Sunrise, Sunset: Big boxes ditching CDs

Posted Apr 27th 2007 3:53PM by Zac Bissonnette
Filed under: Bad News, Products and Services, Consumer Experience, Newspapers, Competitive Strategy, Wal-Mart (WMT), Columns

I've always thought Wal-Mart (NYSE: WMT) was a master of merchandising, but this seems pretty bonehead. According to the Wall Street Journal, Wal-Mart embarked on a plan to sell Yiddish music CDs last year and, miracle of miracle, wonder of wonders, they didn't sell.

"Within months of shipping thousands of CDs to Wal-Mart, the classical music distributor's loading docks were swamped with unsold copies of "Klezmer Concertos & Encores" and "Great Songs of the Yiddish Stage," according to the article. Since they hadn't sold quickly enough to meet the retailing giant's standards, 80% of the CDs Naxos shipped to Wal-Mart were returned. Record stores typically return only 20%."

OK then. Something tells me that any 8-year old could have told you that "Great Songs of the Yiddish Stage" wasn't going to be a big hit at Wal-Mart.

But it isn't just obscure titles that are having trouble at the big-box stores. Stores like Wal-Mart, Target, and Best Buy account for over 65% of U.S. music sales (including downloads), and they are cutting back on the floorspace alloted to music. CD sales have plunged another 20% so far this year.

Want a contrarian stock pick on this trend? Handleman Co. (NYSE: HDL) manages the music departments for numerous Wal-Mart locations. As you can imagine, owning shares has been a doozie for the past few years. But with the stock currently trading at a 50% discount to its book value, is all the bad news already priced in?

Tags: CD, Handleman, HDL, music, WMT

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Reader Comments (Page 1 of 1)

4-27-2007 @ 6:19PM

Mark Berry said...

My name is Mark Berry and I'm the publicist for Naxos of America--the company that put the "Great Songs of the Yiddish Stage" in Wal-Mart!

I posted my own response to Ethan Smith's article on The Naxos Blog at Sequenza21: http://www.sequenza21.com/naxos

You're certainly right and as Jim Selby pointed out, the Yiddish Stage music is certainly "niche-y." We've had big box success with a different line of products: the Jazz Icons DVDs that we distribute, for example.

I think what we're realizing (thanks to our Wal-Mart experience), as a distributor of classical music (primarily), is that big box stores aren't the be-all-and-end-all. Nontraditional outlets can, in the long run, helps us find and maintain the music fans we want to reach.

Big box stores certainly aren't the "trendsetters." They follow them and try to capitalize on their success.