Business News Retail

Which? reckons supermarkets and VAT dodging mail-order sites contributing to the death of independent music retail

By | Published on Wednesday 2 June 2010

The June issue of Which? magazine plots the demise of the independent record shop in the UK, and questions why so many indie retailers – 73% in the last ten years – have fallen by the wayside.

And while the growth in both illegal and legal digital services – which have, of course, impacted on the whole record industry – are probably part of the story, the article suggests that, perhaps unsurprisingly, it’s the rise of cost cutting supermarket CD departments and online mail-order websites that have really hit the high street record seller, big and small.

After all, while digital completely dominates in the singles market these days, CDs still accounted for 92% of album sales in 2008, and it was always album sales on which indie record shops relied. And Which? notes that, of the 2263 consumers it surveyed, 34% said they bought CDs from supermarkets and 66% from mail-order websites. By comparison, 42% said they shopped in high street chain record stores while only 13% went to indie record shops.

Regarding the impact of supermarkets selling chart CDs at low prices, the consumer rights magazine quotes an HMV rep who says: “An onslaught from supermarkets selling many titles at well below the manufacturer wholesale price may have contributed to some independents or chain branches being forced to close”.

But, while the HMVs of this world have also had to face new competition from the supermarkets, they have in turn benefited from the boom in mail-order CD sales. And, of course, the big mail-order sites, like,, Amazon and Tesco’s online operation, can all undercut the indie retailers – even if they offer mail-order services – because the big boys base their mail-order businesses in the Channel Islands where they benefit from the much previously reported VAT dodge.

As previously reported, because of the slightly strange constitutional status of the Channel Islands, mail-order companies based there do not have to charge VAT on products up to £18, which includes most CDs. Which means said companies can undercut their mainland competitors by 17.5% without affecting their profit margins. The campaign to close the loophole continues, now at a European level after the Jersey and UK governments, despite talking about the need to tackle the tax dodge, subsequently refused to do so.

Most people agree that the decline of the independent record shop is a bad thing, especially for smaller indie labels who often relied on their counterparts in the retail sector to get their releases on the shelves. The Musician Union’s General Secretary John Smith told Which?: “When independent retailers go out of business it threatens the existence of small music companies that rely on these shops to promote new artists”.

On the significance of the VAT loophole, Smith continues: “I hope that the EU will act on the protests being made about this practice in order to protect the UK music industry”.