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Wal-Mart Squeezing Record Labels to Cut CD Prices
Raindance writes "RollingStone.com has a revealing article detailing how retail giant Wal-Mart is making loud noises about throwing its weight around in order to get significantly better bulk prices on CDs. Says one industry executive, 'This wasn't framed as a gentle negotiation, it's a line in the sand -- you don't do this, then the threat is [your product is dropped].' This is the first time a big player has attempted this sort of hardball move on the labels, and the labels may be forced to deal, as Wal-Mart sells 1 out of every 5 retail CDs. Monopoly one, meet monopoly two."
Two wrongs sometimes do make a right.
Walmart does it to ALL of their manufacturers. Perhaps this one may deserve it.
If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us.
Making a profit on a 33% mark-up is gouging? Sheesh, I had no idea that CDs should be sold for one penny more than they were purchased.
While I don't agree with this practice, I am glad to see it getting turned on the record companies now, since they've been ripping me and other consumers off for years. Let the jackals tear each other to pieces...
"Personally, I can’t believe that 1 out of 5 CDs are sold in Walmarts."
The thing is, nearly 1 out of 5 *anythings* are sold by Walmart. They are big on a scale most people can't imagine.
We view "entertainment" industries as big, but really, companies like Walmart dwarf them. They just aren't in the news every day like the movie and record industry. They chug along making billions of dollars without drawing attention to themselves.
Wal-Mart has 3500+ domestic stores, and nearly 1500 international units. They pull in over $60 BILLION dollars per quarter and $2 billion of that is PROFIT.
Walmart has so much purchasing power with wholesalers that this current story is just everyday business. However, this time they happened to target a branch of the media, who tend to yell and scream louder than most industries when *anything* happens to them.
The Glass is Too Big: My Take on Things
I just thought I'd tack something onto that post--a bit of math in case you don't understand my point. Purchasing 60,000 CDs at one unit each is $720,000. If you expect a store to shell out enough to carry ten each of those most-popular 5,000 CDs and still carry one each of the rest, you're talking $1,260,000. At EACH store branch! Up front, with no chance of recouping most of them, offering that variety for you as a customer so you can have what you clearly desire: choice!
Assuming they want to stock enough to not lose sales to the store-next-door if they sell one of those 55,000 albums of which they only stock one, they need to tack on another $660,000 in stock. If you were to go try and borrow that kind of money, it'd cost you all your profits just to pay the interest!
I seriously cannot believe you fault indie-er record stores for charging what they charge, man. It's really, really pathetic.
Read jack phelps dot net
Some of those stories details how Wal-Mart abuses its position as the largest, wealthiest and subsequently most powerful retail chain in the world.
They have squeezed their suppliers enough that many suppliers have had no choice but to shut down all manufacturing operations in the United States and move those operations into foreign markets where they can continue to stay in business.
The option is either lose their largest customer and possibly enough revenue to shut down completely or shutdown all US Factories, put anywhere from a few hundred to several thousand American factory workers out of a job and stay in business. Business-wise, they have no choice but to comply with Wal-Mart. Unfortunately, that isn't good for the US workers that just lost their jobs.
You can say things like, "Well, those American workers should have learned to live with earning less money."
It's not all about just the money paid to an hourly worker. It's about the cost of benefits, cost of mandatory operation fees, like licenses, worker's compensation, unemployment office fees and a number of additional aspects that raise the cost of production in the US.
Then, you also have to take into account the minimum wage law. If you can have something produced overseas by workers that are fine with making, over the couse of a single day, the same amount that a highly skilled American manufacturing worker, like a Tool & Die Maker (Which is between $19 and $25 an hour), is paid for one hour. As a business, what are you gonig to do? Stay in business or go out of business?
Wal-Mart has done more to help decrease the number of available manufacturing jobs in the United States then most people think.
If you ignore the other uses of a tool, does that make the tool less useful, or you less useful?
Umm. It's obvious you've never run a business. This markup barely covers overhead and people expenses. What do you expect them to pay their people with? Dorito's?
It's funny listening people complain that the Independent record stores are disappearing and then think those same stores should give their stuff away for free.
Money from heaven I guess.
I have a very different take on Walmart. They are successful for one reason-they market what consumers want. This is what makes them different from the Redmond Giant. Walmart has made themselves based on extraordinarily good pricing. Their methods of getting that pricing are sometimes dubious, sure, but they provide what people want, and usually at a good price.
Will they continue to do so once they have wiped out all the competition? Probably not, but I don't think that Walmart will ever be competition free.
There will always be conscientious objectors to the big W, and they will shop somewhere else. There is Target, which has made some very smart decisions on how to carry a very similar product line, yet be compelling. They are price competitive on most items, but they also market to a higher class customer, and tend to have more trendy goods than Walmart (their home decor is especially telling). I think target is here to stay. They are avoiding the mistake of Kmart, and not trying to imitate Walmart to closely (which is what killed Kmart, largely--there was little to differentiate the two, and Walmart consistently beat them on price).
Is Walmart perfect? No. I hope they get slammed in the current class action suit under Title VII (gender discrimination in wages). They deserve it.
Can people earn a living at Walmart? Probably not until you get to the Management level. This means that you need to either work your way up, or move on. It makes the perfect job for high-school and college kids trying to make a few extra bucks. It doesn't work for anyone with the desire to work there for the rest of their lives, unless they can make management.
"We don't know what we are doing, but we are doing it very carefully,..." Wherry, R.J. Personnel Psychology (1995)
After college I worked at a great independent bookstore for about 3 1/2 years, just at Burns Ignoble (Barnes & Noble) was starting to drop store everywhere.
More than once UPS, USPS, etc dropped off the wrong box in the shipping room, intended for B&N, we'd be opening boxes quickly usually and didn't always notice until we looked at the invoice. The discount a place like B&N gets over the independent is significant, like 8-12% more. This is a similiar situation with record stores.
When you're running close margins to begin with and your comptetitor is getting stock for 8-12% less than you, THAT's huge, and it's d*mn hard to compete. Sadly, that bookstore, after 45 years in business, closed this summer.
Also before you complain about costs, think about what independent media places (records & books) tend to offer; people who love their product, are knowledgeable about it, and MOST importantly, they support small presses/publishers/labels than the uber stores won't touch (including Target by the way, not just Wal-mart)
As independent record and book stored closes, so do the many small presses & labels. The store I worked at bought some great books from indie pubs, many of those are now out of business since Target, Wal-Mart and the like won't even talk to them. Those books are no longer available and those people lost their jobs.
Seriously, thing hard about where you buy things. Yes, I understand $2-3 more is a lot to some people, however, you are ultimately reducing your the choices and varieties of the music you hear and books you read. Sometimes being a consumer involves more than just the price of an item.
My 2 cents
'The unexamined life is not worth living' - Socrates
Hello Mr Pot, I'm Mr Kettle. By the way, I couldn't help noticing that you're black...
Telling people that anyone who disagrees with you and attacks you is a troll after you post a comment full of attacks - attacks on the record industry, attacks on Wal-Mart, attacks on its staff, attacks on people who buy the music that it stocks, attacks on independent music stores - is a bit rich.
Let moderators decide for themselves how the comment should be moderated. If I've noticed anything in six plus years of reading Slashdot it's that people with mod points aren't shy of moderating down even the slightest personal insult.
In the meantime though, I suggest you learn to appreciate a few things, including the fact that Wal-Mart does just fine selling CDs you don't want to buy, that other people have different tastes to you and that's not a crime, and that independent stores sell CDs for $16 because that's what they need to do to survive.
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
Interesting fact my Torts professor shared with the class: sales at Walmart peak at the beginning and in the middle of every month as their number one customers are those people living paycheck to paycheck. Walmart's extremely low prices are a boon for this working class and thus quite a good thing for a large part of America (especially rural America).
When someone on Slashdot admits he is wrong, a geek loses his virginity. God bless America!
An Education is the Font of All Liberty
OK, everyone, read the parent post where it says:
They pull in over $60 BILLION dollars per quarter and $2 billion of that is PROFIT
Now, while 2 billion bucks is a load of cash, 58 billion was spent in search of it. That's a margin of only 3.3%. It is NOT a profit of 33% as a post farther up claims with the illustration of a $12 CD being sold at $16. Walmart makes all of its money on razor thin margins. Yes, 3.3% is razor thin. Compare to, say, Intel, who pulls in a whopping 22.7% profit margin. Now THAT'S a huge margin of profit. Not Walmart and their piddly 3.3%, nevermind how many billions that 3.3% adds up to. Say what you want about the monolithic nature of Walmart and their heavy handed tactics with supplies but you cannot knock it on gouging or otherwise extraordinary profits.
Suddenly, radio stations are folding because they can't afford to pay the Walmart prices, Clear Channel has to start playing independent bands selected by live DJ's, and the only place you'll hear the Britney Spears is at her live concert in a Walmart parking lot.
Wait, nevermind, that's a great idea! Get Walmart into the music industry ASAP!
(This is why you never see those 'explicit lyrics warning' stickers at Wal Mart -- they just don't give you a choice and force their censorship on you without your knowledge or consent.)
Apparently, Wal-Mart is doing just fine with these CDs on their shelves. It seems that theer is a large enough market for these censored CDs that they turn a profit on them. That's all well and good.. but if you're not happy with it, don't shop there. Simple as that. Don't complain about a company because they do something you don't like. Voice your opinion by disposing of your cash reserves elsewhere.
What is your penile percentile?
There's a reason why Walmart is popular in sparsely populated areas -- time. In rural areas, a consumer may have to drive to several different stores separated by great distances to get everything they need for the household. This takes an enormous amount of effort and time. Walmart brings all of these disparate "stores" under one roof, making it much more convenient for rural shoppers to go to Walmart. The tradeoff is that the stores may not be the cleanest or have the greatest variety of products, especially at the high end.
By contrast, in the larger cities, the necessary goods are in closer proximity to one another so that going from one store to another is much less cumbersome. This also creates greater competition for shoppers' dollars, and the stores (on the whole) have a greater variety in order to distinguish one from another. In addition, bigger cities are actively trying to fight back against suburban sprawl and make better use of nearby land. The sheer size of Walmart runs counter to those goals. Therefore, Walmart is disdained in the big cities because it takes up an enormous amount of valuable space and does not stock the high end products that are locally available.
Rule #1 -- Politics always trumps technology.
Walmart is so powerful it's scary.
I guess you aren't one of the people who miss the days when Levi's were the best jeans you could buy? Wal-Mart forced them to "cut the fat" so they would be able to offer the product at a reduced price every year. From jeans which could hold together while being pulled by two horses, to jeans no tougher than three ply tissues.
The consumer quest for rock bottom prices has also lead to rock bottom quality.
You don't mind that Wal-mart is essentially a sweat shop that pays below average wages? That they lower the standard of living in the neighbourhoods they are set up in? That it's up to the government or the spouces benefits package to make up the difference? You may save up front, but at what cost? Every consumer that shops there is contributing to the problem.
People get up in arms when workers are exploited overseas, but don't care when it happens to some extent in their own backyard as long as it saves them $0.50 on toiletpaper?
You're right, no one has to shop there if they don't want to. I don't like what Wal-Mart stands for; I think they lead to a social net loss. So I don't shop there. And I discourage others from doing so as well.
Incredibly priced dog shit is still dog shit.
Sure, but if you ever have a need for dog shit, why should you have to pay full MSRP?
A computer once beat me at chess, but it was no match for me at kick boxing -- Emo Phillips