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Retailers: Apple iPod demand iffy

Apple CEO Steve Jobs has said the product will be "the hottest gift this holiday season," but retailers say response may be more tepid. The iPod hits shelves Saturday.

When Apple Computer launched its new iPod MP3 device last week, CEO Steve Jobs said the product would be "the hottest gift this holiday season," but retailers say the response may be more tepid.

To be sure, the iPod, which goes on sale next month, is generating buzz among Mac devotees, but that interest may not translate into strong sales, according to retailers contacted by CNET News.com.

The device, about the size of a deck of cards, can store up to 1,000 songs. It was unveiled earlier this month and goes on sale Nov. 10.

The 6.5-ounce, stainless-steel device has a liquid-crystal display that shows the music artist's name, song title and album name. The iPod connects to a Mac using a FireWire port and can download an entire CD in less than 10 seconds.

It's an important product for Apple. For starters, the iPod is the company's first foray into the consumer electronics market and marks an effort to use Mac-powered devices to drive sales for its product line. The move comes with a question mark, however: Has Apple created another iMac-like hit or a well-designed but too expensive flop like its Cube?

The iPods will be sold online and through Apple's stores, as well as through the company's reseller partners. To make the iPod work, Apple may have to depend on a push from retailers, which have had run-ins with the company in the past.

Price worries
While the major national chains aren't yet taking preorders for the devices, an informal survey of retailers found that consumers are curious to see the machines, although somewhat cautious about their $399 price tag.

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 Apple's musical iPod unveiled
Steve Jobs, CEO, and Philip Schiller, VP worldwide product marketing, Apple
"We've had a lot of calls on them, but some people are concerned about the price. At $400, some people seem a little hesitant, but it looks like a great product," said Kevin Molway, director of operations at Bitznbytes in Concord, N.H. Bitznbytes is an Apple specialist, and about 80 percent of its business comes from Apple products.

"We are taking preorders, but there's not a lot of demand. I haven't had people saying, 'Get me one, get me one.' I'll probably order four or five to keep in stock," Molway said.

A spokesman for Circuit City said the chain hadn't decided whether it would carry the new devices. CompUSA is not doing any major marketing pushes this week, but some local stores are taking preorders for the devices, according to a spokesman.

An Apple spokeswoman said that although the company has been accepting orders for the devices in advance of delivery, it doesn't have any information about how strong demand is. The company didn't disclose at launch how many iPods it would produce.

Will Apple faithful be enough?
Apple fans are definitely turning out, said Jason Wu, senior merchandising manager at catalog and Web retailer Micro Warehouse. The company is accepting orders for the devices now, and demand has been higher than expected, he said.

Historically, Apple's core consumers flock to buy new products, retailers say, adding that the real test is whether the company can attract new customers to Apple.

"History shows that we get the first wave of people who are big Mac fans. I would say the (test of) real demand would come out after," Wu said.

While analysts praised Apple's entry into the MP3 market, they expressed concern that the cost of the device--$50 to $100 more than some competitors--could be a sticking point for some consumers. The fact that the iPod only works with the Mac OS could also limit its potential, analysts said.

Jobs said that Apple will look into making the iPod compatible with Windows, but for now, the company is focusing on the Mac OS.

"Given Apple's positioning of the product, it is likely to capture only a small share of the MP3 player market despite its breakthrough features," wrote Needham analyst Charles Wolf.

The iPod gets credit for a more attractive design and better features than many MP3 players, and Apple's marketing experience should also be a boon. Even with the price and compatibility handicaps, the iPod "will be more palatable for mainstream users than other solutions on the market," wrote Goldman Sachs analyst Joe Moore.

Still, that price hurdle could come back to haunt Apple.

"There's been a lot of interest, but many people are waiting to see it when it comes in. People have to make a serious investment in the concept," said one salesperson at a New York retail store that specializes in Apple products, who asked not to be named. "I've ordered about 20. As a Mac specialist, I have to have them even if I don't want them."

Staff writer Tiffany Kary contributed to this report.