Business Update with Mark Lacter

Holiday shopping; Napster

KPCC's business analyst Mark Lacter talks about what's in store for retailers this holiday season; he also talks about the end of Napster.

Susanne Whatley: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, with all due respect to Halloween, which is still more than a fortnight away, what kind of preparations are businesses making for the all-important holiday shopping season?

Mark Lacter: You'd expect this to be a disastrous season, Susanne, at least based on those consumer confidence surveys - you know the ones that make it seem as if we're all about to jump off a cliff. Thing of it is retailers have been holding up surprisingly well - August and September back-to-school sales were quite good, though shoppers are looking mostly for the discounted merchandise. And that should be the story in November and December. The forecasts are calling for an overall sales increase in the two-and-a-half to three percent range, which is about half the activity retailers would like to see in a healthy economy, but it's not the kind of disaster that we saw in 2008 when sales actually fell - something that rarely happens during the holidays.

Whatley: What did the big retailers learn from that?

Lacter: They've gotten very good at maximizing their profits by selectively promoting certain kinds of merchandise - it's no longer a case of just ordering lots of sweaters and TV sets and marking down whatever doesn't sell after Christmas. These days, everything is calculated - they want to make it seem as if we're really getting a great deal. Also, the bigger national chains have gotten good at ordering based on region of the country and even stores within that region. That means color, size, style – there can be lots of variations between what's being sold in, say, Santa Monica versus Thousand Oaks.

Whatley: How are they dealing with online purchases?

Lacter: That’s another area where retailers have had to change – merging their online shopping operations with their physical stores. Now, this can be tricky for shoppers - many of us have had the experience of seeing something for sale online but not in the stores. Also, if you buy something online and it doesn't work out, how easy is it to make a return at your local store instead of having to ship it back? All these logistical issues can be a big deal for both customers and retailers - something that wasn't true just a few years ago.

Whatley: Here’s something else that’s changed – no more Napster.

Lacter: That’s right. It's kind of ironic that it came on the same week there was so much attention placed on how Steve Jobs revolutionized the music business with the iPod and with iTunes. Some would argue that Napster was really the thing that revolutionized music, for better or worse. Napster was a file sharing service that made it very easy for people to share their MP3 files.

Whatley: Much to the music industry's chagrin….

Lacter: Well, let's be honest: It allowed people to download music for free. And as you may remember, there was a lot of litigation by the music labels. Napster was ordered to shut down its operation, the company filed for bankruptcy, and in the years following there were several owners that tried to revive the place as a legitimate paid music service. Most recently, Best Buy gave it a try, but it just wasn't a good fit.

Whatley: And the new owner?

Lacter: It’s Rhapsody, which is among the largest of the subscription music services. It’s a different business model than iTunes, where each song or album is purchased. The Napster name will be retired, and there are plans to lay off around 100 people in L.A. and San Diego by the end of the year. End of an era, I suppose.

Whatley: Sorry to hear about those people losing their paychecks.
Thanks Mark!

Lacter: Thanks Susanne!

Whatley: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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