Record stores keep balance in music world’s rough seasAdapt or die. Retailers are familiar with this truism, and independent record stores are more familiar with it than most. Over the past 50 years, stores selling recorded music have had to adapt to massive format changes—from LPs and 45s (commonly called vinyl) to compact discs in the 1980s and ’90s, with brief flirtations with 8-track and cassette tapes in the 1970s and ’80s.
“Since I opened my first record store in Ann Arbor 31 years ago, I’ve adapted countless times,” said Steve Bergman of Schoolkids’ Records in Exile. “But the challenges are very different today, mostly because of the recording industry and the bad choices they’ve been making.” Bergman opened Schoolkids’ Records as part of a co-op of independent record stores in 1976, then broke away from it. With the help of his partner, Michael Lang, the Ann Arbor store grew in size and reputation until it was known as one of the premiere “indie” music stores in the country. Bergman also diversified his business efforts. In 1985 he started SKR Classical, a stand-alone classical music store. In 1992 Schoolkids’ started its own nationally distributed “indie” record label, primarily to promote local musicians. In September 1998 Schoolkids’ went out of business. But a few years later Bergman reopened as Schoolkids’ Records In Exile in a much smaller space, catering to a smaller but enthusiastic clientele that values the store’s unique place in the Ann Arbor market. The rapid pace of change in the music industry makes it difficult for an independent record store to keep its balance. But many of those that have survived the past few tumultuous years are determined to keep adapting. Unsettling trends Sales of music CDs dropped nearly 13 percent in 2006, and in the first quarter of 2007 sales were down 20 percent, the The New York Times reports. Since 85 percent of total music sales still come from CD sales, these drops are startlingly high. At the same time, independents face the same heavy competition from national general merchandise chains that most specialty retailers face—not to mention national bookstore and electronics chains that have increased their stock of CDs over the past decade. National “big box” chains are now responsible for at least 65 percent of music sales (including digital and physical recordings) in the U.S., up from 20 percent in the mid-1990s, according to record executives cited in a recent Wall Street Journal article. One form of competition independents don’t face is a strong national music store chain, at least since Tower Records liquidated and closed its last U.S. stores in December 2006. A few national and regional record stores continue, but most have shifted their focus toward entertainment—selling as many or more DVDs than CDs. Mall-based record store chains have undergone massive consolidation in the past decade, with Trans World Entertainment’s f.y.e. (originally “for your entertainment”) stores the only major player in Michigan. Trans World acquired Musicland, Sam Goody and Camelot Records and rebranded most of them as f.y.e.
Most significantly, the Internet is changing everything—more so than in any other retail niche except, perhaps, video. Imagine that whatever you sell—gifts, clothing, furniture—could be instantly delivered to your customers by means of a computer download. Apple’s iTunes store and various other download sites—coupled with the popularity of iPods and mp3 players—have made that happen for music. “Truthfully, both legal song downloads and illegal downloads are hurting CD sales,” says Dan Bernath of Flat, Black and Circular in East Lansing. “The sound quality of these downloads is inferior, but most people don’t care.” Staying afloat Independents tend to carry a wider spectrum of alternative music and “indie” record labels than the national chains. That larger selection, along with a knowledgeable sales staff that is familiar with it, are their primary means of differentiation. “We are in a smaller space, but we still give the impression of carrying many more titles than you see at a big box store,” said Bergman. They also tend to sell both new and used CDs (as does f.y.e.), new and used vinyl, and often DVDs or VHS tapes as well. Flat, Black and Circular now sells both used DVDs and VHS tapes but has no plans to carry new DVDs. Selling used CDs and vinyl is a specialty in itself—with margins that are significantly higher than on new titles, according to Bernath. To maintain the store’s reputation for quality, Bernath and his colleagues, co-owner Dick Rosemont and Jon Howard, make a point of carefully checking every disc someone wants the store to buy. “We make it clear we only buy discs in near-new condition, but you wouldn’t believe what people bring in, thinking we might buy it,” said Bernath. Bergman, whose store carries all new music, understands that selling used music along with new could help his margins. He is simply not interested in doing so. “It’s not my expertise—evaluating the quality of what comes in, pricing these items to sell, selling what others bring in instead of selecting my inventory,” he said. Many independents also have become specialists in vinyl, which is seeing a minor resurgence. Not just old records—current artists also are putting out vinyl. “Vinyl is trendy right now, and for some audiophiles, when played on high-end equipment vinyl sounds better than CDs,” said John Kerr, of Wazoo Records in Ann Arbor. Flat, Black and Circular—which despite its name sells both CDs and vinyl, new and used—has added services that its customers appreciate. While it does very few online sales itself, the staff will search for a title online and handle the online order for those who are uncomfortable with ordering online. The store also will transfer music from one format to another—not from their sales stock but from the customer’s own collection. “If a person wants a CD or digital version of music he owns on vinyl, and we can’t find the title on CD, we’ll transfer it for him. It’s labor intensive, but it’s a way of offering customer service not typically found at other stores,” explained Bernath. Aris’ Disc Shop in Grand Rapids offers this service as well, and even transfers the rarer 78 rpm format to digital format. Internet impact
Both Bernath and Bergman have stayed out of Internet sales. Bergman’s store sells only new music, where online sales are dominated by the huge online retailers and margins are too slim to be worth it. While he has adapted to other changes in the industry, he is not interested in selling online. “If I wanted to spend all day shipping products, I’d work for UPS,” he joked. He would miss the daily face-to-face contact with his customer base. Bernath sells the occasional rare vinyl on eBay if it’s not selling in the store, but has no plans to open an online version of his store. “Selling online is just a whole different business. It can be done well, but it doesn’t interest us for now,” explained Bernath. “We strive to reward our customers who walk through the door, offering face-to-face service.” On the website for Vertigo Music in Grand Rapids, the owners explain: “We’re not here to sell you anything...yet. You still have to come downtown and visit us in the flesh for that.” The statement suggests both a commitment to a traditional storefront and a readiness to move to online sales in the future. That approach is typical of the independents. Wazoo Records has moved much farther toward online sales, with a presence on eBay, Amazon and MySpace.com. A hard-to-find title will usually sell for much more on eBay or Amazon than in the store, said Kerr. He has high praise for Amazon Marketplace, a program that allows any retailer to sell its merchandise through Amazon, benefiting from its very high traffic and its search engines. “Items you list appear right alongside the same item carried by Amazon,” Kerr explained. “A customer can buy new or used, seeing the prices from various merchants at once.” Amazon’s fees seemed steep to Kerr at first, but no fees are charged unless the item sells, and Kerr often gets a higher price through Amazon, which makes up for it. “I sold a disc yesterday for $125 through Amazon Marketplace,” Kerr said. “A guy in Germany bought it. I never would have found that buyer on my own, even with a store website.” Record Time, with locations in Roseville and Ferndale, is the largest Michigan-based “clicks and mortar” independent store. Its website (www.recordtime.com) sells CDs and has a section called “indie store exclusives,” giving the online store a bit more “indie” flavor than a huge online store like Amazon has. Downloads The common assumption is that illegal downloads (piracy) through websites like LimeWire and Kazaa have seriously hurt CD retailers, but Bergman and others believe legal downloads are equally responsible for the dent in CD sales. “It’s not the pirated music, but the legal downloads that have really hurt independent record stores’ sales,” said Bergman. “First, legal downloading legitimizes the idea of having digital versions of songs, so if you ‘rip’ music (transfer songs to a CD or other format), or if you have thousands of songs on your iPod, people no longer assume they were stolen. “But far worse, from the indie retailers’ viewpoint, iTunes has set the price points ridiculously low. At a buck a song, you could legally download a whole CD for about $10-$12—less if you skip the tracks you don’t want—but we have to sell a CD for $15-$18 if we want any margin at all.” The competition between legal download sites is getting stiffer every day. Wal-Mart.com’s download site sells songs for $0.88, and Amazon plans to launch its own download store as early as this month. In addition, other Internet entrepreneurs are planning to offer free downloads of songs to users who are willing to watch an ad embedded in the download first. Will the CD format go extinct in the next decade as a result of the revolution? Many in the music industry assume so, although the exact time of death is difficult to predict. “The CD as a format is certainly declining,” said Kerr. “But I’d hesitate to say it will ever be dead, because that’s what they said about vinyl, and it didn’t happen. Vinyl’s audience is much smaller, but it’s there and dedicated.” Serving a relatively small but dedicated customer base is increasingly what independent music retail is focusing on. Come on in Alternative music—the kind of music that could spark a question about the band or artist— is typically playing at all times. Customers are encouraged to listen to anything in the store before buying, including vinyl. Bergman has made a point of maintaining a welcoming atmosphere in his store, avoiding the snobby or overly hip attitude that he has seen in some record stores, while still giving a strong impression of wide selection. “Sometimes the people who apply to work here are so fiercely devoted to one music genre that they can’t or won’t sell everything we stock,” said Bergman. “One applicant once told me, as a sign of his fine taste, that he wouldn’t ever sell a CD by some band he hated. I told him he made a great customer but not a salesperson for this store.” Flat, Black and Circular—voted the Lansing area’s best music store and featured in a 2004 Sports Illustrated article featuring the “Top 10 Campus Indie Music Stores”—has a fun atmosphere. An arch created from stacks of vinyl LPs greets customers at the door. Inside, CD racks and crates of vinyl LPs fill the large room, with more valuable and eye-catching albums displayed on the walls, punctuated by a few bright posters. Wazoo Records in Ann Arbor has a similar look. There’s a feeling that one of those crates of vinyl could hold a wonderful find. It appeals both to the high-end music collector who appreciates the store’s breadth and depth and to the budget-minded young person who can buy a stack of older vinyl LPs for what one new CD costs. The owners and staff are always ready to talk and listen to customers about music. That face-to-face contact, the conversations and the stores’ individual personalities, keep customers coming back for an experience they don’t find online. Forecast “I’m just not interested in adapting to these latest changes. Others will, but I’m done,” said Bergman. Bernath and Rosemont consider running their store a “fantasy job,” but Bernath doesn’t want to project where his business will be in five years, considering all the changes in the industry. Kerr hopes to keep Wazoo Records going at least until he retires and is working steadily on getting his catalog online for sale through Amazon marketplace. His knowledge of the used music marketplace—aided by Internet tools like eBay and Amazon—is an asset in online sales. Independent specialty retail is challenging in any corner of Michigan. But when the changes buffeting a retail category are as diverse and powerful as those in the music industry, where the very nature of what you’re selling changes dramatically every several years, just staying in business is a feat of balance. This article was written by Amy Buttery, Michigan Retailer staff writer. |
Today’s
recorded music industry is experiencing upheaval that many describe as
a revolution. It’s not just another shift in the product’s
physical format, but a wild free-for-all in distribution and sale of recorded
music, as digital downloads and a precipitous drop in compact disc sales
force the industry to rethink everything about how it works.
There
are 22 f.y.e. locations in Michigan, suggesting that many Michigan malls
no longer have a store that specializes in music. Even f.y.e. is more
an entertainment store than a music store, selling more DVDs than CDs.
Amazon
and other large online retailers, including the online channels of “clicks-and-mortar”
stores, can offer a vast selection of CDs that no traditional storefront
can touch.