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Shelf Space Wars

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Apple is mystifying the public again. Pushing out new models in multiple configurations virtually every month, it seems that Apple has launched more new Macintoshes in the last six months than in all the previous years that the Mac has existed put together. "I can't keep up," Jane and Joe Consumer cry. "Why so many?"

Apple declines to comment, but I think I know, because I know their motivation, and motivation determines method. The motivation is increased market share. The method is shelf space war.

In retail sales, each store has only so much shelf space for any type of product. Manufacturers always clamor for as much of that finite space as possible. Having more space generally means better market share.

For example, let's say that American Products decides to enter the widget industry. Since most stores have already allocated as much shelf space to widgets as they are likely to, a widget brand will have to be dropped so that American Widgets can be sold. This is why companies find it difficult to break into markets with well-established product lines.

Some companies discovered they could do even better by expanding their product lines. Let's say General Widget is a successful widget company, and they decide to sell three new kinds of widgets. Because General Widget products have been successful in the past, most stores will sell the new General Widgets, but they probably won't expand the shelf space assigned to widgets. That means that stores will have to drop some other brand of widget so they can sell General Widget's new widgets. General Widget gains in two ways: first, if the product is good, they sell more, and second, some of their competitors are no longer sold. Thus, General Widget gains market share with little effort.

The classic example is soup companies. Campbell's Soup won the shelf space battle years ago, dominating the market with something like 100 soup flavors. Many of those flavors don't make any money, but they keep the shelves filled with Campbell's soup cans and fewer Progresso soup cans.

Apple is doing the same thing in the computer industry. In the computer superstores, shelf space is at the same premium as at the supermarket. Currently PCs take up the majority of space, not just because there are more PCs sold, but also because more companies sell PCs. PCs, in essence, have lots of brands that force Macs off the shelves. Apple has decided to fight back, I believe, by selling more and more models so that they have need for shelf space. Smaller computer companies will be shoved out, and Apple hopes it will pick up market share.

Apple certainly has other motivations like creating a more diverse line to compete with the variety of PC clones, but their main thrust, it seems, is to increase market share by doing what the soup companies do.

I wish them luck.

 

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