their movie list to include different members’ choices,” says Sunita Gupta, executive vice president of retail consultants LakeWest Group.
With the prospect of digital movies downloaded directly over the Internet-a service already offered by Comcast-Netflix has other challenges ahead. But with its takeover this year of the online movie rental business at Walmart.com, it stands to reap an even bigger subscriber base and benefit from co-marketing efforts.
Hastings notes that digital downloads are still limited by the number of available movie titles and the number of consumers equipped to receive them, but as downloads take hold with more titles and buyers, and computers do double duty as video screens, don’t expect Netflix to fade into the sunset. After all, it has all those subscribers, and its story line so far suggests it will continue to play a major role.
When Newegg.com, a retailer of computer equipment and consumer electronics, launched in 2000, it wanted to give tech-savvy shoppers an experience beyond what they would find in a retail store. The company set out to accomplish that by building a large product selection and by offering competitive pricing and top flight customer service and fulfillment. “We have no face-to-face time with the customer,” says Howard Tong, vice president. “The web site is really the only sales front that we have.”
Newegg has built a reputation for offering quality service to do-it-yourself techies, gamers, information technology professionals and what Tong refers to as digital lifestyle persons who make up its customer base. Newegg has eight, custom-built, state-of-the-art logistic centers that ship 98% of packages within 24 hours. And it has a call-center in California that handles only customer service.
To give customers a superior retail experience, Newegg also posts “massive amounts” of photos of new products. That includes shots of all sides of the box and packaging, all sides of the product, all accessories, manuals, CDs and wiring. “Since we don’t have a storefront, you can’t touch or feel or smell the product,” Tong says. “We decided to simulate that retail experience as close as possible.”
Not only does Newegg sell hard-to-find parts, it also provides links to forums for customers to exchange ideas on everything from assembling equipment to troubleshooting. Newegg also has a large customer-review base, where customers can ask questions, give advice or comment on new products, and it posts expert opinions, specifications and other information from manufacturers, and other content. “You have everything you need at your fingertips,” Tong says. “We make it easy to navigate, easy to find, easy to check out, so it becomes a source for not only buying products, but for learning about products.”
Newegg’s customer-centric approach has helped it attract a loyal customer base, says Patti Freeman Evans, retail analyst at JupiterResearch. “Newegg has made it easy for people who really are intensely interested in this information to both share it and get it,” Evans says. “That creates a great bond with the customers because they know this is the place to come even if they’re not going to buy something today.”
After losing its reputation as a leader and innovator in direct to consumer sales, SonyStyle.com is returning to its roots as a branding tool that delivers the information consumers need to make the decision to purchase Sony products on a repeat basis.