Music loses its beat as internet competition bites

Jason Howson has closed his retail store and will sell music and art supplies via the internet. Photo / Richard Robinson

Jason Howson knows better than most the difficulties facing local brick-and-mortar retailers, especially those in the music business.

Beat Merchants, the Auckland-based record store he bought five years ago, shut down last month after operating for almost 15 years.

Although the market had already begun to slow it was the global economic downturn a year later that really put the boot into his sales.

"We came out of the blocks saying 'we know music is getting harder to sell, we're selling less of it but at the time my biggest seller was drum n' bass and dubstep vinyl [records] and we were still selling a lot of music but then people got short in the pocket and vinyl especially became a bit of a luxury," he said.

"Also because of digital [formats] they had the option of going out and buying a tune for $2 [online]."

The hard times continued into 2010 when Howson moved the store from the CBD to Grey Lynn.

"It was always like a 'cash is king' thing and we were slowly running out of cash. We were also seeing smaller volumes of music being sold. I think we were surviving and some months would do well and it would be back and forth," he said.

After more than a year at the Grey Lynn site, Howson decided it was time to try something different. Beat Merchants will now run primarily as an internet service, selling music and DJ gear with a physical office in Kingsland where customers can arrange to buy graffiti and art supplies.

While Howson was excited about the possibilities of Beat Merchants' online incarnation, the move will see the city lose one of its "last surviving traditional independent record stores".

The shop's closure is a reminder of just how tough it is for small retailers to stop the tide of online shopping eroding their sales.

With online stores often beating their brick-and-mortar counterparts on price, local shops can be put in a difficult position.

In the case of record stores, customers also have the option of purchasing music more cheaply in digital formats over the internet.

Slowing music sales also present a further challenge to record shops.

Total sales of recorded music in New Zealand fell from $82.7 million in 2009 to $65.4 million in 2010, according to the International Federation of the Phonographic Industry

The drop was not just a one-off; figures from the IFPL show music sales almost halved between 2003 and 2010.

Despite the downward trend, co-owner of Ponsonby's Conch Records Dustin Lindale said other retailers selling books or clothes were in the same boat and were facing increased competition from the internet.

"Generally I think retail is probably hard, I don't know many retailers who'd say the last three years [have been] easy," he said.

One way Conch was trying to generate interest was hosting in-store events to attract people to the shop, Lindale said.

"If you get people in the door there's a chance they're going to buy something ... [a lot] of people that do come in really enjoy the place and experiences they have, it's kind of a hub for people meeting up," he said.

Although Queen St's Real Groovy has been through turbulent times and went into receivership in 2008, founder Chris Hart was confident of the store's future.

"The single biggest thing affecting music retailers isn't downloads, it's the fact that the big box retailers have jumped on the wagon to use CDs and DVDs as a loss-leader to sell their stereos, caneware and plasticware.

"It's really hard for us to compete with The Warehouse selling CDs at $19.95 when our cost price is $20.60 plus GST," Hart said.

"The reality is that Real Groovy is owned by people who love music and it's run by people who love music and I'm convinced there will always be a place for us."