What A Record Label Should Know About Music Retailers

This article is an excerpt from the upcoming Third Edition of
"Music Is Your Business".

Record sales are the "report card" for record labels. All the Four Front strategies - the work done on Artist and Product Development, Promotion, Publicity, and Performance - whether online or through brick and mortar retail stores must lead to record sales or those marketing efforts are in vain.

There are only two grades on a music retail report card. It's the pass/fail system; either you sold records or you didn't.

If a record doesn't sell, it's usually because the marketing plan was poorly conceived or poorly executed (unless, of course, the music sucks). Many musicians who put out their own records know something about music and a little bit about business, but they know next to nothing about selling music.

A record label traditionally sets up distribution and sales for a record before they begin to market it. They get exposure for a record by getting airplay on radio and TV, securing publicity from the print and broadcast media, and by supporting live performance tours. Online promotional tactics are now part of the retail marketing mix as well. But once the marketing campaign is underway, the focus of a record label should be to stay in touch with their distributor and work closely with the music retailers.

How Record Labels Work With Record Stores

For well over fifty years the relationship between record labels and record stores has been a rocky but consistent one. Labels need stores to sell their records as much as they need radio stations to play their records. So, labels have developed many in-store marketing programs for retailers to take advantage of. They create point-of-purchase materials such as posters, flyers, endcap displays, bin cards, and counter displays. They offer discounts on some new releases and back catalog items. They also offer advertising plans for print and broadcast co-op advertising to most music retailers. This is to guarantee that their current hit records will be available at specific record stores for a specific sale price.

On the retail side, listening station programs are available from all major record store chains, many independent record stores, and the newer independent store coalitions that formed during the '90s to compete as a group against the large music chain stores. Any ambitious new record label needs to study these programs and participate in them or be able to offer them to stores.

Record Store Realities

Today, record stores sell music recordings, but they're selling a lot of other products too. Have you been to an independent or major chain record store lately? If not, and you're planning to release your own record, I suggest you get yourself down to one as soon as possible. Things have changed recently; here are three things to notice:

1. A smaller selection of CDs, tapes, and vinyl from independent labels are on sale.

2. More "lifestyle" products such as clothing, DVDs, videotapes, comic books, candy, and clothing are being sold.

3. Digital delivery of music is finally beginning to appear at brick-and-mortar music stores.

The commitment of record stores to support new music hasn't changed. What has changed is the extent to which many of these stores can support the hundreds of new releases that come out each week. Since the mid '90s, many mom-and-pop stores that specialized in alternative music have been forced to close or sell out to larger record store chains because they couldn't compete with chain store prices.

Mass merchandisers, such as Circuit City and Best Buy, decided to use music CDs as loss leaders to get people into their stores. They started selling a current hit record for $9.99 and lost money on each sale in order to entice the consumer to their store, where they hoped the music fan would buy related products; CD players, TVs, VCRs, and computers. This had a dramatic effect on smaller music retailers who couldn't afford to sell music for less than they paid for it.

In the mid '90s, a record industry policy known as MAP (Minimum Advertised Price) was initiated. It required stores to stop advertising these low priced CDs or forfeit the label's offers of advertising and in-store promotional support. It took too long for the MAP policy to take effect. After almost two years of lowball pricing, over 500 independent record stores across the country went out of business or sold out to large music store chains.

By the late '90s, the MAP policy had finally proven to be an effective deterrent, but in the year 2000 the policy was found to be anti-competitive by the Federal Trade Commission and has now been repealed. The lowball pricing policies have started to return.

So, What's This Got To Do With Your Record And Your Plans To Sell It In Record Stores?

This whole sorry MAP episode contributed to an environment at brick-and-mortar independent record stores where they had to change in order to survive. Selling DVDs, videotapes, clothing and other entertainment and lifestyle products is their solution. Carrying your record may not be.

CDs don't leave a store much of a profit margin. Granted, if a store could sell every record in stock (at the list price of that record) things might be different. But they can't. Even if a nearby chain store isn't selling a CD at $9.99, they're usually selling a $16.98 or $17.98 list price record for around $12 or $13. However, a store pays around $10.85 to $11.40 for those records - so do the math. Independent stores have to compete with prices of other neighboring stores, so they can't sell their records for the list price.

This situation has forced most independent stores to find other products to sell that have a higher markup. Lifestyle products, used CDs, collector CDs and vinyl, blank tapes and blank CDRs provide that higher margin. Your new release does not, unless you can convince them that they will sell lots of your record and the quantity of sales will make up for the low markup.

Some major chain stores are ready for the digital distribution of music. They offer kiosks that enable shoppers to request a selection of songs to be downloaded directly to a customer's iPod or MP3 player. It's about time, isn't it!

As things stand today, the labels still need the traditional music stores and will continue to work closely with them. We are, as of this edition, just on the dawn of the age of retail stores embracing downloadable options for their customers. Those who embrace it and stay ahead of the curve will most likely succeed and continue to also offer traditional CDs. At the same time, record stores are stocking their shelves with whatever music-scene "lifestyle" products they can get their hands on. This is something to watch, because new opportunities for in-store merchandising will be necessary for cutting edge record labels and musicians alike to take advantage of.

Working Retail

Music retail is the weakest link in most record label's marketing plans. But very little has been written about the realities of the brick-and-mortar record retailers, so let's take a look at this much misunderstood and neglected link in music marketing - the independent record store.

When you think of an independent record store, what comes to mind? Did you see the movie (or read the book) High Fidelity? That's the best picture of what an independent record store can be (and maybe should be) - records, records, and more records, and a staff of goofy but passionate retail clerks who love music and want every customer to love music as much as they do. This kind of record store still exists, but it's getting harder and harder to find. Why, because it reflects a way of doing business that's getting harder and harder to maintain.

Independent record stores are the places where the music matters more than any financial bottom line. Independent, or mom-and-pop music stores, are where passionate music lovers can find the latest and the greatest new releases. They're the places where an independent record label can go to put their CDs on consignment, where a local buzz can be created, where the impassioned, music-loving staff can play your record for shoppers. They can take pride in helping you launch your career - if you take the time to study who they are, where they're located, and what they want from you.

Major record store chains and mass merchandise entertainment stores obviously have a commitment to music, but they can't afford to be too experimental or too niched in selecting the music they stock. Seek out the hipper large record stores in your area. You'll be surprised how much of a commitment many of these stores have to their local independent bands and artists.

It's Up To You To Convince Record Stores To Carry Your CD And Work With You

When record store buyers choose records to buy it's a business decision, not an emotional decision. I know this from first-hand experience. I owned a record store for ten years. The first lesson I had to learn was that I couldn't carry every record I wanted to carry. I had to choose the ones I felt I could sell, out of all the new releases coming out each week. Today that decision is harder than ever to make.

It's estimated that over 1000+ new CD titles are released each week! Yow! just a couple of years ago, there were about 500 new CD titles released each week. No store on the planet can carry that many new titles. So, music retailers can only select those titles that they feel they must have.

This gets us back to the marketing plans you must create to get your music on the air, reviewed in the press, and heard from concert stages. Do those things well, and the report card you'll get at the record stores will look pretty good.

If the buzz you create about your music reaches store employees, and your label can create excitement about your release, that can make it a necessity for the store to stock your record.

If you want record stores to carry your record, convince the store buyers that they have to have it.

* Keep the stores up to date on your other marketing efforts (radio airplay, press reviews, concert attendance figures). Contact them regularly.

* Think up some value-added promotions to offer the retailer. Value-added promotions are things like giving a free live-CD to all the customers who buy your record, or discounts off your older, back catalog releases, or discount coupons for your upcoming live show.

* Give things to the retailer to make their job of selling your record easier. For example, a packaging option that can make CDs more appealing as holiday and birthday gift ideas are slip covers that come in shapes, (heart shapes, etc.). The label must create these slip covers, but they go a long way toward showing a retailer that you want to help them sell your CD. What cool item could be a future collectible?

* Work with your distributor to offer a special price on your debut record. Even though you want to price your CDs competitively, do what many labels do when they introduce a new artist: make the list price cheaper. So, instead of making your first record $16.98, make it $13.98. The store's price is cheaper and of course it's cheaper for the customer too. But only offer the lower price for a limited time.

* One of the most common tricks the labels use to create demand for a record is to release a song to radio three or four weeks ahead of the street date (the day the customer can buy the record). If you decide to do this, work with the retailer to encourage them to take advance orders, or set up a special late night purchase party if the demand for your record merits it.

* Give them point-of-purchase items to put up around the store (posters, postcards, bin cards).

* Check with your local retailers to see what independent distributors and one-stop distributors they buy their product from. Perhaps you can get in on some seasonal promotion campaign or new artist program one of these outlets may be offering.

* If you use a distributor, get to know the sales reps and find out what stores they call on to solicit new releases. Much of this business centers around personal relationships and a rep who knows and respects you, your label, and your artists can do a lot for you at the retail level.

* All the major chain stores have comprehensive listening station programs that record labels can buy in to, but be sure to research this carefully. Stores like Tower, Borders, Barnes and Noble, Virgin, etc. are very expensive to participate in.

* Try to get your CD into as many independent record stores as you can. Some of the spots on the listening posts at these stores are not for sale to any labels. The best indie stores leave room for staff favorites or CDs from local bands and solo artists. Also, since many of these independent stores belong to a coalition these days find out which coalition your independent stores belong to.

* Give free copies of your CD to the store owner or buyer, and be sure the record store clerks who might like your music get their own copies. I can't tell you how many records I've sold simply by playing them in the store. Actually a good record store is much like a good radio station. In this case the customer is a captive audience and to this day you'll spot hip store clerks scanning the shoppers and finding the perfect record to pique their interest.

* Ask permission to post your live show posters or flyers at the store and give some free passes for your shows to the staff.

* Check for any in-store artist promotions, like store concert series or autograph parties, and be sure to bring your mailing list sign-up sheets to these events.

* Put your records on consignment (at a competitive price with other artists of your style) and call the stores regularly to check up on how they are selling.

* Consider pressing up some cheap limited edition sampler CDs and tapes that can be given away to store shoppers. Put your contact information on these.

* Many independent and chain stores have their own music publications, so be sure to submit your records for reviews and research the costs of buying ads in the relevant store magazines.

* Ask about the store's website. Do they have any online promotional opportunities for you to take part in? How about links connecting your site to their store's homepage? If they do have downloadable kiosks in their stores, ask how you can get your CD into their system.

* Think about any combinations of online and offline experiences your fans will use while shopping for music. The future of music retailing will be one that finds creative ways for a music fan to go from a store's actual brick-and-mortar site, to the store's website, to a favorite band's homepage, to radio stations that are playing the band's music, to content at cool Internet magazines and e-zines - with links allowing the fan to hear the music all the way down the digital line. And, don't forget to include some clubs and other live venues in your linking strategies.

Conclusion

To sum things up, every record store is in business to do one thing; sell music. Granted, the music retailer's world is not what it once was. Gone are the days when they could make a buck selling music and nothing else. But this change can work in your favor as well. If they sell entertainment lifestyle products like t-shirts and other stuff, give them a reason to sell your products.

It will be a long time - like never - before the record store disappears from our cities and towns. So, take some time to study the stores available in your area and in the regions of the country that your marketing strategies expand into. Internet or no Internet, you'll always need to work with record stores. Bank on it.

The creative record label and entrepreneurial musician will make sure to leave no stone unturned when working with a retail music store. It may not always be a music fan's final destination, but it will be an essential player.

Throughout his fprty year career in the music business, FourFront Media & Music's Christopher Knab has shared his experience at many industry conventions and conferences, including the New Music Seminar and the Northwest Area Music Business Conference.

Knab was owner of a San Francisco music store, co-owner of the 415 Records label, and station manager at KCMU Radio in Seattle.

He currently provides a unique consultation and education service for independent musicians and record labels. His new book is entitled "Music Is Your Business".

Christopher Knab

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