Big-box stores and internet music continue to steal customer traffic from record stores
Los Angeles, CA (PRWEB) February 13, 2013
Over the five years to 2013, competition from large discount and digital music retailers, changing consumer preferences and the recession have dampened consumer demand for products from the Record Stores industry.
“Big-box stores grabbed market share by offering a greater selection of music at affordable prices, and online digital music stores and streaming services have developed cheap alternatives to CDs,” says IBISWorld industry analyst Natalie Everett. “Consumers have used these changes to save money and time, accelerating the downward spiral of record store sales.” Additionally, in mid-2008, consumer confidence and spending levels began to dip, set off by diminished disposable income as employment levels tanked. As a result, IBISWorld estimates that industry revenue decreased at an average annual rate of 7.2% to $2.3 billion over the five years to 2013, including a 4.1% drop in 2013.
Faced with mounting competition from digital and streaming sources, industry operators increasingly have had to make major adjustments to avoid closing their doors, especially during the recession. “Having slashed prices to better compete with online listening services, most operators slashed prices again when consumer sentiment and disposable income dropped during the recession,” says Everett. Record Stores industry employment has also been drastically declining as stores let go of nonessential employees. Despite these cost-cutting efforts, sales losses have been forcing companies to close at an average rate of 6.1% per year to 4,460.
The industry’s low concentration is due to the specialized nature of many record stores, which are traditionally independent. Also, its distribution system has traditionally maintained short-term contracts, enabling independent stores to enjoy the same deals as chain stores. However, the industry's largest player, Trans World Entertainment Inc., has lost market share in recent years, with the company struggling to maintain profitability due to decreased sales. An influx of nonemployer establishments is expected as the economy recovers and independent music dealers and collectors begin increasing their activity within the market, further diffusing market share concentration.
While consumer sentiment is projected to improve over the next five years, the Record Stores industry will fail to turn around. Consumers who have grown accustomed to digital music will not likely return to make regular purchases at brick-and-mortar stores. Additionally, increases in disposable income will lead consumers to spend more on consumer electronics, such as mobile devices and home systems that are compatible with the internet.
As a result, more people will use internet music distribution services. Successful operators will introduce merchandise that caters to this changing landscape, such as the electronics that enable online listening. For more information, visit IBISWorld’s Record Stores in the US industry report page.
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IBISWorld industry Report Key Topics
Record stores primarily retail prerecorded audio- and videotapes, compact discs (CDs), digital video discs (DVDs) and phonograph records. Online music sales are excluded from this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.