By Darren Waters
BBC News Online entertainment staff
UK record shops face an "insecure future" due to downloading and CD sales in supermarkets, a report has said.
Record stores are offering more music than ever
The pressure of new players competing for the record buyer's pound could make music stores "irrelevant", it stated.
The report was produced by the Music Tank network and published in trade magazine CMU Weekly.
Online store Napster also announced it has increased the size of its music library in the UK by 40% to 700,000 songs at a cost of £1.09 per track.
Napster said the library is now the world's largest online music catalogue.
Leanne Sharman, Napster vice-president and UK general manager, said: "Napster gives users their own virtual music superstore where there is something for everyone.
"We're very grateful to the labels, artists, managers, publishers and other rights holders who have been so quick to add their repertoire to the catalogue."
The music report's author Jennifer O'Kane said competition from online stories was just one factor being faced by record shops.
Last week, the British music industry announced that 500,000 songs had been downloaded legally in the UK so far this year.
"Music stores need to move fast to enhance the customer experience in order to encourage the public back," she wrote.
"In terms of price, the music retailers have been forced into a price war by the online music sellers and the supermarkets."
But Ms O'Kane concluded that it would be a mistake for stores to enter into a cost-cutting battle.
"They should seek competitive advantage through 'consumer experience'."
She highlighted the Virgin Megastore in Oxford, which has instrument dealer Sound Control in its basement.
"This gives the store a new breadth of credibility and encourages new types of consumer into the store," she wrote.
"To survive the retailers need to think differently," she concluded.
"Record stores have always been the most popular place to purchase music and are part of the culture here in the UK.
"As the increasing popularity of downloading highlights, there is certainly still a market for music."