C&M, Washington's last "one-stop" (independent record wholesaler), closed its doors last Friday. It's a bad sign for this area's remaining independent record stores. C&M was a "rack jobber," a middleman between record manufacturers and the small mom and pop stores that were, until about 10 years ago, the backbone of the Washington record market.
"The industry has changed," says C&M head Murray Berman, a 25-year veteran. "There just isn't enough margin in wholesaling. Our prices have been stable for the last couple of years, where everywhere else they've gone up. In our market nobody raises their prices -- if anything, they lower their prices -- but the manufacturers keep going up and up and up. The prices that a dealer pays and what a wholesaler pays are virtually the same: As a result, the heavy discounters have really hurt the small independent dealers that are the bread and butter of my business."
C&M, which also did business on a regional basis, operated as a warehouse-showroom: Store owners (and even deejays) came in, looked at a new product, listened to it and walked out with their orders. Even the larger chains used C&M for weekend fills on hits.
But after a flat record business in 1985, unexpected computer costs and a failed attempt to develop a strong compact disc presence in mom and pop stores, the recent price increases by all the major labels were nails in the coffin.
"Margins dealing direct from a manufacturer to a retailer are 40 percent, at best; $8.98 less 40 percent -- that's the wholesale price," Berman explains. "When you add in my cost [16 percent], I'd have to sell records at least 14 percent over cost to make a living. That means an independent dealer has less than a 30 percent margin, assuming he can sell them at list price. Heavy discounters have created a situation where the public believes $6.99 or $5.99 is truly the list price for albums. When it costs $5.17 wholesale, you can't sell things at $5.99 all day long. Small dealers aren't creative enough; they just don't have enough buying power."
Washington was once a major center for independent stores, but in the last decade has become packed with power chains like Kemp Mill (27 stores), Waxie Maxie's (28 stores) and Penguin Feather (17 stores): All are heavy discounters. The remaining mom and pop stores will now have to look out of town, to Philadelphia's Richman Brothers and Universal or Baltimore's JEK and Musical Sales, ordering from catalogues, with shipping costs and delays a new part of the equation.
Lanham's Schwartz Brothers, one of the last major independent distributors, will be opening a compact disc one-stop, but has no plans to carry that over to the record side. Schwartz, which has been operating for 40 years, recently opened a sales office just outside New York City (after expanding its sales offices to Philadelphia in the early '80s and to Cleveland last October). It now services 35 percent of the country, so it's little wonder that last week Schwartz Brothers announced a record year, with revenues and net income at an all-time high (revenues were up 52 percent to $64 million, while net income almost quadrupled to $766,000, or 95 cents a share). The company attributed the rise to expanding video distribution, compact discs and LP/cassette sales, in that order.
Tape Prices Up
Expect price increases not just on the record side, but on the blank audio and videotape side as well. This month, Maxell, Fuji, TDK, Sony and Memtek will raise their wholesale prices between 2 percent and 7 percent, which will result in retail hikes of 25 to 50 cents a tape. Manufacturers are blaming the price rises on the drop of the dollar relative to the Japanese yen, which is also pushing up the price on CDs by as much as $1 in some places. Part of the blame for that, however, must lie in the gap between supply and demand: The vast majority of CDs are still imported, since there's only one CD plant in this country (though five are now in the works). Same with blank tapes, which, though often assembled stateside, still go through sophisticated tape-coating processes in the Far East.
Laurie Anderson's new film, "Home of the Brave," will open here appropriately on July 4, five days after her Constitution Hall concert. That's the same night that the German progressive band Tangerine Dream will bring its first American tour in 10 years to the Warner. And if you're wondering who's top-billed on the Dylan-Grateful Dead show July 6 at RFK Stadium, here's the order: Dylan and Tom Petty and the Heartbreakers will kick off the show at 2 p.m., followed by the Dead (the JFK curfew is 10 p.m.).
Success Without Videos
Van Halen got its first No. 1 album ("5150") without the services of David Lee Roth, and more surprisingly, without the aid of an MTV video, the first album in some time to accomplish that. The next supergroup that may achieve that status is Journey, whose first album in three years, "Raised on Radio," also is hitting the stores sans video support. The group cites a quick burnout factor via video tie-ins to particular songs. Both groups will embark on major tours this summer, with Cap Centre stops in August. Tickets for a third Z.Z. Top show at the Cap Centre May 26 go on sale tomorrow, and a fourth show is possible as well.