Music Retailing Changes

A recent study by analysts Customer Growth Partners has found that department stores, specialty retailers, and other chains that fill US shopping malls accounted for just 19% of total retail sales in 2002, down from 38% in 1995. Mall-based retailers accounted for 22% of 2001's retail sales.

The study also reveals that of the $766 billion in sales from the 40 largest US retailers in 2002, stand-alone retailers such as Wal-Mart and Home Depot accounted for $617 billion. According to the researchers, "Conventional malls that are anchored by department stores are dinosaurs, as out of step with today's consumers as rotary-dial telephones."

A second report, this time coming from market research firm Retail Forward, expects this trend to continue and suggests that the music retailing industry will look significantly different by 2010. The report forecasts that in the next few years, a small group of companies will come to dominate the global market, entire industry segments and store formats will disappear, and the boundaries between retailers and suppliers will blur.

The researchers predict that this will mean a booming music business for Wal-Mart and its super-center format, since music CDs, especially the major label releases that drive overall sales numbers, have become a commodity to most buyers, who are seeking the best price and favor convenience when shopping.

Other retailing trends noted: department stores are in a "death spiral," as escalating competition from discounters and specialty stores forces further consolidation and retrenchment. Consistent with CGP's findings, Retail Forward states that shopping malls "will have to change almost beyond recognition to survive." And it's also no surprise that online retailing is predicted to grow beyond its relatively limited share of total retail sales.

More fascinating is the prediction that we will see suppliers move closer to their retailers. "Retailers will look to key suppliers to become category consultants, setting strategy for the category, managing inventory, and selling space by location, almost as if they were operating leased departments." The forecasters also say that at the same time, more suppliers will seek to sell directly to the consumer.

Customer relationships are also seen as becoming key competitive assets for retailers, as consumers gravitate towards technologies that give them better information about products and more control over the shopping process. The study says that retailers will also reduce personnel costs by trying to automate as much as possible, adding more kiosks and self-checkout terminals. What won't happen: The researchers predict that the sale of products and services via cell phones and other mobile devices will probably remain limited through the end of the decade.

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