Even though digital is on the upswing, physical is still performing relatively well on a global basis — if not in the U.S. market, where CD sales were down 18.5 percent last year. But things are about to get worse here, if some of the noise coming out of the big-box retailers comes to fruition.
Best Buy has just told music suppliers that it will pull CDs from its stores come July 1. At one point, Best Buy was the most powerful music merchandiser in the U.S., but nowadays it’s a shadow of its former self, with a reduced and shoddy offering of CDs. Sources suggest that the company’s CD business is nowadays only generating about $40 million annually. While it says it’s planning to pull out CDs, Best Buy will continue to carry vinyl for the next two years, keeping a commitment it made to vendors. The vinyl will now be merchandised with the turntables, sources suggest.
Meanwhile, sources say that Target has demanded to music suppliers that it wants to be sold on what amounts to a consignment basis. Currently, Target takes the inventory risk by agreeing to pay for any goods it is shipped within 60 days, and must pay to ship back unsold CDs for credit. With consignment, the inventory risk shifts back to the labels.
To be fair, this is an interesting way to potentially sell more. When I was a bookseller in France in the early 1990s, pretty much all the books we bought were on the standard system where we could return them after 30 days for refunds. One distributor of small presses came to us and offered a consignment deal: we could have as much stock as we wanted of their books (within reason, of course), and we’d re-order every book that we sold. So we’d effectively pay for the books we sold after we sold them, retaining the original inventory, which we could return – at our cost – at any time.
I think we sold twice as many books from this distributor in the first year, because we didn’t have to risk any money to have the inventory. If retailers selling CDs work like that, if they can have more inventory that doesn’t represent a financial expense for them, it’s possible that they’ll sell more, simply because they have more CDs to sell.