SIC 5735 Record and Prerecorded Tape Stores

 
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SIC 5735

This industry includes establishments primarily engaged in the retail sale of phonograph records, compact discs, prerecorded audiotapes and videotapes, and disks. Establishments selling computer software are covered in SIC 5734: Computer and Computer Software Stores, and businesses engaged in the rental of videotapes are included in SIC 7841: Video Tape Rental.

NAICS CODE(S)

451220

Prerecorded Tape, Compact Disc, and Record Stores

INDUSTRY SNAPSHOT

The retail music industry was struggling in the early years of the twenty-first century. Brick-and-mortar retailers were losing ground fast to online outlets and downloaded music. While CDs sales had dropped, sales of recordable compact discs (CD-Rs) experienced triple-digit growth. As the industry struggled, fingers were pointed in different directions. The Recording Industry of America Association (RIAA) placed the blame squarely on the shoulders of those who promoted the piracy, bootlegging, and illegal free downloading of music. Although Napster, the once popular Web site that provided free file swapping, was defeated in the courts and dissolved through bankruptcy, others, including harder to regulate person-to-person (P2P) sites, stepped in to take over. Others blamed the industry's demise on lack of creative and inspiring new music available on the market and the overpricing of CDs as the main culprits.

By the middle of the decade, however, the industry was starting to pick up. Individual CD list prices were dropping in response to many years of complaints from retailers. Playing the "if you can't beat 'em, join 'em" game, retailers began to offer customers ways to buy and download music right in the store. In addition, new technologies such as two-sided discs, with music on one side and a DVD on the other, generated considerable interest in the mid-2000s.

ORGANIZATION AND STRUCTURE

By far, the largest portion of industry market share went to the large national chains, such as Tower Records and Musicland in the late 1990s. Megastores, such as Tower Records, with more than 10,000 square feet of floor space in each store, catered to an eclectic public, stocking thousands of titles in each store. Variety, price, and long hours ensured the success of the megastores. They offered more titles than any other single retail source, carrying esoteric items as well as current hits, and they maintained long operating hours to ensure accessibility.

Many of the larger, big city stores such as the Tower Records on Sunset Strip in Los Angeles were common post-show entertainment for young people. Because these large chain stores buy in bulk quantities, they often receive discounts and thus frequently offer the lowest prices in town. Chain stores tend to have a strict hierarchical organization of sales clerks, buyers, and assistant managers working under a store manager, who in turn answers to company officers. Individual megastores frequently have a large degree of autonomy but rely on the buyers' and managers' knowledge of the local market to keep product returns to a minimum.

Small-store chains, like some Musicland outlets, work in much the same way, but without the variety or the long hours. While megastores tend to be free standing, smaller chain stores are usually located in shopping malls, offering customer convenience. They cater to a more general clientele than the megastores, usually centering collections on current hits and reliable standards. With fewer local employees, the smaller chains have clerks and managers but generally do not employ buyers, relying instead on the parent company for inventory selection.

Both the larger and smaller chains use independent as well as record company distributors. Many of the largest record manufacturers have branch offices that distribute records locally. Independent distributors cover the smaller labels and independent record companies, along with the larger labels in the geographical areas not covered by branch distributors. Chain retail outlets buy from these distributors in bulk, warehousing the units until they ship them to their individual stores. The advantage of this system is the price break that bulk buying allows. The disadvantage is the lack of flexibility for the smaller chains, where individual stores frequently have no control over their own merchandise.

In many areas of the country, small and independent record stores still flourish despite the predominance of chain stores. These stores tend to carry a limited and specialized collection and cater to a specific, local clientele. Large college campuses, for instance, can frequently support stores specializing in rock, jazz, and/or classical music in addition to the local chain outlet. Independent record stores tend to buy products from one-stop distributors.

One-stop distributors are sub-distributors who buy from the larger branch offices and independent distributors and sell to the retail outfits too small to be regular distributor accounts. Prices tend to be slightly higher than in some of the larger chains because of the smaller quantities and the markup of the one-stops. In addition, because the floor space is smaller than the megastores, the selection tends to be less diversified, although frequently in the specialized stores (e.g., classical only) the selection within one area may be as good as the megastore and better than the small-store chain. The organization of the stores is localized and less stratified; the owners usually manage and work in their stores and employ only a limited supplemental staff. The advantage for the shopper at these smaller stores is the personalized service the knowledgeable staff can provide.

Department and variety stores also sell a small selection of records and tapes, sold as a concession or on consignment from a distributor known as the rack jobber. Rack jobbers buy from large independent and branch distributors to fill display racks at supermarkets, department stores, variety stores, drugstores, discount houses, and bookstores. They deal in the biggest hits of the year, the most popular standards, and the cheap cut-outs and discount collections. "Cut-outs" are the items dropped from production and sold at greatly reduced prices, and discount collections are compilations of the most popular works of the standard classical composers and jazz artists, as well as collections of older popular hits, and are designed for the general public rather than the musically-educated listener. The rack jobbers target people who might never go into a record store. They either lease retailer space, taking all of the...

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