iPod nano: Will small size mean big sales?

Posted by: Peter Burrows on September 13, 2005

It’s been pointed out many times that the appeal of Apple Computer’s iPods go far beyond bits and bytes. For most customers, it’s also about form, function and fashion. But the fashion business is a tricky one that doesn’t lend itself to nice predictable demand curves. It’s a hits and misses business. It just so happens that Apple has had very few of the latter in recent years.

So what about the new iPod nano?

While the product has just hit store shelves, early indications are a bit worrisome. In a report today, Shaw Wu of American Technology Research says initial demand for the just-released iPod nano is "good, but not great." While the iPod mini immediately sold out and was on back-order at most stores for its first six months, most Apple stores have sold only about a fifth of their stocks, he says. Other informal channel checks seems to suggest the same muted reception. As for me, I stopped into the Apple Store on University Ave in Palo Alto, and saw shoppers spread out throughout the store--with no crowding to have a look at the new nanos.

Why the lack of round-the-block lines? Some analysts look to the iPod nano's product specs. At $200 and $250 for two and four gigabyte models, Apple is asking consumers to pay about the same as they did for the iPod mini, which came in four and six gigabyte configurations. In other words, there's slightly less storage space for the buck.

But if the nano doesn't pan out as a blockbuster, I bet it will be for a reason that goes beyond a few bucks difference in price. It will be that Apple misjudged the power of the unit's "impossibly small" size as means to generate new sales.

I don't know if anyone else who was there would agree, but that possibility seemed palpable to me even as Jobs was giving his keynote presentation to announce the product on Sept. 7. Sure, there was far more excitement than there is for most tech product launches--but nowhere near the giddiness that accompanied the introduction of groundbreaking Apple products such as the initial Mac, the iMac, amd the iPod mini.

To be sure, I'm not saying the nano isn't cool. It is, without a doubt--as most reviews suggest (personally, even more amazing than the wafer-thin size is its light-as-a-feather weight). Nor am I saying that the product will bomb, like other fashion-heavy products on Steve Jobs' product resume. Apple's decision to discontinue the iPod mini line will make sure of that. For the millions that want an iPod, there's no other choice in the vast territory between the 1-gigabyte $130 iPod shuffle and the 20-gigabyte iPod at $300.

But that doesn't necessarily mean the nano will uncover a swath of new customers or new growth. That's the concern held by Harvard professor Clayton Christenson, author of the book, The Innovators' Dilemma. I called him the day after the unveiling of the Nano, assuming he would say that Apple's decision to kill the wildly popular iPod mini to make room for the nano was a text-book example of great companies take big risks to continually reinvent themselves. Instead, he's worried that Apple may be resorting to the same play--making the iPod smaller--too many times in a row. At some point, he argues, the product is small enough--and customers won't pay a premium, or pay at all, for further reductions. As he said in our initial story on the nano, "if you improve a product in a dimension of performance that really doesn't matter to the customer, you just end up spending a lot of money -- and in a sense cannibalize a beautiful product in a way that doesn't get you much more traction."

Whether he's right will have a major impact on whether Apple can sustain its remarkable momentum of recent years.

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Reader Comments

Andrea

September 13, 2005 10:13 PM

I think that apple should have the 2gb $100.00 and the 4gb be $150.00. $250.00 is reasonable but I woudn't pay it. ThankYou

John Westhoff

September 13, 2005 10:26 PM

For me, the fact that the Nano is flash-based is key. The mini was disk-based and disks can only take so much during prolonged exercise (my iPod hangs about 20 minutes into my run). I was waiting for a Shuffle with more memory. The Nano fits the bill.

Cody Willard

September 14, 2005 03:59 AM

As I wrote on Realmoney.com yesterday regarding:

"I don't know why Apple Insider continues to quote Shaw Wu from American Tech Research -- he's been bearish on Apple's (AAPL:Nasdaq) fundamentals for way too long to have any credibility left in my eyes.

Regardless, Apple took a hit when Apple Insider posted this: "Our checks indicate good, but not great initial sales of iPod nano," said Shaw Wu, an analyst for American Technology Research. "This may be surprising given the consensus view from both the investment community and technology reviewers that the iPod nano would be a big success."

Uh, yeah, that is suprising, because he's wrong. The nano is on fire.

Position: Net long AAPL"

FWIW, I've been long and writing bullishly about Apple and it's music strategies on Realmoney since the stock was at $7, split adjusted. But maybe Wu and the Apple bears can finally get the top called correctly this time!

Jim

September 14, 2005 06:21 AM

The biggest problem with the Nano is that it just doesn't look as resilient as the Mini. The iPod Mini had a great, scratch-proof anodized aluminum body that felt sturdy and looked great. The Nano lacks this. Plus, the availability of the Mini in a range of colours was a boon for the fashion conscious. The Nano looks nice, but is no Mini.

David

September 14, 2005 07:13 AM

Or, it could be because this time Apple didn't stagger the announcement and retail release of the Nanos and actually made sure they had sufficient supply to meet the initial demand. But that doesn't make a great story, does it?

niko

September 14, 2005 08:10 AM

You can't say iPod mini introduction was received with so much giddiness. Everybody said it was way too pricey then were surprised it had so much success several weeks later. The mini sold out mainly because stock was very very low at the beginning. Apparently this time Apple managed to provide several hundred nanos to Apple Stores in the first week. There is no serious comparison for now.

azntennisplaya87

September 14, 2005 10:41 AM

well i've been all around manhattan today and everywhere is sold out of the 4GB black ipod nano. everyone wants the black one and the 2GB is too small for most. so it seems that the ipod nano that really matters has been selling like crazy. a guy at the apple store in soho told me that it was sold out across the country.

Pip

September 14, 2005 11:10 AM

Mini was also introduced when the MP3 market was at its earlier phase, with hardly any alternative brand or product on par with the first generation IPOD. Secondly, Nano is introduced during a time when greater number of people already own an Ipod (mostly Mini), or more precisely, when greater numbers of Ipod owners also are recent owners. That said, it is not uncommon to find people who just RECENTLY bought an ipod whether it is a Shuffle or Mini or other series of IPOD, some as recent as months or weeks ago. Nano's fire is yet to be released and will be the greatest success the industry has ever seen, give it a few months, a tsunami success of Nano will shock the world.

Mike

September 14, 2005 02:31 PM

Apple ramped up the volume way higher this time (versus the mini). You can't post a story and ignore a basic understanding of proportions.

Why not base sales figures on the conjecture of one analyst with a shoddy record? Hey... why not...

Brett

September 14, 2005 04:27 PM

I think it's really cool.

David Schneider

September 14, 2005 07:28 PM

The idea was in the right place but the price was not. I think that Apple should lower the price somewhere in between the bottom price for a mini and above the top price for a shuffle, since it has more memory than the shuffle but less than the mini. with that in consideration I had been planning to buy a mini in the next few months but wanted something cheaper than a mini but more memory than the shuffle. The nano is the answer to all of my problems.

Wes

September 15, 2005 12:09 PM

I've been wanting an iPod for a couple years now, yet gasped at the $300+ price for something that I will likely use for a couple weeks and then put in the dresser.

The Nano has me thinking about finally making my iPod purchase - yet a Nano is not on the shopping list.

I've found the 20-gig iPod for just over $200 on some internet sites, and IMO, this is a much better deal than a 2-gig Nano for $199, or even the 4-gb Mini for $180.

I would consider the Mini before the Nano. The small size of the Nano does not justify the high cost.

Price the Nano 2gb between 125-150 and I'll be the first in line. At $200, I'll pass.

Cassandra

September 15, 2005 11:29 PM

I have owned the 40GB ipod for two years and can no longer tolerate its limitations at the gym. I came close many times to buying a shuffle but didn't feel totally compelled. The value and excitement of the Nano was immediate! The concept is brilliant... It took less than a nano- second to decide to buy one. I just couldn't decide between the black and the white. I decided to just go with my gut feelings...

Roger

September 16, 2005 09:44 PM

The reactions here really surprise me. It's NOT just about gigs of storage. The nano has no hard drive, yet holds 2 to 4 times what other flash based MP3 players will hold, at a very reasonable price point compared to those players. Given that you can put roughly 1000 songs on the thing with NO hard drive to risk breaking is just wonderful.
This thing looks really durable, based on tests I've seen on the web.

For me, the built in battery is a real turn-off on all IPODs. I'd rather have it be mini sized, but let me use AAA NICAD batteries. Then I have no limitations with battery life since I can carry extras, no downtime for charging, no worries about expensive L-ION battery replacement down the road, etc.

As a Windows user, a smaller issue is I really wish they'd allow drag and drop file transfer. Once I get my MP3's ripped from my CD collection -- let me manage my music as I see fit, and not fool with some lame application that pushes Apple's online music store.

If Apple wants to expand its market, user friendly features (or options at least) like these will be more important than just size.

AB

September 17, 2005 11:02 AM

I already own a 30 GB photo ipod, but am looking to buy the mini. But I guess I will wait until the price falls down by a few 10s of pounds before I more. Maybe sometime around or after the holiday season.

kenshin`

September 17, 2005 04:19 PM

I saw the nano 5 days ago, sold my 5 month old mini today, i was going to buy the 4gig nano tomorrow but its sold out everywhere here in singapore. That's how much appeal it had on me at least, so 2 weeks to go before the next shipment comes.. and i can't wait! :)

Wanta_nano

September 19, 2005 09:47 AM

The Nano is a bit over priced to be sure. The biggest problem with all of the iPods is the software that comes with it: iTunes. Garbage. I also wish that the Nano included at least one video codec so you could watch movies or videos on it.

Libae Lee

September 19, 2005 03:49 PM

Even if I used a iPod mini for a couple of months, I already want this iPod nano.

iPod is not just for music, but for fashion. all Apple products are. it may seems risky that Apple introduces iPod nano to the market where iPod mini currently dominating, but product like iPod mini is easy to be 'out of fashion'. therefore, companies like Apple must innovate their DESIGN as well as function as time goes by.

I think launching of iPod nano is even greater opportunity for iPod brands. can't wait to see that.

george

September 19, 2005 05:28 PM

No. It is not overpriced. Try to buy a 4 gig flash memory and see how much you will have to spend. This thing is not much bigger than a compact flash card.

venaden

September 20, 2005 02:53 AM

IPODS SIZE COMPARISON
http://www.arcanauo.net/SL/ipodscomparison.jpg

Jar

September 20, 2005 03:42 AM

I think that the ipod nano will be selling a lot due to the success of motorola's v3 razr. Since the razr lacks features such as an mp3 player, many people who own a razr would want to match their phone with this mp3 player. I can't wait. I'm gonna get the black nano to match my black razr. Yay!

Keith

September 20, 2005 04:34 PM

I cannot find one at any local retails. Best Buy has sold out on there web site. Circuit City's in the D.C. area are out of them in stores but have them in the infamous "warehouse". Apple should have thought hard about the white colored item being the big sellect. The black is really slick and new!

Mick Truss

September 28, 2005 08:02 AM

I just bought an Ipod Mini. I like the look and size of it. I don't care about a color screen or photos - I'm just interested in music and something that's strong enough not to snap if it's in my back pocket and I sit down.

Lily Persand

September 29, 2005 09:08 PM

Actually i own an iPod nano and have found them to be extremely durable. I'm a very clumsy/forgetful person and sit on it and drop my nano all the time. It doesn't have even one scratch on it and now i'll just put it in the back pocket of my jeans and forget about it...i love it!!!

Jay

September 29, 2005 11:08 PM

Take a look at http://arstechnica.com/reviews/hardware/nano.ars/3 to see simply the best real life test of the iPod Nano. For those who have heard rumours of the Nano being 'fragile', the results from what can only be described as very vigorous testing will amaze you.
I own a 60GB iPod photo, and ordered the 2GB iPod Nano as soon as it was released. I love my original iPod, but it looks like a tanker next to the Nano and it is my Nano which is now by my side at the gym instead of its chunkier big brother.

nick

October 5, 2005 10:23 PM

I can't find any Nano 4GB because they are all sold out, so how does one say that it's not a success. The 2GB is not, but the 4GB is on absolute fire, backordered everywhere. If apple can put the 4gb in stores, you'll see them everywhere on Dec 26th

Ryan

October 23, 2005 01:35 PM

I don't understand why they should discontinue the mini ipod just because they came out with the nano. I and many other people are angered by the fact that we haven't gotten one yet and now we have to search for some other source to buy them. Apple had a great thing going for them with the mini until they got rid of it. Sure people want a nano but we still want the minis too.

Van Lowe

October 26, 2005 02:04 AM

I went to the shop today to buy my ipod, i was wanting a mini but seeing as they are discontinued they only had a few pink ones left, now i didnt want pink, so i resorted to the nano, while i like the fact that the nano is olour screened i prefer the larger sized minis, perfect palm size, the nano feels as if you can crush it, so really i want a mini sized nano with the extra storage space, all up a 4gb nano packaged in a mini case =D

Brent Usry

November 26, 2005 01:13 PM

I bought the 4 gig Nano.
I am very happy with the product.
The size is perfect and it is constantly getting comments from people.
If sales are not going well maybe its because the Gas prices are so high and housing interest rates are on the rise.
If the same economic situation existed today as the release of the mini I believe the Nano would be a sell out.
Americans just do not have as much expendable cash today that they has a year or two ago.
Maybe writers should not spend so much time making light of the genius of Steve Jobs and start talking to the Government about Gasoline Prices!

bling bling

December 3, 2005 02:08 AM

Jo i think the nano is one supper awsome machine that should be worshipped, as me and me hommies do so catchya latter

erin

December 26, 2005 09:28 PM

i think ipod minis are better than ipod nanos. I ipod mini come in a range of colours and the covering doesn't scratch so easily as a ipod nano. my friend put her ipod nani in her pocket and when she took it out to change the song it was scratched horribly. i reakon if apple released the ipod mini again they should make it colours screen and maybe a tiny bit smaller. if they want top make ipod nano better they should put a protective case that can come with it

emily

January 1, 2006 02:21 PM

I am very satisfied with my ipod nano not only is the size so ideal but you can not help but fall in love with the colored screen. So what if they do not come in a colored exterior? Also, later on this year we should be seeing some clear protective cases for the ipod nano which is also on the apple site but not in stores - yet. Every store that I went to for my ipod was sold out. The only place that had my ipod was the apple store itself so from what i have seen the ipod nanos are in pretty high demand.

Jared

September 20, 2006 04:08 PM

You need to look at the new one. It's all color exterior, twice the space, same price.

matthew salt

September 20, 2007 09:03 AM

i agree with dave the pirate!! aarrgh

bruce thom

October 3, 2007 11:55 PM

purchased a black 4gig Nano at Future Shop for $165.00 Canadian (about the same in US$) - thats about half of what I paid for the first generation ipod nano two years ago - four times the capacity and will hold all the music I need for gym workouts and dog walking. I do think they should include a wall charger (I have one from the first nano which will work just fine) and at least a rudimentary arm band - $40.00 for the armbands (when they become available) is a bit over the top!

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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