Media Coverage 2003

Vancouver Sun - August 19, 2003
Specialty stores sing big-box blues: Wal-Mart is a hit with Canadians shopping for audio and video products

by Joanne Blain

Big-box retailers are hitting the right note with Canadians shopping for audio and video entertainment.

They are making tracks on specialty stores in sales of CDs, digital electronics and DVDs, according to a survey by the Toronto-based Solutions Research Group.

Traditional music retailers have seen their share of the market drop to 49 per cent this year from 57 per cent in 1998, according to excerpts from the survey released Monday.

Across Canada, HMV is the top choice for CD sales and Music World is No. 3, according to the survey of 1,500 Canadian consumers, but Wal-Mart has muscled into second place.

The big-box chain has quadrupled its share of the music market, the study showed, to 17 per cent this year from just four per cent in 1998.

Wal-Mart is also the top pick in the country for DVD buyers, ahead of Future Shop and Blockbuster, and it's second to Future Shop in sales of digital home-entertainment products, such as DVD, CD and MP3 players.

The snapshot is slightly different in B.C., where A&B Sound has long topped the charts in CD sales, but shares the top-three list with Wal-Mart. Discount department store Zellers came in fifth.

A&B is third among B.C. consumers for DVDs, but takes a back seat to Future Shop, Costco/Price Club and Wal-Mart in sales of electronics products.

Wal-Mart is also the first choice in the province for DVD sales and third for digital electronics, behind Future Shop and Costco/Price Club.

Study director Kaan Yigit said the trend is a natural evolution of the convergence that's happening in the entertainment industry.

"The Canadian home has never been more wired ... and various entertainment categories are converging in both the content and the hardware," he said.

For example, Yigit said, many DVD players also handle CDs and MP3 files, and some CDs are now packaged with DVDs, blurring the lines between formats and product categories.

That has forced some retailers who carried just one type of merchandise, such as CDs, to branch out into other products, he said. And it may also be encouraging non-traditional retailers to jump on the bandwagon.

"If the people are there, it's dawning on a lot of traditional retailers that maybe the margins aren't huge, but there is still some incremental potential in carrying entertainment products," said Yigit.

Dropping prices for home electronics have also brought more mass-market retailers into the field, said Colleen Gallagher, marketing manager for A&B Sound.

"Usually, $500 is the magic price point," she said. "Once something becomes lower than $500, it becomes a mainstream consumer product."

She said a recent U.S. market-research report suggested "half of the DVD units sold in the U.S. this year are going to be under $50."

Retailers like Wal-Mart also have the advantage of being "in the right place at the right time" as the Canadian population ages and the younger generation finds other ways to spend its money, Yigit said.

"Especially in the music area, the contribution of young Canadians is declining because they're downloading more or they're spending money on other things," he said.

Coupled with the demographics of the country's aging population, "older-skewing big-box retailers are beginning to account for a larger share of the market."

Older customers with deep pockets may be the ones buying big-screen TVs and expensive stereo systems, but they also want the DVDs and CDs to play on them, said Lori DeCou of Future Shop.

That's why the Burnaby-based chain has increased the amount of floor space it devotes to those products, she said. "The customer wanted to go someplace to get everything they needed."

Yigit said the writing is on the wall for "mass specialists" that carry only one type of entertainment product. To stay competitive, they'll need to "pick a target audience and become a destination for that audience," he said.

"If I'm targeting an 18-year-old's lifestyle, why should I only carry music? They're interested in music, they're interested in DVDs, they're interested in video games.

"We think the future for those 'mass specialists' is finding a target and super-serving that target, irrespective of category, instead of specializing in one category of entertainment products."

Wherever you shop, Yigit had good news for B.C. music lovers -- the average price of a CD here is roughly 15 per cent lower than the national average.

In a survey last year, he said consumers reported paying about $15 a disc here, including tax, compared to the Canada-wide average of more than $17.

SHIFTING TASTES: B.C. consumer preferences in three categories, according to a recent survey: Music: 1. A&B Sound; 2. Wal-Mart; 3. HMV

SHIFTING TASTES: B.C. consumer preferences in three categories, according to a recent survey: DVD's: 1. Wal-Mart; 2. Future Shop; 3. A&B Sound

SHIFTING TASTES: B.C. consumer preferences in three categories, according to a recent survey: Digital hardware: 1. Future Shop; 2. Costco/Price Club; 3. Wal-Mart

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