As Best Buy Bails On CD’s JB Hi Fi Still Delivering Good Returns
As US retailer Best Buy looks to bail out of selling CD’s ChannelNews can reveal that the story is very different at JB Hi Fi where the local retailer still has a viable software business.
According to Billboard, the No. 1 tech retailer in the USA has informed music suppliers that it’s cutting the CD cord on July 1 after annual CD sales fell to $40 million, or 0.1 percent of total 2016 revenues.
According to Richard Murray the Group CEO of JB HI FI and The Good Guys the Company is on a percentage basis still delivering a significantly better return on CD and software sales than Best Buy some analys say by 3-4%.
He said that management at the Australian retailer are “constantly” reviewing the floor space allocated to software spanning music, videos and gaming.
ChannelNews understands that today overall software content sales are worth around $600m at JB Hi Fi. Nearly half of that is music, and 25% gaming.
In the early days of JB Hi Fi, software content sales made up 40% of JB Hi Fi’s sales today that is around 16% of JB Hi Fi’s $4.5B in annual sales claim analysts.
Today JB Hi Fi has a far more “flexible racking solution” in its store claims Murray and this allows individual stores to configure the CD and gaming racks to get maximum results.
US analysts claim that the Best Buy move is more a formality at this point for the US retailer, whose once formidable, traffic-driving CD assortment has long since been usurped by streaming media and more productive categories in-store.
In its last full-year report, the company showed a nearly 14 percent decline in entertainment comp sales for 2016, noting that the “decrease was driven by declines in gaming, music and movies due to continued industry declines.”
In contrast, Best Buy will continue to carry vinyl records for the next two years due to vendor commitments, the sources told the magazine, and will merchandise the music albums alongside turntables.
None of this was lost on Target, which is reportedly demanding a new consignment-sales model for its CD and DVD businesses that would shift the inventory burden to music and movie suppliers. Under the plan, Target would only pay for the discs when they are purchased, rather than upon receiving them.
The No. 2 discount chain has given DVD suppliers a start date of Feb. 1, but pushed back the CD deadline to the spring, Billboard said.
At its height Target carried upwards of 800 music titles but has whittled that down to less than 100 in most locations, the magazine reported.