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Over the past few years, we have seen the downsizing and fading away of certain retail concepts. The three major retail store types that are rapidly disappearing are:

  1. Home Video Stores:Blockbuster Video, Hollywood Video, and Video Warehouse
  2. Music Stores: Tower Records and Sam Goody
  3. Toy Stores: FAO Schwartz, KB Toys, K&K Toys and Toys R’ US

Each one of these retail categories went through a period where they could do no wrong, but changes in retailing and technology have lead to the downsizing and closing of these categories.

The video industry still exists, but I have seen many Hollywood Stores close and many Blockbusters close or downsize. There are many reasons behind the changes in this industry, but the main reason is profit margins. The prices of DVDs have reached a point where there is hardly a difference between renting and owning a DVD.

The toy industry has basically been a victim of WalMart. WalMart sells toys that are near identical, but significantly cheaper. There is not much more to say, but I recently read that KB Toys is closing many locations and WalMart was a leading cause.

Music Stores are fading away because of stores like Best Buy and Circuit City stalking CDs and people buying music on iTunes. Despite popular belief, people still buy most of their music in stores and not on the internet, but the internet will progressively be the main avenue for buying music.

Many of the companies in these sectors are not run by the original founders and as a result have been taken in a new direction. Tower Records is apparently trying to sell music online digitally, but I do not expect break through success because iTunes has basically eliminated or silenced all of its competitors. Toy Stores will still exist, but they are not likely to be 10,000 Square Foot stores and they certainly are going to stay away from WalMart. The big brand video stores are calling it curtains for the most part. Expect your city/area to have one video store instead of 7.

Although these concepts are going through dramatic changes, the niche retailer will still be able to survive. For example, a video store that specializes in renting foreign films is catering to a very small select market and will not be subject to these changes. The toy store that specializes in toys for new born babies should not be subject to Walmart’s dominance. And the music store that sells rare albums from the 1950s is catering to a nice market and they are not likely to be iTunes users or find the music on iTunes.

So before you open that toy store, music store or video store, evaluate whether you are in a niche that is prepared to survive changes in technology, Wall Street, and WalMart.

In a future blog post, we will discuss some niche businesses that are doing well.

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