Wherehouse files for bankruptcy

From today's issue of SCT Xtra...

Chapter 11 for Wherehouse, the latest music sector casualty

In a continuation of the music retail sector's struggles, Wherehouse Entertainment has filed for Chapter 11 bankruptcy protection. Torrance, Calif.-based Wherehouse, which earlier this month closed 30 stores, plans to shut an additional 120, leaving it with about 250 units. "The retail music environment has changed dramatically in the last three years, and through the Chapter 11 process, we believe Wherehouse will be able to restructure its operations and exit underperforming stores," said President and CEO Jerry Comstock in a written statement. Wherehouse is hardly alone in its troubles. On Jan. 9, Best Buy said it had closed 110 Musicland brand stores. Industry observers expect more music retailers to close stores in the near future. They say that music downloaded off the Internet, the popularity and ease of CD burning and competition from discount retailers have hit the sector hard.

 

Another one bites the dust...Wonder why Amazon didn't gobble them up?

 

Yea, Trade on...

 

This is Wherehouse's second bankruptcy filing in recent years.

 

I just don't know how Wherehouse, FYE, Sam Goody, etc., can compete with retailers who use CDs as loss leaders. What niche do they own that Best Buy, Target, Wal Mart don't? I love my local independent stores and patronize them regularly because they sell used CDs and vinyl, but I don't hesitate to buzz over to Best Buy when I want to pick up a new release and it's $10-$11. It's a no-brainer and it's my money.

 

I'm not that surprise. Their website is very poorly design. They could use a little Holy Zoo expertise. I have difficulty in the past trying to contact them by telephone.

I guess they were poorly managed and need some fresh ideas.
Maybe an internet Savy CEO.

 

Most chain stores have more selection than the average mass merchandiser store although Best Buy stores and lately Wal-Mart do have decent selections, plus mall chains can special order unline mass merchandiser stores.

 

Wherehouse sells used stuff. The two closest to me probably make most of their money off of used CD's and DVD's, both of which take up far more floor space than new ones. Also, you can usually get any new CD during the first few weeks for $10 when you trade-in any unwanted used CD; there's also a so-so deal where you can trade-in 5, sometimes 4, used CD's for a new one, which isn't much of a bargain. In that respect, I would think Wherehouse would have an advantage over the others.

Best Buy and Target are more than just music stores, and I'm certain most of their money comes from other things. I can't imagine either being in good shape if music took up a bigger chunk of their sales.

 

Sam Goody is actually now owned by Best Buy. We'll see how long BB puts up with them.

 

The used cd issue is becoming a big issue too. I relate it to the cost of college textbooks. The price of them keeps rising because of the used textbook sales. Used textbooks are cheaper so on one buys new books. Publishers don't sell as many new ones so they price goes up to make up the difference. Same can happen to CD's... especially if you can buy a new one, take it home, burn a copy, and bring it back and then the retailer resells it.

 

I used to shop at the Wherehouse in southern California, years ago. They were notorious for opening factory-sealed CDs so that customers could listen, and then resealing them and selling as new. I purchased the Mo-Fi version of Aja there and upon removing the shrinkwrap, it appeared that someone had been listening whilst eating Kentucky Fried Chicken. The disc, case and booklet were covered with smudges and fingerprints. I returned it and stopped patronizing them after that.

 

Textbooks have something over CD's though: new editions. Oldest trick in the book is to put out a new edition every few years, with new chapters, new sequencing, new problems, etc. Not necessarily a better book, but certainly different. Even worse, if your class is the last one stuck with the old edition, you can't sell it back. Really sucks if your a science major; all my chemistry book and physics books were something like $80 or $90.