Some distributors will allow returns on certain titles, or offer some incentive to stock it. It may be that these stores that were going bankrupt had lost some of their clout with distributors, or the new CDs were just those they had bought. Retailers and distributors all take on significant risk when stocking a new CD for sale. It appears that risk is spread among the artist, label, distributor and store to bring music to the marketplace. The amount of risk taken on probably has something to do with reputation and ability to sell at each of these levels. For example, a distributor might be willing to take on more of the risk of stocking a title if it is going to a store that he knows can move that type of product.

If a label does make more of a title than the market can bear at the initial price point, then they eventually begin discounting them. This is how "cutouts" end up on the market. Distributors will mark the CDs with a cut or hole so they know what wholesale price they sold it for if it is returned to them (usually cutouts cannot be returned).

Returned CDs can be redistributed or destroyed. Check eBay for wholesale lots of new CDs that have been sold by the pallet by a distributor or label for pennies each and are being resold in smaller batches.

I am making generalizations as there seems to be all kinds of variations on deals for retailers and distributors. I find all of this very interesting as it is a window into how the market works.

Mark