Wal-Mart has entered the online music market and is using its already proven strategy of undercutting its rivals on price to win sales. However, Wal-Mart's commitment to the online music market, where margins are low, is questionable. The main reason for the venture could be to attract new customers to its online store in the hope of selling them other goods.
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 announced this month that its iTunes Music Store has sold 50m songs with about 2.5m songs being downloaded each week.
Many companies are now seeing the opportunities in the online music market with major players such as Microsoft 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 per cent now its three month trial period is over.
Total US retail eCommerce sales were $17.2bn in Q4 2003, up 25.1 per cent from Q4 2002, and sales are predicted to reach $65bn in 2004. There are great opportunities in online home, grocery and personal care shopping, which are experiencing steep growth.
The Ticketmaster division of InterActiveCorp reported that more than 50 per cent of the $1.1bn 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.