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Charting The Shifting Retail Landscape

...to reduce in-store inventory from “months-worth to days-worth” in an effort to match online rivals. “Better supply chain management is critical,” says the CFO. Toys R Us is pressing its suppliers to “become more creative,” because the apparent lack of innovation is a drag on sales. Wal-Mart has pledged billions to expand its online presence because, “omni-channel is the way of the future,” declares the CEO. These examples underscore the fact that current challenges cut across all retail sectors, from the biggest mass merchants to the smallest mom-and-pop m.i. retailers.

M.I. retailers like to think of themselves as specialists, and with good reason. They can explain the difference between a Les Paul and a Stratocaster, show a customer how to chain MIDI products together, and provide the appropriate encouragement to a ten-year-old entering a school band program. They also have an intuitive understanding of musicians that guides their promotional and merchandising approach. Despite this uncommon skillset, they are wrestling to adapt their businesses to a changing environment, just like Macy’s, Home Depot, Toys R Us, and Wal-Mart.

The rise of online retail is the obvious cause of the current retail upheaval. But it’s less about online vs. brick-and-mortar, and more about dealing with an increasingly empowered consumer. The prospective buyer who has scoured forums, company websites, and blogs and decided on buying “model x” will not easily be persuaded to buy something else. The retailer who doesn’t have that specific model will have trouble closing the sale. Similarly, those margin-enhancing add-on sales are harder to come by when the customer can readily price the individual items online. The challenges of having the right inventory and providing customer transparency are the same, whether in a store or online. Furthermore, the results of individual retailers reflect this harsh truth: You can find online specialists with shrinking sales and brick-and-mortar operators enjoying double digit gains.

This year's Top 200 ranking provides some insights into how better informed consumers are reshaping the m.i. distribution channel.

For complete sales and productivity data on the Top 200 U.S. music retailers, plus much more analysis, order the new report!

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