Independent Music Shops Surviving Despite Online Competition

Internet traffic doubles every 100 days, according to some statistics. This growth has been accompanied by an increase in the amount of online shopping---a phenomenon that has had a significant impact on retailers. Independent bookstores, for example, have been squeezed not only by the expansion of large-scale operations like Barnes & Noble, but also by the popularity of Internet discounters like Amazon.com and Borders.com. Online sales of recorded music by both record clubs and start-up resellers have put a dent in the bottom lines of many mass-market music stores---although not a huge one yet. The trend will certainly continue.

How is the Internet affecting specialty music stores? Rich Isaacs, owner of Listening Pleasure, a mid-sized independent music shop in Larkspur, California, has considered the question repeatedly over the last year. "There is no doubt that it's had some effect on sales," Isaacs said, noting that his per-day average is down significantly from the same time last year. He is quick to point out that it's difficult to make a clear assessment, because business in the Larkspur Landing shopping center where his store stands has been down overall since the departure of a major bookstore late last year.

He is carefully observing the trend. "Although I won't really know until I move to a new location, my feeling is that it's the big mass-market stores---Tower, Virgin, Wherehouse---who are feeling the effect of the Internet the most," Isaacs said. He is currently scouting for a new home for his shop, now adjacent to Access to Music, a high-end audio shop owned by Bob Sheldon. The two stores have enjoyed a "symbiotic relationship," according to Isaacs, both benefiting from the other's proximity.

Listening Pleasure's $300,000 annual sales volume puts it "right about in the middle" of all independent music retailers, Isaacs says. The 1500-sq.-ft. music shop is stocked primarily with CDs, in the genres of pop, jazz, rock, soundtrack, comedy, spoken word, new age, world music, and blues. The store has a small classical section and does a moderate business in audiophile vinyl and used and rare LPs. Like most independents, Isaacs will research obscure recordings and special-order anything for his customers---if it's available. He keeps a toll-free line open for this purpose: 1-800-887-LPCD.

Isaacs relies on a core of loyal customers who enjoy the personal attention they receive in his shop. All of his approximately 7000 titles are open and can be auditioned through headphones on one of three disc players on a table at one end of the store. "Customers appreciate the kind of help and expertise they get in an independent store," Isaacs said. "The online operations are engaged in a price war which cannot possibly be profitable. It's hard to see how they can continue at that level."

Profit-and-loss statements by online retailers confirm Isaacs' doubts. Despite a stellar performance in the stock market, operations with the volume and visibility of Amazon.com have yet to show a profit. Market observers like to point out that online retailing is in its infancy, and that new businesses are at present simply establishing territory. Record clubs also take a bite out of traditional retailers' bottom lines. The Recording Industry Association of America's mid-year statistics note that 18% of all shipments of recorded music were by record clubs or other mail-order operations, including Internet sellers.

Listening Pleasure, like almost all independent shops, consistently discounts discs from their suggested list prices, Isaacs pointed out. He dismisses record clubs as "hit vending machines with poor selection" and believes that the Internet appeals to "people who don't go into stores---those for whom the in-person experience isn't especially valuable." He is in business for precisely the opposite reason, he says---because he greatly enjoys the personal interaction.

"If I must go online to survive," he says, "I would like it to be as a way of advertising my store and introducing my service to customers." He sees ominous implications if "cocooning is taken to an extreme. I worry about the future. I find it dismaying that people will go to the Internet while shunning local alternatives within a few miles of home."

Where is it all headed? Isaacs believes suburban shopping malls may eventually feel the biggest effect from the Internet. In his view, traditional retailing will change to accommodate online competition, but will never go away completely. "Downtowns will see a resurgence. There will always be a need for a commerce-oriented gathering place."

Even though he's felt its pressure, Isaacs admits that the Internet brings big benefits to those who live in isolated communities. "It's a real blessing for those who live hundreds of miles from the nearest big town. If you live in a small town in Wyoming and have musical tastes outside the offerings of your local Wal-Mart, the Internet is a wonderful thing."

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