The second largest category was computer hardware, which was number one lsat year.
And while history has shown us what competition will do to margins in an increasingly commoditized hardware category, this is a new type of cycle where margins have held up for Apple despite competition.
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Tablet-style computers a moribund hardware category until the iPad started generating buzz earlier this year are expected to be a big topic at next week's Computex trade show, a major forum for product announcements by manufacturers of personal computers.
One bright spot should have been sales of the iPod digital music player, which Apple breaks out in the "peripherals and other hardware" category.
While unit sales of most of Apple's computer lines were down in the fourth quarter of 2002, sales in its "peripheral and other hardware" category, into which the iPod falls, grew by more than 50% versus the year-ago quarter.
Clothing sales made the biggest breakthrough last year, with apparel and accessories displacing computer hardware and software as the top non-travel category in online retail.
With the popularity of the Apple (AAPL) iPad, there has been a rush by hardware manufacturers and chip makers alike to rush into the category, which had been pretty sleepy until Apple entered the market.
This dominance in the used-game category, coupled with the launch of the current generation of videogame hardware, such as Nintendo's Wii and DS, Microsoft 's Xbox 360, and Sony 's Playstation 3 and PSP systems, has resulted in outstanding growth since the acquisition.
Both console makers have taken an unusually long time to update the hardware that is crucial to driving demand in the lucrative game category.
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That will change this year as hardware makers, eager to stake a claim in a hot new gadget category, are lining up to take on the iPad.
For hardware marketers such expectations raise pressure for fast product cycles, but on the upside it also indicates the category is far from maturation.
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