Handleman Records

A legacy of the early Towers days, were "rack jobbers" - companies contracted to provide merchandise services. Two remained until 1991 when the company was sold - Morse Shoes and Handleman Records. Handleman reps would order stock, return dated stock and maintain the racks. Here's a backgrounder on the company. ~Bill

The original company was established as a partnership distributing pharmaceuticals in 1934 and had achieved over $30 billion in revenue since its founding. During the 1950s the company made a decision that proved to be crucial to its future growth: it began wholesaling records. Eventually stocking the racks for major retailers like Kmart, Walmart, and Woolworth, Handleman became better at managing record displays than a large store could be. By 1980 the firm stocked records at over 8,000 retail stores. In 1980 the company became the largest record and tape wholesaler in the United States.

The number of music retail departments serviced by Handleman had grown to 6,500. The firm serviced even more video departments--7,400, book sales in 2,600 retail departments, and now serviced 4,700 software retail departments. Handleman remained heavily dependent on its two largest customers. Kmart, which was experiencing financial trouble, accounted for 40 percent of Handelman's sales, while Walmart accounted for 25 percent.


ORIGINS
Originally a sole proprietorship, in 1937 the Handle-man Company became a partnership with Philip Handleman and his sons Joseph, Paul, and Moe.

 

Started to distribute pharmaceuticals, the firm soon shifted to selling health and beauty aids in 1940. By World War II, the company was being run by the sons. In 1946 another brother, David, joined the business.

During the 1950s the company made a decision that proved to be crucial to its future growth: it began wholesaling records. When Joe Handleman, then president of the company, wanted to buy a friend a gift, he was shocked at the poor quality of the record store’s display and selection. He sensed an opportunity for a record distributor. With record sales expanding and poised for far greater growth in the future, this was a fortunate move.

With record sales fluctuating wildly as trends came and went, Handleman became an expert in inventory control. Eventually stocking the racks for major retailers such as Kmart, Walmart, and Woolworth, Handleman became better at managing record displays than a large store could be. Record sales generally consisted of releases by many different artists. Some records had a short life span, others might become bestsellers overnight. Overstocking or understocking a record might prove to be a big mistake. As a result, major retailers handed over to Handleman responsibility for supplying selections, deciding how many of each to stock, advertising records and setting up promotional displays.

DAVID HANDLEMAN TAKES OVER


David Handleman took charge of the company in 1967. In 1974 he became chairman and CEO. The following year, under his leadership, the firm moved into book distribution with the purchase of Sieberts, a record and book marketer.

By 1980 the firm stocked records at over 8,000 retail stores. It was a tough year for record sales, with sales across the entire industry declining. The U.S. economy was in recession, the usual crop of yearly recording hits failed to materialize, and Handelman’s sales dropped to $199 million, down from $224 million in 1979. With those sales in 1979, Handleman built a large inventory in anticipation of another great year. When the sales slump hit, the firm was stuck with excess inventory, and many record companies restricted returns to 20 to 30 percent. As a result, the firm’s suppliers forced it to lessen its future inventories. So, for example, in late 1980 the firm bought only 65,000 copies of a new Barbra Streisand album, less than half of what it might have bought a few years earlier. Despite these troubles, in 1980 the company became the largest record and tape wholesaler in the United States, moving past the Pickwick division of American Can.

About half of the firm’s sales were coming from Kmart. Handleman used optical scanners there, and at its other major accounts, to track customer inventory and send the information to a central computer. The firm used the information to examine trends and decide what to carry at its distribution centers and at individual stores. Handleman’s gross profit margins averaged about 27.7 percent for these services. The company had 21 distribution sites throughout the United States and Canada. It picked up a major new account when it began stocking records at the Zayre chain’s 250 stores in the northeast United States. This gave it a total of about 5,000 record and tape departments.

Handleman was also expanding its book distribution business. The firm ran the book departments in 2,000 retail stores across the United States. It would take only customers for whom it already stocked records. This allowed the same sales representative to handle music and books for the same store, keeping costs down and simplifying the sales process. About 40 percent of book sales came from romance novels geared toward female customers. Books and magazines accounted for about 9 percent of Handleman’s 1980 revenues.

Handleman accounted for about 9 percent of all sales in the record industry in 1980, but because so much of what the firm handled were major releases, it accounted for 20 percent of total hit sales. As a result, nearly 90 percent of the firm’s revenues came from handling recorded music. This reliance on the products of one industry gave the firm a narrow base, however, and with the total number of records and tapes sold declining by 18 percent over a four-year period, the company wanted to broaden its product lines.

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