Saturday, November 11, 2006

Tower Records & The Decline Of The Record Store

Tower Records is much like other record stores, caught in a declining demand market for brick and mortar record stores that sell CDs where in 1992 roughly 5,000 record stores existed in the U.S., but now less than 1,700 remain in business today. Too much competition from online music sources such as downloads or low cost retailers such as have really taken the wind out of the sales of the traditional record store.

Tower Records will now close all retail stores in the U.S., but is keeping it's online website open. Part of the problem is that by keeping a massive catalog of slow selling back copy CDs, in high rent locations. It has always been a financial recipe for financial disaster, as most large retailers look for a good return per square foot of retail space as the rent is usually determined by square foot. Large big inventory record stores never do well in a declining market for records, where the large and slow selling back catalog becomes a prime reason for financial strangulation and tight cash flow problems. Smaller stores that deal with a specialty market or carry an inventory closer to the top sellers can sometimes better insulate itself against market contractions. For larger stores, the big inventory is impressive to browers, but makes little good financial sense.

It is deeply sad that Tower Records is disappearing from the scene. I bought some of my Doors albums from the Sunset Strip Tower Records, and many of my T.Rex import albums from another Portland location. A large inventory of imports and back copies of older records was always a Tower Records plus. For years, their collection of 45's was very impressive as well. It is deeply sad as a record fan to see such a great 1960's business like Tower Records fade into the Sunset. However, the website remains one of the most fun websites to spend time checking out and listening to the short music samples. Some retailers of records in Portland, Oregon are now edging into buying used merchandise to sell along side their new merchandise to offer better prices. Retailers are having to find new ways to compete in a market where CDs are selling for about $16, with only two or three great songs, and buyers looking elsewhere like the internet to purchase single songs for ipods, etc.


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