NPD Group Blog » The Canary In The Coal Mine Is Still Breathing Heavily

The Canary In The Coal Mine Is Still Breathing Heavily

Friday, April 17th, 2009
By Stephen Baker, Vice President, Industry Analysis

PC software has oftentimes been linked to the canary in the coal mine. As purchasing and downloading software virtually has become so pervasive some say PC software is the precursor to the death of the store, just like the canary warned the miners of old. In that spirit I would like to point out that NPD just released a new report from our software group about online software purchasing. One of the issues we highlighted in the press release deserves more insight as it directly addresses this. According to the report, 63% of PC software sales online were downloads, that is a virtual sale and delivery, but approximately one-third of those folks opted to also have a shiny disc sent along. And 37% said they didn’t want a download, just the disc (and the pretty box!!). Adding it up that means that 59% of all online buyers wanted the box. So, while some segments of the industry may tout that virtual product and the cloud will make the store (or the box) obsolete, the consumer’s perception is not quite the same.

No one is going to claim that PC software is a retail growth segment (according to NPD’s retail tracking service sales dollars from PC software have been essentially flat, at around $3.4 billion over the last four years). And although our online channel tracking has grown from 11.5% of sales to 17%, there is still an appetite from the consumer for the physical manifestation of the product. As my colleague Russ Crupnick pointed out a few months ago in discussing music, there remains tremendous value in the disc, and I would add, in the store it was bought in. So, although online sales are gaining share consumers are still treating those purchases much like they would a purchase in the store, and seeking the safety and comfort of the physical media. There is no denying that content like PC software, movies, and music are losing space in the brick and mortar world, but we are far away from an industry where either the shopping or the content is delivered digitally. If one-third of all buyers who actually downloaded their software then asked for the disc too, then I would posit that the day of the virtual store (and virtual content) is still pretty far away.

The web enthusiasts would have us believe that everything will be in the cloud and exclusively online and they are eagerly singing that song. But at least for a solid majority of consumers the canary is still in full voice.

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