Decision to Ditch CDs is Awesome for Retail (and Music)
On the surface, the recent announcements by Best Buy and Target that they’re coming close to phasing out compact disc content from their stores reads like the end of the line for the CD. In truth, that may already be the case—CD sales in the U.S. are down about 18.5 percent over the past year, according to Billboard. But what retailers of all sizes should see in this is a major opportunity to revamp their in-store strategies. The way I look at it, CDs demise at the big box level is a good thing for those stores as well as the music industry.
To catch you up, over the past few days, both Best Buy and Target have made announcements that point to the end of the CD in their respective stores. Best Buy, to its end, said definitively that it will remove CDs from its stores by July 1. Target, meanwhile, is seeking to flip the script on its current CD replenishment strategy with vendors, effectively turning the model into one that represents a consignment agreement—Target currently takes on the inventory risk in its supplier arrangement, agreeing to pay for product it Is shipped within 60 days, and it must pay for return shipping for unsold CDs that it receives a credit for. According to Billboard’s report, Target gave an “ultimatum” to music and video suppliers to take on that inventory risk or the company would remove the entertainment section from its stores altogether.
In a statement made to Billboard, Target did say it remains committed to the entertainment software industry, even if it plans to streamline its business model within the category. "Entertainment has been and continues to be an important part of Target’s brand," the company said. "We are committed to working closely with our partners to bring the latest movies and music titles, along with exclusive content, to our guests. The changes we’re evaluating to our operating model, which shows a continued investment in our Entertainment business, reflect a broader shift in the industry and consumer behavior."
Both stores, for what it’s worth, have already greatly reduced the physical footprint of the CD/DVD sections in their stores. Have you been to a Best Buy CD section recently? They resemble a graveyard that hasn’t been cared for in years, with overgrown weeds overtaking the entire grounds. It’s depressing. A sad reminder of what was once one of the biggest music merchandisers in the U.S. Data from Consequence of Sound shows that in 2001, over 800 million CDs were sold in the U.S. That number has since dropped to around 89 million.
Credit: The Mama Report
For what it’s worth, Best Buy did say it will remain true to its commitment to the record industry by continuing to carry vinyl for at least the next two years. As such, the likely move will be to have their records move closer to the turntables section in stores.
With the apparent death of the CD in big box stores, two clear opportunities exist for both retail and music.
Independent Stores Can Step Up
Despite the painfully obvious signs that the content format is on the way out, the reaction from consumers that CDs would likely disappear from major retail chains like Target and Best Buy was one of shock. It’s a huge change for those music listeners who still rely on the format. Beyond those big stores, there aren’t many other options for where a consumer can go to grab a new CD on release day, or to browse a selection of music for the heck of it on a slow Saturday afternoon. There are some little chain stores in malls around the country, but those tend to jack up prices and ultimately push consumers away.
This is where independent retailers around the country can step in a help fill a gap that now exists. That’s not to say we should see CD stores pop up like the record stores, but maybe those record stores can carve out slightly larger sections of their stores for the closer-to-current-day media format. Or, if your an owner of an electronics shop that’s looking to shake things up a little bit, maybe you can find a way to integrate a selection of new music into your store.
The strategy around doing so should involve understanding the neighborhood you operate in, the type of music that’s prevalent in your community, and the type of customer that typically walks through your door. Do they want CDs? Are they looking for a way to get their favorite artist’s new album on release day? Maybe there’s an opportunity to serve the community by being that go-to shop for music content that consumers can hold and feel. It doesn’t have to be a full-blown 800-CD section that takes up an entire store, just enough to satisfy those CD carrying customers who drive around in cars with those old six-CD changers.
The other side to this coin involves working with the music industry and convincing them that an independent retail strategy is the way to go to ensure the future of the CD. I’m not going to pretend to know what that kind of conversation would involve. But, again, we could look to the recent history of vinyl and the resurgence that the format has had thanks almost entirely to the work of small and independent retailers who remained committed to carrying the product. CDs could face a similar path back to relevance.
Optimizing Big Box Sales Floors
For Target and Best Buy, the death of the CD department has been a long time coming. The format has been on a sharp decline since the rise of the digital media format, and it’s only going to get worse as consumers continue to adopt premium streaming services like Apple Music and Spotify (the former of which is expected to overtake the latter in total number of subscribers by this summer).
With big box, we’re talking about stores that are already struggling to remain viable in the age of Amazon. Consumers are spending less time in super stores as it is, so these major retail chains need to optimize the in-store experience in any way possible. For Best Buy in particular, gutting its entertainment section is such a crucial step in the right direction. Upon entering a typical Best Buy location, the first thing customers are greeted by is the CD/DVD section off to the left, which sits next to the smartphone store-in-a-store area. It’s such a unique juxtaposition to see those two departments next to one another that it’s practically laughable. You’ve got the latest and greatest media streaming devices welcoming you into the Best Buy, and right there next to them is the forgotten media format that kids today view as relics of an ancient civilization.
By removing that sore thumb of a section, Best Buy can dedicate more space to new and emerging technologies, or perhaps even expand current sections to offer more engaging and informative displays. Though the footprint has been shrinking as it is, any space gained by completely removing CDs can be viewed as critically important for Best Buy—and Target for that matter. Show me more smart home and less outdated music media. Put in a drone cage and let me waste a few hours flying the latest DJI products. Add a section of real PC gaming setup options with playable demos. There are so many more-useful applications for big box sales floor space than physical music content.
So, while it might suck for some consumers out there who will need to look elsewhere for the newest T-Swift album, the majority of consumers will absolutely benefit from their removal. The caveat to that being that Best Buy and Target need to properly strategize how they will fill their reconfigured floor plans. Hit the nail on the head, and struggling big box stores could stem their own bleeding.