The Vista Sales Numbers: Anatomy of a Wash

So if the conventional sales channel is indeed becoming the online channel for software, whereas physical storefronts are becoming the "legacy" channel, has the software market evolved past the need for operating system overhauls every five or six or seven years, in the vein of Vista?

"That is a hypothesis; I don't want to say it couldn't happen," Swenson responded. His case in point is Apple's .Mac online subscription service, which Apple sells through retail outlets. It contains nothing more than what a Macintosh user might purchase online - literally a license key for a software subscription that the user registers over the Web. Yet retail sales for this item that doesn't theoretically require a box, remain strong and growing by NPD's estimate.

"Apple realizes something fundamental about the retail channel," said Swenson. "It raises awareness about products that enables a sales rep to throw that additional sale onto the hardware...Stuff is tangible in the retail channel. [But] there's also awareness. People still like to browse aisles, and there's search costs involved with doing heavy Web surfing. People have limited time, they've got stuff to do, they can't sit there and search for 50 hours to find the best deal on the Web."

By "search costs," he's referring to the economics concept advanced by Nobel laureate Prof. George Stigler, beginning in the 1960s. Stigler researched consumers in the era before e-commerce, when they researched major purchases by perusing catalogs and shuttling themselves between shopping malls.

He came to the conclusion that consumers will research their purchase until the point where they conclude that their "search costs" -- perhaps weighed more psychologically than monetarily -- will have exceeded the value of any further information they might acquire. At that time, Stigler believed consumers would decide to make the purchase or not.

Swenson is taking this idea a few steps further. Despite online tools such as PriceGrabber, he believes the online shopping experience for most consumers remains daunting, even if they're doing online research for products they'll purchase in conventional retail stores later. In a strange way, consumers may be becoming more exasperated through the online experience than through retail browsing, based on his read of NPD surveys of consumers and their shopping habits.

The exasperated customer is a dangerous one for conventional retailers to approach. But Swenson believes this is where conventional methodologies can close the sale, including the presentation of a simple box that's packaged and marketed well enough to warm up the consumer's heart. The box itself becomes the product's best advertising.

"If you're not advertising heavily, how are potential customers going to become aware of your product? It's hard if you completely ignore retail; it's an added weapon in your arsenal of things to target."

So the picture Chris Swenson paints is an unexpected one, which perhaps none of us anticipated: a picture of a market that has shifted more toward e-commerce, but in such a way that is agitating the consumer rather than satisfying him. In that picture, conventional retail still plays a role: as not just the solution but the cure for the consumer's headache.

As long as there's shelf space for Windows, there may continue to be a "next version," a "Vienna" or "Blackcomb" or whatever. The market may have shifted, however, and the headaches will have shifted with it - from the consumers to the analysts.