Smiths flags 1.99 [pounds sterling] single over move to pull format: retailers' margins have been hit by cheaper format.(Retail)

WH Smith has partially blamed the 1.99 [pounds sterling] single--trumpeted as an answer to rapidly-declining sales--for its exit from the singles market.

Smiths says it will remove singles from its entire chain of more than 500 stores stocking music at the end of this month, after finding itself at the brunt of an industrywide 33% drop in sales in 2003 and a dismal start to 2004.

The generalist has specifically highlighted the introduction of the 1.99 [pounds sterling] format, designed to bring pricing clarity and better value for money to singles consumers, as a reason for its decision to pull the plug on singles.

Margins have been hit hard by the new, cheaper format, the retailer told suppliers in a letter last week. "The UK singles market continues to decline and recent changes in commercial terms, including the introduction of the two-track format and the mix of firm sales versus sale or return stock, makes retailing singles unprofitable," the letter states.

Smiths' category controller for music Scott Jameson also lays the blame at record companies for allowing singles sales to decline so sharply. "The UK singles industry is in some degree of turmoil," he says. "Sadly, the music industry has been the principal orchestrator of its decline. It has not done enough to defend against new channels to the market like downloads."

Warner commercial director Alan Young notes the irony that the two-track single, billed as a saviour to physical singles, now stands accused of helping to persuade a key retailer to stop selling them. "Clearly a strong voice came that we need a strong two-track basic single at a basic price," he says.

Smiths, which controls less than 10% of the singles market, will stop taking orders for new singles releases after next Monday before removing all singles from its ...