MSR February Cover

First Published In The Music & Sound Retailer’s February 2007 Issue

We’ve heard the talk. We’ve seen the stories in this magazine. Times have been tough for retailers. But how tough was 2006? Are you optimistic about 2007? To get those answers and a bunch more, we went straight to the source: you. We surveyed our readership, and the pie charts, as well as this story, have the answers. With Pres. George W. Bush delivering his State of the Union address on Jan. 23, we thought what better time to find out info about the state of the MI industry.

Our first question determined if our respondents worked for independent or chain retailers. Most were independents, evidenced by a 96 percent figure compared to just 4 percent for chain stores. Once we got that housekeeping out of the way, we got down to the nitty gritty. We asked, “As we look back at 2006, would you say sales were better, the same, or worse than 2005?” To say the results came out as a mixed bag would be an understatement. Amazingly, while 38 percent said “Better,” the same exact percentage said “Worse,” with 24 percent saying “Same.”

The answers changed only slightly when we asked, “Looking to 2007, are you: Very optimistic, Somewhat optimistic, or Pessimistic?” Sixty percent responded they were “Somewhat Optimistic,” followed by 22 percent saying they were “Pessimistic,” and 18 percent “Very Optimistic.”

We also asked, “What Demographic buys the most products from your store?” According to your responses, the 25-to-54 age group still rules the day at 81 percent, followed by 14 to 24 years old at 14 percent, 55 and older at 4 percent, and 13 and under at 1 percent. Does this mean the potential for retailers to make wads of cash from Baby Boomers has not been tapped yet? An opportunity seems to exist there, as this older demographic has seemingly yet to make a major dent in our industry’s sales numbers.

Among other questions we asked you was, “What is the biggest challenge your business is facing right now?” As expected, the answers varied widely. But the most common themes were Internet competition, margins, big box stores moving in close to your store, difficulty maintaining a reliable sales staff, distributors being short of product, and eBay (which we categorized separately from the Internet).

Alluding to general Internet sales sites, one retailer answered the biggest challenge question by saying, “The Internet resellers: They have a 8 percent price advantage (sales tax) that makes a mockery of MAP and puts me at a major disadvantage.”

Speaking on the same topic, another retailer said, “Internet sales are rampant and cutting DEEP into the store’s profits because of unfair prices and the US/states lack of taxes on Internet sales. And the young customers do not support storefronts and have the mindset that the Internet is the best price and have set no value in service [until they need it].”

Switching gears to another response to this question, one retailer responded, “With the onslaught of all of the manufacturers selling guitars in grocery stores, I am looking for a good bread, butter, and milk supplier.”

With that said, if you had the chance to run the music industry for a day, what would you change? This question elicited perhaps the most interesting answers. As one retailer responded, “[I would] preach to someone about how mass marketing will kill the soul of the MI industry.”

As another put it: “I would level the playing field so that a bricks-and-mortar store has an equal chance to service the customer.”

Said a third retailer, “[I would] look out for the independent dealers who made the suppliers and manufacturers what they are today.”

“I would develop a fantastic/exciting TV promotion to inspire people to take up or bring them back to the benefits of playing music,” responded another retailer.

Speaking on a hot topic, a fifth retailer said, “MAP prices need to be higher (we’re not selling tires here so kill that ‘give it away’ mentality). And secondly, sell every brand to anyone who wants it. Competition is good!”

“Make MAP have a high enough margin for all dealers to make a profit and enforce it!” said a sixth retailer.

Responded another retailer, “I’d squash the asinine expectation of manufacturers that dealers must purchase ever-escalating amounts of products when there are still unsold products from last year and the year before that are still lingering on the walls.”

Another retailer said he/she would eliminate discounting. “Everything should go back to full list, at least double manufacturer price, with no discounting allowed. I would also re-establish 50-mile (minimum) territories, enforce them strictly, and not allow Internet sales in an area that has a dealer for that specific product.”

Another respondent took another approach however. “The dynamics have changed so much that there is no going back. [We can] only work toward partnerships that are more profitable for both the retailer and manufacturer.”

When we conducted this interview in January, we also surveyed you about our magazine. Check our editor letter in upcoming issues for information about this part of the survey and new story ideas and/or columns to be implemented based on this research.

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