Grab an Apple and a bag of chips

By Published on .

An iPod vending machine has the tech world bloggers buzzing: Is it for real? How do you pay for them? And, most importantly, does the MP3 player drop like a bag of M&M's?

Yes, with a credit card, and no, a robotic arm picks it up and delivers it to a tray. Still, consumers are agog at pictures posted around the Web showing the iPod box in a tray behind glass along with other electronics like digital cameras and earphones, in Zoom Systems' Zoom Shop machines at the San Francisco and Atlanta airports.

But while a vending machine-or rather, an automated retail machine-may seem an unlikely place to find an iPod, it's actually just an extension of Apple's aggressive retail distribution of the iPod.

The real story is the way Apple has opened up to outside retailers and distributors. NPD Group analyst Steve Baker said, "With the iPod, Apple is much more willing to expand their distribution and make sure the product gets into as many hands as possible."

For the first time, Apple seems willing to give up its tight control over the retail experience for the sake of widespread distribution. The proof is in Apple's attitude of viewing the Zoom machines the same as it would any third-party retail agreement such as Best Buy or Circuit City, said one person familiar with the matter. Apple and Zoom did not return calls for comment.

`LIMITED REACH'

"The Apple brand has plenty of strength, but it's got limited reach," said IDC analyst Roger Kay.

That's something the company was ready to change to capitalize on its wildly successful MP3 player. Apple already claims more than 21,000 distribution points for the iPod (it has 4,000-plus for Mac), and analysts expect that to continue to grow rapidly. Those points are in addition to Apple's own 105-plus retail stores, of course. But do the math-a lot of "outside" connections and brand associations are being made to sell the iPod. So far the far-and-wide strategy has added up to a lot of sales. The Apple iPod now commands a more than 90% share of all hard-drive sales, and the recent addition of the iPod shuffle devices gave Apple a 58% share of the flash-drive market in March, up from 43% in February, according to NPD.

"I would say the distribution strategy has supported the sales growth rather than the other way around," NPD's Mr. Baker said.

But does the strategy also add up to a lot of risks? Some have wondered if so many contact points risks an over-dilution of the product.

"If someone screws up, it could do some minor damage to the brand," Mr. Kay said. "But ... ultimately, it's a good thing because Apple in the past has probably been over-controlling and not experimented a lot in leveraging the brand."

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