Singing the Same Tune
Last night's edition of Frontline
was about the music industry and all of its troubles. While this could
have degenerated into another gagging regurgitation of the internet
file sharing controversy, the program instead focused on the overall
business and how it works.
Throughout the program, there was
discussion of the retail distribution channels for music and how much
the big retailers dominate the business. One record company exec said
that Best Buy, Target and Wal-Mart together account for 50% of music
sales. As is the case with so many other products, CD's now have to
please the few dominant retailers before they are readily available to
the consumer.
This is yet another illustration of my longstanding belief that merchandising has become less about carrying the products that consumers want to buy and more about retailers offering what they want to sell. More and more product offerings are retailer-driven, not consumer driven.
Although the retailing giants do not operate in a vacuum -- they cannot succeed if consumers are not willing to buy what is
being offered, things are very different than they used to be.
Oligopoly, which is basically what we have in much of retailing today,
reduces the risk of failure for the dominant players. They have the
foot traffic, so as long as they meet the minimum requirements, they'll
sell whatever they offer. Remember the bread lines in the Soviet Union?
Do you think quality was much of an issue? (Extreme example, I know,
but it's still a relevant point.)
Maybe a more realistic
example is the U.S. auto industry in the 1970's. They went for years
offering an inferior product -- and people accepted it because that's
what was available! It took many years of pressure from the Japanese
before GM, Ford and Chrysler woke up and realized that consumers will,
when given the choice, respond to better products when they are readily available.
Ultimately,
I think many categories of retailing are on the same path. Sure, there
are new factors like internet shopping, but I still believe that
history will repeat itself. They only question is when.
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