Small entertainment retailers must innovate and specialise if they are to compete in a changing market, one industry body has said.

Steve Redmond, spokesperson for the Entertainment Retailers Association (ERA), said: "Smaller retailers will have to do what they have always done - to innovate and in particular to specialise."

He suggested that companies should look to niche areas and new ideas that the larger firms were not yet involved in.

The Rough Trade record store in London was, he said, a good example as it offered titles unavailable in high street stores.

Mr Redmond added software was being developed which would let SMEs enter the online entertainment market place.

He said: "A series of other [firms] are waiting in the wings with technology platforms which will allow smaller retailers to compete."

Last week the BPI, in association with the Official Charts Company, revealed that music download sales reached almost three million in the run up to Christmas 2007.

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