When the 70-store HMV chain filed for receivership in an Ontario court in February of this year with $39 million debt on its books, the prevailing wisdom was this was the tombstone for physical music sales in a digital universe.
The opposite has rung true for 30-something Doug Putman who grew up working at the family business, Everest Toys, a manufacturer and distributor based in Ancaster, ON.
He moved into the music sales with the acquisition of the five-store, Ontario-based Sunrise Records chain from Malcolm Perlman in October 2014 and quickly doubled the number by opening in cities like Ottawa and North Bay. In April 2017, Putman surprised just about everyone with an ambitious plan to re-negotiate leases in all of the HMV locations and make Sunrise a national brand.
In just over two months Putman has opened up 50 more stores and "business is booming," he says.
It doesn’t stop here, either He has plans to have a fleet of 85 outlets by year-end.
“The numbers we are doing are off the chart, they are insane right now,” he shared in a phone interview yesterday.
“A lot of people just don’t realize the scope of demand still for CDs and vinyl."
In fact, over 12 million CDs were sold in Canada last year, a figure that translates to $100-plus million in retail sales; and the vinyl business continues apace and carries a premium price sticker.
The customer base at Sunrise today is a diverse mix, but Putman says the big surprise is he sees a lot of millennials buying CDs and vinyl in his stores.
“The thinking was ‘Oh, Millennials don’t buy, they shop online, they don’t want physical’ but that’s not what we are seeing.
“And then there’s the regular CD buyer we’ve had forever. Our (inventory) content is skewed slightly more to male customers, but not by much. I’d say we skew 60/40 male to female.”
The music entrepreneur is a fast read of industry trends and understands that millennials grew up listening to their parent’s music, Classic Rock, Classic Hits and that golden age in music that cruised through the Seventies through to the early Nineties.
For this reason, the catalogue from that era is a big part of his business today. The fact that a headline of superstars has passed on in the past several years has further helped to spur catalogue sales.
The typical Sunrise chain store today carries 10,000 titles with as high as 70 percent being catalogue (defined as any release 18 months and over) and deep catalogue (three years and over).
Add to this, about 5,000 vinyl titles are carried in the chain’s stores.
Sunrise also carries paraphernalia or, in the vernacular, cultural merchandise, which currently represents about 30 percent of the overall business.
“What we’ve done is focus on the core business, which is music,” Putman says. “We are making sure that the audio customer still has somewhere to go and what we are finding is the depth of catalogue we are stocking is paying off for us.
“We’ve been selling hundreds of copies of catalogue items in the first eight weeks of being open that HMV was missing the boat on. And there are thousands of titles like that. The extra depth of catalogue is doing exceptionally well for us.”
What’s more extraordinary is that Sunrise’s success so far has come without an explicit marketing or promotional campaign.
It’s not that it wasn’t part of the plan, but his strategy has been to open mall outlets, fix the bugs and when the full complement of stores is up and running to have an official grand opening campaign.
It’s still his plan, but just the bright Sunrise marquee and the right mix of inventory is drawing customers into the mall stores without any fancy fixings online or in mainstream media.
Overall, music represents about 55 percent of the chain’s gross sales, with DVDs a significant part of the business and paraphernalia bringing in the balance.
And vinyl is a big part of the music business, again with catalogue trending as the leader.
In the coming three to four weeks, Sunrise Records will be launching its online music store, adding more growth to a chain that is fast becoming a fixture on the national landscape.
The chain’s national music buyer is Tim Ford, a veteran Sunrise employee who came through the store system, starting off in Brantford.
Putman has found a niche in a market that looked to be last, bringing back a business most thought was done by making smart choices on his inventory mix, giving the stores flash appeal with modern fixturing and in many cases hiring redundant HMV employees who know the market, know the music and had relationships with the communities they worked in.
The catalogue business is an important driver in online and in-store music sales. Top artists include the Beatles, Rolling Stones, Eagles, Bob Marley, Queen, Pink Floyd, Nickelback, Styx, Journey, Leonard Cohen, Kendrick Lamar, The Tragically Hip, Drake, Metallica, Meat Loaf, k.d. lang, Shania Twain, Taylor Swift, Sam Hunt, Tom Petty & The Hearbreakers, CCR, Guns N' Roses, Simon & Garfunkel, Amy Winehouse, Prince, Red Hot Chili Peppers, Eminem, Neil Young, Bob Dylan, and a hodge-podge of soundtracks, musicals and various artists hitscompilations.
Physical album sales accounted for 58 percent of all album sales in Canada in 2016.
Deep catalogue represented about 47 percent of all forms of music (physical, digital and audio streams) listening in Canada in 2016.
The biggest single day for album sales las year was Friday, December 23 with 151,308 units sold—120,866 in the physical format.
The week of December 16 was the largest one-week sales period. In the seven-day cycle, a total of 603,009 CDs sold, 43,060 vinyl LPs for a total week count of 805,145 units (including downloads).
Over 500,000 vinyl albums sold in Canada in 2016.
— Fact sources include BuzzAngle 206 Canada Music Report, Nielsen Music 360 Report, Nielsen Market Watch sales report.