Record Stores Eat the Cost of Returns

Good Deals on amazon.com (part3)


Busting this out as its own from Amazon Deal thread:


lv70smusic said: ↑
I think brick and mortar stores started to reject returns when the record labels started rejecting returns.
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See @lv70smusic 's post above - many brick and mortar shops can't return vinyl to the labels for credit the way they used to be able to do. Some will do so for customer goodwill, but they're eating the cost of that return.
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Which is one possible explanation of why some stores are pricing above list. It’s to help cover these costs.
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Yup. Music is now sold unreturnable to retailers. So every time the customer returns something, they eat it.

This has been the case since CDs took over in the late 80s.
I worked closely with buyers at a now defunct national music chain and can say with no uncertainty that music was wholesale priced with a built in allowance shown right on the invoice that the retailer received a discount when they purchased the product to cover the retailer for a certain percentage of returns. In the long run it saved the retailer and the label money by discounting the wholesale price and skipping the return process.

The sad song story from retailers about eating the price is pure bunk.

 

So you worked for a chain? 70s 80s? in the US?

Independent record stores in the US dealing with OneStops to get Major Label vinyl have to eat the cost of defective vinyl there are no returns.

 

Sorry to immediately start with a "huh, what is this" question, but you may have been attempting to quote from an existing thread and regrettably none of the quotes are showing up for me...?

Can the Gorts lend a hand helping the OP argue with something other than upward pointing arrows leading to blank pages?

 

Sorry bout that its from the Amazon Deals thread, I never have luck with multi quote.

I Clarified the post above yours

Good Deals on amazon.com (part3)

 

My head hurts

 

Sorry No Returns

 

I think brick and mortar stores started to reject returns right about the time women started getting those "I'd like to talk to the manager" haircuts.

 

Fixed for accuracy

 

banned to the Marketplace, close the thread

 

As a form of support, this is why I don't buy new, sealed albums at my small, local independent record shops (and stick to online sources...Amazon whenever possibble); I feel it's a real kick in the butt returning a defective album to them for which they have no control from either end.

 

What's the point of quoting everyone?

 

With the table set by the OP and @lightbulb's post of multiple quotes, we know that

• there are no longer returns of defective LPs and CDs to the suppliers
• it's been that way since the 1980s/'90s
• that's true for large and small retailers alike
• both size stores still take returns because they want to take care of their customers
• the big guys have enough water in their system to cover the cost of the returns
• small stores don't
• the small stores (and I suspect the large ones, too) will often resell returns at a discount.

So, what's the question?

 

Yikes, I get back to the forum with all these notifications...apparently, someone said this above wasn't true? Didn't you retail LPs in your shop at one time, @ggergm ?

 

No. Outside of a few forays into specialty records, we were strictly a stereo store. But my best friend at the time and retail soulmate owned the independent record stores in La Crosse (WI), Rochester (MN) and a few smaller towns. We'd get together and talk shop. I knew everything about his business as he did about mine.

The biggest contradiction to what I posted probably was in this post by @Kyhl. While he can certainly speak for himself, I don't disagree with what he said. As I read it he said that when unlimited returns were eliminated, there was a discount off the wholesale price to cover the cost of defective merchandise.

The record industry historically has been ripe with funny money like co-op, promotional fees, advertising allowances, discounts and similar special incentives. But there are two problems with saying these discounts covered the effect of distributors no longer taking returns. One, the discounts were never as big as the dollar volumes of records that were returned, including perfectly good but slow moving titles, which always went back to the distributors in the unlimited returns era. Two, back in the 1960s and '70s, all of this advertising and promotional money was also available. It didn't suddenly appear in the 1980s and '90s. In earlier times it was offered to retailers in addition to the return privilege they had. In fact, my buddy in the business found the steady trend over time for there to be less and less of the funny money available. The discount on the invoice from the distributor to the store may have gone up for a few years after returns were eliminated but then it fell back down.

The record store business is a brutal one. Margins suck. They were the same as my stereo store. At retail, 40 cents of every dollar might be gross profit. If the piece was on sale, that could quickly go down to 30 cents of profit for each dollar sold. A hit album by Madonna might only have 10 to 20 cents profit in every dollar of sales. And that's gross profit, so you still have to pay salaries, advertising, rent, insurance, the phone bill and every other dime of expenses out of the 10-40 cents. Sure, there might be a 5% discount on an invoice in a line item called co-op advertising, but that didn't make up for the fact that the last George Michael album was a dog. You, the retailer, are stuck with 90 unsold copies in your back room. In the old days, you could have returned them and not a question would have been asked.

I realize I'm talking about more than just returns for defective records but the situation is more nuanced than that. A generous return privilege and promotional allowances could be the difference between a record store making money in a year or not. There's a good reason all those record stores went out of business, along with the nationwide distributor Kyhl worked with. They took a big hit, too.

 

Once on a RSD, I had 3 defects in one day.

When I mean "Defect", I mean, literally a bad melt (came off the press with damage while it was hot), huge scratch and a "scrunch" warp - all different titles. And boy, I spent MONEY that day almost couldn't carry the lot to the counter.

On return of those three with receipt in hand, the record monger was not only just upset, but came close to say, "Screw and don't return, peasant!"
Now, this is after doing about 24 years of business with this cat and his sidekick, and I used to go in there for years like it was Moe's Tavern.

The sidekick explained that the money lost on the returns was high, even since the sticker wasn't giving any room for profit, the record shop lost huge money. I'm sure I wasn't the only one though, and I while I sympathize, I had to buy another copy of a 3rd one since even the record label directly "couldn't help".

RSD for me since then has taught me two very valuable lessons.

1. Open EVERYTHING you intend to keep.
2. Don't go nuts, love/hate with RSD (general feeling).

I thought RSD was a great idea, but I really don't like the really bad twists and turns that make it a frustration. This is only one of them.

 

I had an older cousin who managed a Turtles (remember those?) in the late '70s/mid '80s. I certainly don't recall all the ins and outs of his conversations about working music retail, but IIRC, the store's managers began taking a hit on returns in their bonuses sometime in the '80s. The stores got a certain percentage of LP sales they could return to distributors (damaged or just unsold inventory), and the rest the store had to absorb (the more hits the store took, the less your bonus). Again, this is just going by memory. For sure, the independent stores eat the cost of all returns now (2 local owners have verified this to me).

 

I also bet the promotional dollars that would show up as discounts on invoices have also mostly dried up, although I have no first hand knowledge of that. It's just speculation on my part, driven by the fact I saw much more special funds from companies and industry segments which were growing. Stable and contracting parts of the hi-fi business had little special funds. Outside of the resurgence of vinyl, the music software industry is suffering. Sales are down big time.

There might be hope. I was in Fingerprints, a hopping, seemingly thriving record store in Long Beach, California a couple of weeks ago. They had cardboard standups for new titles and bands. My word! I hadn't seen money spent by suppliers on such things in ages. The more people buy turntables, the more they buy records. It will never be the 1960s again but maybe in the future the record industry will be healthy enough to cover a defective batch, like the previously unreleased version of Blood On The Tracks that was sold for this last spring's RSD. Many of the albums were noisy, including my copy, and there was no way to get another. It would be wonderful to hear that Sony released that version as a regular LP, not a RSD special, but with a different catalog number, a low wholesale cost and a high MAP. With that extra water in the title, Sony could then tell retailers to make their customer's day and offer exchanges for the bad RSD pressing. Let the retailers sell the defective LPs for $5 and everyone comes out a winner.

But first Sony would have to be making good money by selling vinyl and I don't know if that's happening yet.

 

I'm sure you're right about promo money - I'll try to remember to ask the shop owners I know what, if any, they see these days. I know that one of them survives in the music retail biz because he owns the space itself (in a building he owns and leases part of to other tenants), and doesn't worry about rent fluctuations.

 

The industry got burned by returns in the 80's. You'd get credit off anything sent back even really used but they had to be cleans...no cuts or promo stampings/stickers. The Sopranos had a episode with this charade. I knew one guy who made a ton of money tbombing stores with returnable albums by the thousands. One store got sued to the stone-age by sending back dead records or wrong records inside covers. Greed. Building owners survive now or silver spooners with lots of money. A smart person would split a store into non music stuff, clothes, antiques etc.. Use every space.