Music Stores

The music store industry includes about 4,000 stores with combined annual revenue of about $4 billion. Major companies include Trans World Entertainment Corporation (which operates FYE, For Your Entertainment; and Wherehouse) and CD Warehouse. The industry is highly concentrated: the top 50 companies have 80 percent of industry revenue.

COMPETITIVE LANDSCAPE

Consumer spending and entertainment trends drive demand. The profitability of individual companies depends on effective merchandising and competitive pricing. Large companies have advantages in purchasing, distribution, finance, and marketing. Small companies can compete effectively by stocking specialty products, providing superior customer service, or serving a local market. The industry is labor intensive: average annual revenue per employee is $115,000.

Traditional competition for music stores includes consumer electronics stores, mass merchandisers, warehouse clubs, Internet retailers, and mail order clubs. Internet sites facilitating or selling direct downloads of music are changing the dynamics of the entire industry, and have detrimentally affected music stores by replacing CD sales.

PRODUCTS, OPERATIONS & TECHNOLOGY

Products sold by music stores include CDs, records, and tapes (60 percent of revenue) and DVDs, videotapes, and laserdiscs (20 percent). The vast majority of music products are CDs. Other products and services include books, toys, video games, and DVD rentals. Some stores sell used CDs or DVDs. Companies may offer digital music downloads through websites or in-store kiosks.

Music stores include national and regional chains, franchises, and independent retailers. Superstores are designed more as entertainment ...