Distribution 2.0: The shelf wars are over

The shelf wars are over. Thanks to the Web, software distribution has changed. It used to be that to sell your software, you had to get space on the shelf at Best Buy or Staples. Those days are over.

Now users shop for software online – and increasingly they shop for web based services to meet their needs because it is easier than going to a store, and they don’t have to deal with the headaches of packaged software like installation updates, system and compatibility issues, data back up, etc.

What this means is the bottom is falling out for incumbents. Companies like Intuit achieved 87% market share by winning the shelf war. Today companies like FreshBooks go direct to consumers using the web. Perhaps it is by selling to them via advertising online, or – as in the case of FreshBooks – by benefiting from the increased efficiency of word of mouth that the web makes possible. Whichever it is, it’s not by owning the shelf.

Since change begets opportunity, you have to ask: who benefits from these new realities of distribution and who gets hurt? Clearly, it helps us little guys because the big guys can’t muscle you off the shelf in the big box stores like they used to. Who does it unsettle? Anyone who has built massive market share and counts on it to sustain their market cap. I’m thinking of Inuit and Microsoft primarily.

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  • http://web3skills.com Chris Schmitt

    Placing product on shelves via the ‘old’ software distribution model is very costly and inefficient so I’m glad to see it go. Plus you don’t necessarily get the best product.

    I think the biggest losers are the retailers who will see a high margin product line go away (not unlike what’s happened to music stores). The big software makers will have to adapt and I think they have for the most part – Microsoft and Adobe for example, sell a ton of software online.

    The big winners are the consumers who now have access to far more innovative and useful products. Moreover, these products have to earn their way into the consumers home or business by providing good value.

  • http://www.freshbooks.com/our-team.php#mike Mike McDerment

    @chris – totally agree – all this is *great* for consumers.

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  • Brian

    I don’t miss shrink-wrapped software but the inefficiencies of that distribution model sometimes benefitted consumers, in as much as there had to be a certain level of demand before something was available, and a level of demand implies something worth having. Now I can have anything but spend ages trying to find independent reviews of competing products to pick winners.

    On the flipside, web app’s are excellent when you have a minimal or occasional requirement that would never have justified buying shrink-wrap, but you can pay as you go at a good price. And I think the services you can get now *do* rival installed software in many areas. Still, horses for courses.