CD Store

Industry data

There are approximately 185 stores in Israel selling CD’s, records, and tapes. This information reflects the ongoing decrease in stores evident over the last few years.

 

Market Characteristics

The music industry is currently undergoing radical changes. The transformation is from traditional sales at stores to sales via modern distribution channels. The industry has been significantly affected by the rise of the internet due the development of internet sites and portals allowing legal purchase of entire CD’s and individual songs, in addition the development of technology bases for illegal music downloads via P2P programs.

  • These trends, alongside the continuing phenomenon of illegally duplicated CDs, have resulted in a decrease of CDs sold at stores, along with a decrease in the number of active stores.
  • A number of large companies control most of Israel’s music market.
  • Seasonality.
  • High competitiveness.
  • Product demand remains high for a short period of time, then decreases.

 

Customers: Defining the Target Market and its Size, Market segmenting

Potential clientele includes the general population especially young people willing to invest money in the purchase of music. The target market can be segmented according to age, geographical area, income level, and musical preferences.

 

Competition

Competition in the industry stems from a number of factors: CD stores, supermarket chains, retail store chains, internet, bookstores, pop stores, in addition to illegally copied CDs and direct sales by mail.

 

Vendors

The main companies active in the branch also constitute primary vendors. An additional resource for CDs is independent store import.

 

 

Marketing resources

  • Correct use of shop’s window- displaying posters of new CDs or external signs.
  • Print advertisement- chiefly in local print
  • Internet advertising
  • Reputation- specializing in a specific music area such as rare or special records, etc.
  • Promotions- promotional discounts and CD discounts on the store’s initiative or the distributor’s initiative.

As the store develops and becomes more familiar among consumers, advertising and marketing costs will decrease.

 

Future Development Options

The music industry is facing a change that will drastically affect CD stores. According to an evaluation conducted by Forester research companies, the music industry’s points of sale are migrating and music is increasingly sold via the internet. Stores expected to remain active are mainly those offering specialized collectors’ materials, classics, etc, or at population concentrations where technology penetration is slower.

 

Factors Affecting Success:

Location, service, inventory, professionalism, credibility, reputation, comparative advantage definition, and music selection management.

 

Entry Barriers:

Entrance threshold on the experience and professional aspects is low and the main barrier is financial. The industry requires relatively high establishment costs- both on initial store investment and initial inventory purchase.

 

Human Resources:

Sales clerks are usually under the age of 25, similar to the store’s main target market.

A small store can be maintained with one or two employees, one of them acting as manager. At a larger store, additional employees are required.

 

Required Equipment:

  • Furniture- includes shelves (store and storage area), display shelves, store window, and sales desk.
  • Amplifier system and listening posts.
  • Cash register (or a computer-including inventory control), telephone and fax.

 

 

Required Investment

  • Store remodeling- separating the store into a selling area, listening posts, display area, and storage area.
  • Initial inventory- initial inventory investment is high, as the aspiration is to present a wide variety.
  • Equipment as noted above.

Total investment required, not including inventory is estimated at 70-100 thousand NIS.

 

 

 

 

Industry profitability

Companies distribute CD’s/tapes at price list from which a discount is given to the store. This discount is in effect the store’s profit on these sales.

 

Risk Level:

Risk level is high, especially due to uncertainty as to the industry’s future in the next 5 years.

 

Licenses and Certifications:

If the store plays music (aside from personal listening posts), a business license from local authorities is required.

 

Insurances:

Business insurance (for content and inventory), third party insurance, employer’s liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.

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