SIC 5734 Computer and Computer Software Stores

 
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SIC 5734

This industry consists of establishments primarily engaged in the retail sale of computers, computer peripheral equipment, computer printers, and computer software. The wholesale distribution of these products for business or professional use is classified in SIC 5045: Computers and Computer Peripheral Equipment and Software.

NAICS CODE(S)

443120

Computer and Software Stores

INDUSTRY SNAPSHOT

In the early years of the twenty-first century, after the explosive growth of the 1990s, computer sales began to plummet, due to factors that included a weakening economy, stiff competition, and price deflation. Although the industry rebounded slightly in 2003, it was positioned for restructuring. By the mid-2000s, the increased influence and market share of online retailers for computers and computer equipment was growing. Computer stores had stiff competition from online sales and manufacturers-turned-retailers, especially Dell.

However, large office superstores and computer superstores, which added in-house customer service and technical support to combat past reputations for poor quality, continued to drive down prices and strengthen their position in the market, forcing traditional stores to diversify product lines in order to keep up with competition. Industry leader CompUSA was turning toward different product offerings, such as software on demand. There were fewer small computer specialty stores.

Apple looked at increasing its market share through consumer awareness and exposure. In 2003, two years after the first Apple retail stores opened, there were 70 locations across the country. Of the more than three million people who walked through the doors between April and June of that year, only 50 percent already owned a Mac computer.

BACKGROUND AND DEVELOPMENT

The first computers were developed in America during World War II, but it was not until 1953 that computers were sold commercially by companies such as IBM, General Electric, Honeywell, and RCA. These companies were involved in the manufacturing of computers for scientists, mostly at universities. The early commercial market was geared mainly towards large industry, which could afford the new and expensive technology. Eventually, these industry pioneers also started to market smaller and slower computers to a wider market.

By the 1960s, more than 5,000 computers were in use in the United States. During the 1960s, the number of computers doubled every two or three years to more than 40,000 by 1970. As computers grew in number, they became more reliable and faster, but their cost remained high.

Until the 1970s, the United States and Canada led the world in computer use and sales. After that, technology overseas has met that of North America, and computers worldwide were estimated to have grown at a rate of 20 percent per year at the end of the twentieth century.

The commercial sale of personal computers and easy-to-use software, developed in the 1980s, boosted the retail industry. Retail sales of computers were no longer directed only at large businesses. Instead, the target market for computer and software dealers extended to small businesses, schools, and individuals for at-home use.

Personal Computer Sales

In 1990 an estimated 9.5 million personal computers (PCs) valued at nearly $28 billion were sold through retail outlets in America. Personal computers are general application computers with local programming abilities. PCs are grouped into two types, stationary and portable. Stationary systems are mostly desktop, deskside, or "tower" systems, and made up about 80 percent of PCs sold in the United States in 1993. The remaining 20 percent were portable systems such as laptops, notebooks, and handheld or pen-based systems.

The availability of PCs in a variety of retail outlets increased dramatically in the late 1980s. The intense competition spurred reduced prices for consumers. According to Link Resources, by 1993, 67 percent of small businesses (those employing fewer than 100 workers) had PCs. Another large market for PCs has been home worker households which, in 1993, purchased more than two-thirds of the PCs sold.

Workstation Sales

Businesses in this industry also sold low-end workstations. Workstations are single and multi-user microprocessors, with the low end of the market very similar to PCs. Since their introduction in the early 1980s, workstations have been sold mainly for scientific and engineering use. In the 1990s, they became more popular with businesses, which use them for electronic publishing, financial services, and office automation.

Software Sales

Software products sold by retailers in this industry included word processing programs, computer games, accounting packages, and software components for on-line services. In 1993, the leading software packages sold through retailers in America were MS-DOS 6.2 Upgrade, Adobe Type Manager Font, Turbo Tax for Windows, Quicken 3 for Windows, and MS Works 3.0 for Windows. According to the Software Publishers Association, sales of PC applications software alone reached over $3 billion in the United States and Canada in 1993.

Software dealers rely strongly on product trends set by technological developments and software producers. Software products available on the market increasingly are concerned with meeting the needs of children, families, and small businesses.

Marketing

Compared to other retailers, companies in this industry have spent relatively small amounts on advertising. This trend is in part due to the fact that the major computer and software manufacturers carry out product advertising rather than retailers. As a specialty retailer, this industry advertises less, mainly in computer magazines and on-line services rather than in the more costly mediums of television and...

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