Rhiannon wrote:Gunbot wrote:They've already talked about getting out of selling music cds altogether as they don't need it. It's less than10 percent of their business.
Of course they would... major money loss. I said back when the package came out... you can't hardly put together a 4-panel digipak with a 2-cd set in it and have final end sale of $10 and come out with a profit much less a 6-panel with two CDs AND a DVD. Un-possible. Bait item at best. Also why the CDs are in the back of the store (usually). So that the cattle, erm... consumers get distracted by that $19.99 blender.
So many articles on the subject,I just picked this at random.
Trail of the Real Killer
A look at the range of retail CD prices helps to establish what really killed the record stores. In an article about the demise of Tower Records, Elaine Misonzhnik observed:
"Wal-Mart, Target and Virgin Megastores (through the Amazon.com website) have been selling the recently released Christina Aguilera CD Back to Basics for $11.88. But Tower Records was selling the same CD for $17.99; F.Y.E. for $14.99; and Amarillo, Texas-based Hastings Entertainment, Inc. for $15.39."
Ah-ha! Record stores were trying to turn a profit, and simply starved to death. Dramatically cheaper albums, sold by big box retailers, killed the business model of stores hoping to stay in business selling CDs at list prices.
How can Wal-Mart and Target afford to sell CDs for a third less than CD stores? Easy:
the big box retailers aren't planning to make money on CDs, but rather offer CDs as loss leaders to generate foot traffic. Music stores were trampled to death under the feet of shoppers running to Wal-Mart.
Retail Bandwagon
Other retailers have also found that selling CDs helps to attract customers and then keep them in the store longer. Misonzhnik noted that Radio Shack, 7-Eleven, and JC Penney have all added CD sales in attempts to bring in more customers.
Even Starbucks began selling CDs to encourage customers to linger, although it sells exclusive CDs which don't directly compete with albums from record stores.
By selling popular CD titles at a loss, Wal-Mart, Target, and other retailers have traded the easy profits on CDs--which formerly kept music stores in business--into store advertising and then wrote it off as a business expense.