Isn’t it about time we ditched returns?
Kim Bayley speaks to Music Week
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If the twin obsessions of our time are the financial downturn
and global warming, isn't it about time we did something about an
issue which not only damages the environment, but costs the music
and video industries substantially too?
I'm talking of course about returns, the system by which
retailers ship unsold stock back to record and video companies,
wasting thousands of man hours and unnecessary van and lorry
journeys and generating costs estimated at £12m a year across the
industry in terms of music alone.
It is an issue which particularly irks retailers since it
creates work for them and costs them money, not the ideal
combination.
So is now finally the time someone will do something about
it?
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The key problem seems to be that the notion of returns seems
hard-wired into the business.
The days of record companies monstrously over-egging shipments
for PR or even bonus reasons - yes, in the "good old days"
apparently some executives were bonused on the basis of shipments
rather than sales - are thankfully over. But it is not that long
ago since a significant UK record company suffered greater returns
in the first quarter than it had made shipments in the previous
fourth quarter.
The difficulty seems to be that defining sales as shipments
minus returns is regarded as the benchmark not just in record
contracts, but also for instance for the purpose of paying
mechanical royalties.
And of course it's not just on the supply side of the industry.
Arguments over returns allowances or privileged returns have cast a
shadow over numerous terms negotiations between retailer and record
label.
So why is this an issue right now?
The fact is that recorded music is less profitable for retailers
to sell than ever before. It is by its nature labour intensive- the
sheer number of titles ensures that. So retailers inevitably look
to trim any unnecessary costs they can.
And this is what happens:
- Having received product, put it on sale and unfortunately seen
it fail to sell, the retailer packs up the product;
- Some may have been damaged on the shelves, so must be
refurbished - new jewel case for instance;
- The product is returned to the label who unpack it and ensure
it meets the terms of that retailer's returns allowance;
- Typically the label then destroys or sends off for recycling
60% or more of the product.
It is incredibly wasteful and we believe something the industry
- retailers and labels - can ill afford right now.
There is an increasing, albeit belated, acceptance across the
music industry that maintaining a physical presence for music in
stores is worth preserving. The mass market is often an impulse buy
market. Fail to put product in front of consumers and they simply
won't buy.
A lot of effort is going in to find ways to make music's
physical product offering more attractive. This is good and
important work. We need to accept that in the age of the app', the
30 year old CD format no longer excites as it once did.
But just as important is for us to examine industry practices -
particularly the supply chain - to ensure the path of music from
the artist to the consumer is as frictionless as possible.
To put it bluntly: it does not matter how attractive a product
the industry creates if the structure of the supply chain makes it
uneconomic for retailers to stock and to sell.
Record companies, music publishers and retailers need to come
together to address music's flawed supply chain as a matter of
urgency.
ENDS