Analysis of the UK Music Retail Industry Essay Example | Topics and Well Written Essays - 1500 words

Analysis of the UK Music Retail Industry - Essay Example Music is a hobby for every one in five adults in the United Kingdom (UK). Music is a lifestyle for a large proportion of the UK people. Majority of the people in the UK listen to music everyday at home, at work and while enjoying their leisure in other places. The significance of music in a consumer lifestyle is emphasized by study results, which indicate that music access has been enhanced by new technology and other trends. Music retailers in the UK include Woolworths, Zavvi, HMV, EMI, Universal, Sony, and Warner (Key Note 2011, p1). Many of these retailers offer CDs, cassettes and vinyl. For a long time the â€Å"bricks and mortar† music retail shops dominated the UK market. However, there has been a sharp reduction in their market share over the past decade with online retailers like Amazon winning, from the brick and mortar shops, a recognizable share of the market. Several physical retails stores in the UK market have been forced to close some of their branches in view o f the various changes and challenges that have graced the market. The paper will highlight some of the changes that have been witnessed in the UK market and will provide a PEST analysis of the UK music retail industry. 1.2 PEST Analysis 1.2.1 Political Environment Control on copyright and recording places potential limitations on the formal distribution channels, for instance, downloading music online (Burt and Sparks 2003, p74). In other words, formal distribution channels have been affected by recording and copyright controls and laws. The present issue concerning the political environment in the UK involves VAT. The problem of Low Value Consignment Relief (a tax mechanism that allows retailers to utilize distribution channels in Channel Islands to sell goods at a low price in UK without the need to pay VAT) has been a thorny issue for the physical music retailers in UK. The music retailers feel that it will make bricks and mortar music shops be disadvantaged in terms of costs. Mu sic retailers’ fears have been increased with the recent move by the government to raise VAT to 20 percent from 17.5 percent (Cardew 2011, p1). 1.2.2 Economic Environment The relatively low cost of music media and devices indicates that there will be little recessionary pressure on sales and expenditures. The recent economic recession hugely affected consumer spending and resulted in revenue fall in the music industry by an average of 3.7 percent in 2009 (McMillan 2011, p5). While the recent recession saw a significant drop in sales of music albums and media between 2009 and 2010, the economic situation of UK has improved in 2011. This means that across the country, the level of disposable income has grown meaning that consumers may be willing to spend more on entertainment. â€Å"Bricks and mortar† music shops which operate with considerably high overheads tend to set higher prices for their products as noted by McMillan (2011, p6). 1.2.3 Social Environment Some of th e physical music retailers in UK have a popular image in the society meaning that they attract a wide range of customers. The population aged between 19 and 40 is heavily involved with and have varied tastes of music. It is important to note that while the younger generation is more comfortable with using high tech equipment such as computers, iPods, Shuffle flash disks and the likes, the older generation is more conservative and therefore prefer to us CDs, cassettes and vinyl players. What this means is