Borders, which accounts for about 2% of the U.S. recorded music market, plans to dramatically reduce the number of CDs its stores will carry and seeks revised payment terms from vendors. As Billboard’s Ed Christmas termed it, Borders is “threatening” to reduce inventories. Judging from the email that was forwarded to me that was written by someone on the conference call, and judging from the quotes Christman got from a Borders manager of corporate affairs, there is no threat. Borders is making the reductions.

According to the source, 97% of existing locations will reduce inventories by 70%. All stores will carry top new release and catalog titles, an inventory level that could be as low as 50 titles in about 200 stores. Borders is not seeking lower wholesale prices but wants revised payment terms. The retailer has floated the idea of receiving extra dating or moving to a consignment model. Extra dating is, in effect, a reduction in invoice price. A consignment model would help labels emphasize fast-moving, popular titles in order for them to receive payment as promptly as possible.

It would not surprise me if labels granted extended payment terms but got Borders to rein in a bit their reductions. It would be a small victory for a group of companies with very little leverage. Borders has been lowering emphasis on CDs since last year. The day was coming when the chain all but gave up on the format.

Not that Borders is key in developing artists, but there are dramatic implications in this planned reduction. Other major retailers will reduce CD inventories — it’s only a matter of time — and reduce opportunities for new artists to gain a foothold at retail. Labels are going to find their chicken-and-egg situation get even worse: To break a new artist they need retail to carry the title, but retail will only carry popular titles. If not for the top-seller charts at Amazon.com and iTunes, who will know what to carry?

Posted by: Amy Sikkes

Source: http://www.coolfer.com/blog/archives/brickandmortor_retail/

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