Sixty-Six

Tuesday, 27 May 2008

This story from Joe Wilcox a little over a week ago is really quite something:

Apple’s retail market share is 14 percent, and two-thirds for PCs costing $1000 or more. Should I repeat those numbers? The share data is for first-quarter brick-and-mortar stores, as tabulated by the NPD Group. Apple’s market share is but one measure of success. Sales growth is way up, while Windows desktop PC sales are way down.

Just to clarify, this is just the U.S. brick-and-mortar retail market. So it doesn’t count PCs purchased by IT departments (which don’t buy retail, and which do buy $1000+ machines), but it doesn’t count computers purchased via the web, either. So it’s just a slice of the overall market, but an interesting one, because retail sales generally indicate individual preferences. Most people don’t get to choose the computer they use at work, but they do get to choose the one they use at home.

The idea that Apple now sells two-thirds of retail computers costing $1000 or more is simply stunning. I (along with many others) have long argued that a simplistic “overall PC market share” number has never been a good metric for gauging the Mac’s success because the “overall PC market” includes millions of commodity-level low-end machines that Apple neither tries nor wants to sell. Back in 2003, I wrote:

The analyst Baker is on the right track with his “Acura sports cars vs. Taurus station wagons” analogy, but it isn’t quite right. The idea of overall PC market share, as currently conceived by IDC, is not so much like overall automobile market share as it is like overall motor vehicle market share. It’s like counting everything from golf carts to tractor trailers as a single category, thus making the “overall market share” look worse than it is for a company that only makes actual passenger cars.

And, similarly, I’ve long held that Apple’s share of the overall profits in the PC hardware industry would be a far better measure of success than their unit sales share, in that their product line eschews the high-volume/low-profit commodity market.

Paul Thurrott frames this new sales data as simply proving that “Macs really are more expensive than PCs”. One could easily (and rightly) quibble with Thurrott’s analysis in a slew of ways — that, no, comparably equipped Macs actually cost around the same or even less than similar PC machines — but in a way he’s right. Most “PCs” sold today cost less than $1000, and but for the Mini, all Macs cost more than $1000. Which means Apple’s recent market share growth is far more impressive than unit sale numbers indicate.

In fact, given that the Mini is Apple’s only sub-$1000 machine and that typical MacBooks and iMacs aren’t even that close to $1000, I strongly suspect that if NPD’s numbers were more granular, Apple’s share would be even more dramatic at higher price ranges: $1500+, $2000+, etc.

So the striking thing about this report isn’t that the number makes Apple look good, it’s how much better Apple is doing than just two years ago. These fantastic numbers are not how it’s always been. Philip Elmer-DeWitt reports:

Still, Apple’s share of the $1,000-plus retail market was less than 18% in January 2006 according to NPD. By September 2007, it had grown to more than 57%. And in the first quarter of 2008 it hit a record 66%.

So from 18 to 66 percent in two years — in what had seemed until very recently a relatively old and stable market. In short: people who care about computers, at least insofar as “caring” means “spending over $1000”, are switching to Macs. Interesting.