Wal-Mart has officially launched an online music store.
Having entered the online music market, Wal-Mart is now in direct competition with iTunes and Napster. The music industry has been slow to catch on to the great potential of online music sales and current online music providers are reporting strong sales. Apple Computers [AAPL] announced this month that its iTunes Music Store has sold 50 million songs with about 2.5 million songs being downloaded each week.
Many companies are now seeing the opportunities in the online music market with major players such as Microsoft [MSFT] and Virgin announcing their intention to join the market. Wal-Mart is in a strong position as it will be using its tried and tested sales strategy of undercutting its rivals on price, and will be charging 88 cents per download compared to the 99 cents charged by iTunes. Wal-Mart is also expanding the number of songs available on its website by 50% now its three month trial period is over.
However, some analysts are questioning whether Wal-Mart is really committed to the online music market, where margins are already low. It could be that the main reason for this new venture is to attract new customers to its online store in the hope of selling them other goods in this arena.
Total US retail eCommerce sales were $17.2 billion in Q4 2003, up 25.1% from Q4 2002, and sales are predicted to reach $65 billion in 2004. There are great opportunities in online home, grocery and personal care shopping, which are experiencing steep growth.
The Ticketmaster division of InterActiveCorp [IACI] reported that more than 50% of the $1.1 billion ticket sales were sold over the Internet in Q3 2003, proving that the online music business is big. By attracting this experienced group of Internet shoppers to new Internet shopping formats, Wal-Mart is making a smart move.
