Ph.D. in NPD

Yesterday, I listened to Paul Thurrott’s podcast with Leo Laporte, and they discussed NPD data. In addition, a number of blog comments have asked questions about it. I thought it might be useful to walk through what NPD is so folks can evaluate the numbers they hear about.
NPD is a huge analyst firm that owns a specialty business tracking consumer Point of Sale data.
Their goal is to get all of the major retailers in the US to share their sales figures each month. So when you hear sales numbers from NPD, they’re actually the sales figures provided to NPD by the actual retailers – not some consumer survey, not a sample, but the real thing. I’ve spent a lot of time swimming in NPD data for the last few years, and in my experience where I’ve been able to compare sales figures from npd per retailer with actual sales figures, they turn out to be scarily accurate.

The nut with NPD is that they haven’t been able to get all retailers to share data. In the mp3 space, they’ve been very successful – the key breakthrough came a year or so ago when they convinced Apple to share both apple store and apple.com sales figures. So how good is NPD coverage? Actually, it’s excellent. They cover Apple, Best Buy, Target, etc… covering 80% or more of all mp3 players and accessories sold in the United States.

They lack a few key retailers, but the only ones that really matter are Costco and Wal-mart. Together, those are around 15% - 20% of this category. They also miss Amazon (but excepting aapl, online sales are also only a small % of the sales). Everything else they miss put together is noise.

NPD data is very high quality, and it’s also amazingly granular. An npd report is a huge list of every mp3 player SKU and model, along with the monthly sales figures going back 2 yrs or more. Once you’ve got that, you can get a zillion useful analyses. What color ipods sold best last month? How much of a sales bump did apple get when they dropped price? What’s Zune’s market share of the mp3 player space? Of the HDD space? How about Sandisk’s? What % of sandisk’s sales are above a $100 selling price? It’s amazingly useful.

NPD also covers a lot of other categories, including networking gear (including networked music/video devices) and mp3 accessories. Those are obviously useful and interesting too, though less sexy.

What can't NPD do? Several key things:

• They don't share per retailer numbers, so you can't find out how many pink ipod shuffles Target sold in February
• they don't cover international, US only.
• They don't cover 100% of retail, so you must gross up based on assumptions to get to the absolute number in the US.

But overall, NPD is a crucial tool in thinking about the space...as long as you keep the caveats in mind.