Physical goods buisness, kiosks and more.

Retailers must look to a mix of new product innovations and more aggressive consumer marketing strategies to counteract a slumping physical goods business, according to a new study from research firm NPD.

In a presentation to attendees of the National Assn. of Recording Merchandisers (NARM) Russ Crupnick, president of NPD Music and Movies, said that retailers need to have a better sense of who their customer base is, so they can sell product on a more targeted basis—both on the high end to consumers who are active music buyers and open to spending more on music, and on the low end to light impulse buyers who are in stores shopping for non-music goods.

While the average music fan is consuming more music than ever, the amount of music purchased through retail stores is slipping. In its most recent study NPD data indicates that the amount of music the average fan acquired through physical stores is 43% of total music consumption, down 12% vs. 2004. The bulk of the remainder—more than half of the average consumer’s music consumption—is acquired through ripping, burning, and to a lesser extent, peer-to-peer.

Most troubling, Crupnick says the music business has experienced a “chilling decline” in CD purchases by consumers aged 26-35 and 36-50 over the last four years. The steepest drop is among music buyers 36-50, which comprise 21% of music buyers over age 13. As a category their purchases are down 22% vs. 2002.

Crupnick says new offers like bundled product offers and in-store kiosks can possibly help drive greater business. But labels and retailers face a consumer education problem when it comes to kiosks. NPD data indicates 9 out of 10 physical music buyers have no idea what a digital kiosk is.

Meanwhile, there is some consumer interest in CD/DVD combo offers, CDs packaged with coupons and the DVD album concept being floated by Warner Music Group.

But Crupnick says both kiosk and bundled offers work better on a targeted basis than across the board. He also cautions that bundles will assist in impulse shopping, but not necessarily drive traffic.

In other NARM news:

In a star-studded product presentation that included a surprise performance by 50 Cent, Universal Music & Video Distribution outlined a massive fourth quarter push featuring more than 50 releases. Among the artists with new albums expected before the end of the year: Ludacris, Young Jeezy, Lionel Richie, The Killers, The Roots, Rick Ross, Nas, Fabolous, Lloyd Banks, Fergie, Beck, Young Buck, Obie Trice, Snoop Dogg, Eve, Mya, JoJo, Scissor Sisters, The Who, and Natalie Cole. Performers showcased at the product presentation included Peter Frampton, James Hunter, Tanya Stephens, Jibbs and Young Hot Rod featuring 50 Cent.

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