Tag Archives: bad business decisions

bad bookstore business decisions

The large Australian book chain Angus & Robertson has apparently decided it would be a good idea to send invoices to small presses for the lower profit that A&R received from their books (described as a “profit gap”). Not only is this extortionate, clueless, and bad business management, it’s also hilarious reading.

(and of course boing boing covered it)

reflections on the demise of Tower Records

“We’re going to have discounts for consumers to enjoy as they’ve never been seen before in the history of Tower Records,” said Andy Gumaer, president of Great American Group, a Los Angeles-based firm that won the auction …. [LAT 10/7]

Yeah, right.

Last night I stopped by Tower Records to see if I could pick up any deals at their going-out-of-business sale. Yow. No wonder they’re going out of business, when their average CD still costs $18-$20. Take 20% off of something that is 50% overpriced to begin with and, let’s see, do the math — it’s still really overpriced.

I know I signed up for that class action settlement on overpriced CDs (and I never got my check for that, by the way, which would have been a vast underpayment for my ~ 1000 CD collection, no small portion of which was purchased at Tower Records … but it would have briefly afforded me some moral feel-goodness). So what happened? Shouldn’t that have done something to get the prices to something approaching rationality? But no, I guess after the settlement the record companies paid attorney’s fees and shipped multiple copies of the same overstock crap albums to libraries and schools … and then everyone continued merrily on overpricing CDs.

Of course, Tower blamed it on illegal filesharing. “Can’t compete with free.” No, Tower couldn’t compete with reasonably priced. Amazon.com is cheaper even with shipping costs, and iTunes offers 12-track albums for $11.88 on a per-track basis or just skip the tracks you don’t like.

But Tower didn’t have to out-compete Amazon.com and iTunes. Most folks don’t mind paying some kind of premium for brick-and-mortar, which gives you an actual place to go for retail therapy or as part of a date, offers physical browsing and interacting with other people … So a reasonable premium might be, what, 10, 20%? Not the $18 CD. In this market, it’s amazing Tower has lasted as long as it has.

… The LAT (10/22) nicely summed up the goods and bads of this. After driving out all the local record stores with predatory pricing and economies of scale, Tower increased its own prices and proceeded to mismanage itself into bankruptcy. But it was a good record store in terms of selection. So Tower’s demise leaves us with sucky chain record stores and the big-box retailers who “out-chained” Tower and sell only “the hits” — a market that is obviously dwindling.

And the other thing I couldn’t help but notice as I wandered through the vast aisles of youth-oriented crap: There are vast aisles of youth-oriented crap. So what marketing geniuses decided to target the 15-20-yo boy market? Who decides, hey, let’s pick a small age group (a scant 3.4% of the population [US Census Bureau / 2005]) without a very high income, and make them our target demographic? … and the music & movie industries complain about filesharing. Geez.