iTunes Store growing threat to Asia's retailers

Apple's digital store offering sought-after content and easy payment method fuels competition with brick-and-mortar merchants, especially in markets such as Hong Kong and Japan, observers say.

With the rollout of iTunes Store across more Asian markets, industry watchers expect the digital marketplace to pose a threat to physical outlets particularly in markets where popular music and movie content can only be accessed through such online platforms.

Last week, Cupertino launched its iTunes Store in 12 Asian countries including Singapore, Hong Kong and Taiwan. This gives customers there access to digital content such as music and movies, which was previously unavailable.

Kuninori So, partner and vice president of Japan at ROA holdings, a research and consulting firm, noted that in terms of the music market, the iTunes Store is definitely a threat to brick-and-mortar music stores, as it provides an easier and cheaper way for consumers to obtain music.

"The [physical] shop is threatened not only by iTunes but also e-commerce, illegal downloads, and device transformation from feature phones to smartphones," So added.

The availability of Cupertino's iTunes Store will also pose different levels of threats to different Asia-Pacific markets, Benjamin Cavender, associate principal of China Market Research (CMR), observed. Merchants in Hong Kong, South Korea, and Japan, for example, will face more pressure from Apple's digital content store because the latter has popular, exclusive content that cannot be sourced from elsewhere, he said.

However, in markets such as China, music, movie, and TV content are widely available both through physical stores and video streaming sites such as Qiyi, which is offered by Internet search giant Baidu. Thus, Apple's iTunes Store will not pose a great threat, Cavender noted.

Difficult for merchants to respond
The CMR analyst also pointed out that as technology progresses, the demand for physical copies of CDs, DVDs, and even books will continue to decline , which will make it difficult for brick-and-mortar operations to survive.

Since such content can be easily gotten online, consumers no longer see the need to head to a store to examine the product before purchase, ROA's So added.

Yang Yanyi, an iTunes user, agreed. She told ZDNet Asia that with the availability of Apple's online store, the impetus for her to buy from retail outlets is lower as it is easier for her to get her content online now.

"Unless I really like a certain music CD or movie, I will probably not bother to buy the hard copy and keep the 'collectibles'," Yang added.

Marketing executive Olivia Chu said she has not been buying CDs for a long time and has been using YouTube to listen to her favorite tracks. As such, she is happy that Apple has opened up its iTunes Store in Singapore.

"Sometimes you only like particular songs on albums and you don't want to buy the entire album. iTunes lets me buy the songs I like and helps me save money as well," she said.

One retailer, HMV, said its business has evolved from being just a music store to becoming a full-fledged entertainment store over the past five years in order to stay relevant in the digital age. Now, it offers books, games, electronic goods, headphones, accessories, and fashion apparel too, in addition to music and movies, said Michele Tan, a company spokesperson.

"The future is definitely in digital formats but that is just part and parcel of the natural progression of entertainment. Vinyl and cassette tapes were replaced by CDs, and eventually CDs will meet that same fate be it by digital or another format," she said.

Cavender also suggested affected merchants follow HMV's example of adding new revenue streams, or look at ways to drive convenient purchases and carry niche content that is not necessarily available online.