Brick-and-Mortar Record Stores Are Trying to Get Their Groove Back
Like so many industries caught between two seismic sea changes -- the Internet revolution and the great recession -- stores that sell new music are in a fight for their lives.
Tuesday used to be sacramental in the world of music. It was new-release day, the day faithful music fans stopped by their favorite record store to buy something they'd been waiting for weeks to hear or to discover something they hadn't heard.
Back then, record stores were the best places to hear new music and mingle with other music fans.
"Record stores used to be neighborhood hangouts," said Corky Carrel, who co-owns an online record store based near Kansas City. "They were like bars without liquor. You'd go in and browse and talk about music."
Tuesdays aren't the only days that aren't what they used to be -- for record stores or their customers.
Like so many industries caught between two seismic sea changes -- - the Internet revolution and the great recession -- - stores that sell new music are in a fight for their lives. The chains are dying, independent stores are closing, and the record labels that feed them merchandise are running out of ways to make money.
The stores that are surviving are performing balancing acts. Most rely heavily on the pre-owned -- "used" -- business: Buy it cheap, sell it cheap. Some have turned to niche marketing, selling new CDs to one or two refined segments of the music world. Others rely on a combination of the two: Sell CDs and vinyl, new and used, to a defined demographic. And others have been helped by the recent revival of what was once considered a relic, the vinyl record.
Steve Wilson remembers the good days, back when record stores offered surprises and mysteries and employed people who had strong opinions about most of them.
"When I started buying albums in earnest, I went to Kief's on the Mall (in Lawrence, Kansas)," he said. "I remember talking to the guys who worked there. They were there to educate you -- as long as you were there to listen, not talk."
He and Carrel became career guys in the record-store industry. Wilson has been with Kief's since December 1973. That was about the time Carrel started working at a local electronics store that sold recorded music. From there he went to Caper's Corner, a fabled record store in Kansas City. In 1987 he opened his own store, Corky's Records.
Both men are still in the business. Carrel and his partner, Bill Lavery, run VillageRecords.com. Wilson works at Kief's Downtown, one of two record stores in Lawrence and the satellite outlet to Kief's, the electronics/music retailer south of downtown.
Some store owners are optimistic about what lies ahead, but none is willing to say for certain where they or their store will be in five or 10 years.
"The game has changed," Wilson said. "Now it's all about survival."
The music business is in a free fall. Sales of new albums have dropped more than 45 percent the last eight years. In 2000 consumers in the United States bought 785 million albums. In 2008 they bought 428 million.
In 2000 the 10 best-selling albums sold 60 million units. In 2008 that figure was 18.8 million.
The decline in sales coincided with the explosion of home computers, the Internet and the sharing of music files via Web sites such as Napster.
But long before online retailers, digital music and file-sharing entities started eroding sales at brick-and-mortar stores, the small retailers were fighting other forces.
Carrel said the decline began in earnest when a store like Caper's had to compete with large chains like Peaches in the late 1970s.
"Slowly the acts indigenous to our store -- like early Rod Stewart and Elton John -- our sales on them plummeted because their albums were everywhere," he said.
An even bigger hit came when chains like Best Buy started selling CDs as "loss leaders" -- items priced under cost to get customers into the store and shopping for other, more expensive items. Those chains also were getting marketing funds from record labels, which helped them reduce the sticker price of their CDs.
Lavery remembers his employees at Village Records coming in and "bragging about the deals they got at Best Buy, which were better than at our store, even with an employee discount."
Through the Coalition of Independent Music Stores, or CIMS, of which Kief's is now the only local member, smaller retailers eventually convinced labels that they, too, were important to their artists' livelihood, and stores like Kief's eventually enjoyed some of the same marketing benefits that the chain stores were getting.
On a recent Monday, Kief's received a delivery of the new Bruce Springsteen album, Working on a Dream. The package included an incentive, or what Wilson called a "value-added perk": a glossy four-color book of lyrics to each song on the album.
"It means the hard-core fan will probably buy the record in three different places so he can get all three (perks)," Wilson said.
Despite the labels' concessions to the independent stores, the chains hurt many small retailers. Carrel said the consequences were profound: "It really took a chunk out of the independent stores," he said. "It forced a lot of people into the used business."
For years stores have survived on the sale of used CDs. Many still do. At Needmore Discs in Shawnee, Kansas, co-owner Eric Voeks said "about 80 percent of what we sell is used. Used DVDs do well, too."
At Streetside Records in Kansas City, which is part of the FYE chain, manager Jennine Goodman said used CDs have kept them going.
"One of the reasons the company we're with is still doing well is, it caught on early that it was smart to buy and sell used," she said. "We still buy a lot of used, and we sell a lot of used."
But even the market for used CDs has softened, said Kelly Corcoran, who owns Love Garden record store in Lawrence.
"For a long time we made OK money on new CDs, great money on used," he said. "They were the cash cow of Love Garden, until about five years ago. That's when so many corporate chain shops started opening used-CD shops, like Hastings and Half-Price Books.
"A lot of those chains would buy everything that came through the door. A ton of used CDs got fed into the system, and it got out of control," he said. "Places bought stuff without thinking it through. And we suddenly had a tougher time getting good stuff into our store."
Concurrently more people owned computers with CD burners on them, Corcoran said, which meant "maybe you wouldn't have to buy a used CD."
"You could get a copy from a friend. Or if a CD didn't mean that much to you, you could rip the songs you want onto your computer and loan the CD to friends so they wouldn't have to buy one."
And then the file-sharing monster arrived on the scene, and recorded music, to some people, became nothing more than abstract digital files to be shared for free.
The accumulation of all those factors has slowly affected the bottom lines at many record stores.
Voeks, who once worked for the CD Warehouse chain, opened his store in 2003.
"We started off real strong," he said, "but over the last few years, there has been a slow decline. I'm not sure it's entirely an economic issue. It's also a generational thing."
Corcoran said that because Love Garden is careful and savvy about what it buys, new CDs still do well at his store. But he has noticed a trend that other stores are noticing: New vinyl is doing well again.
According to Nielsen SoundScan, sales of vinyl records nearly doubled nationwide in 2008, from just less than 1 million in 2007 to almost 1.9 million. More vinyl records were sold last year than in any year since SoundScan started tracking music sales in 1991.
That 1.9 million represents less than half of 1 percent of all the albums sold in 2008, but these days any upward trend in sales is going to be noticed and explored by both labels and record stores.
At Streetside, Goodman and Chris Labeau, who buys the store's new vinyl, started noticing a rise in demand about a year ago. Since then the store has slowly increased its new vinyl inventory.
"It's kind of shocking how fast it picked up," Labeau said. "Once they started offering vinyl with the free MP3 download, we really started selling more."
He's talking about the have-your-cake-and-eat-it premium that many bands are offering with a copy of a new vinyl record: a coupon or code that gives the customer on line access to a digital copy of the album. That lets them have the vinyl and upload the music to their MP3 players.
Goodman said demand for vinyl was strong over the holidays.
"About half the customers who came in with a Christmas list had vinyl on it," she said.
Consequently, over the past few months vinyl sales have jumped from less than 1 percent of total sales at her store to 7 percent.
"Vinyl has surpassed several other entire genres in the store," she said.
And customers are willing to wait weeks for an LP, if that's what it takes. Labeau said his store didn't get its initial shipment of the Animal Collective's Merriweather Post Pavilion because demand nationwide exceeded supply. That album was released in January, first in vinyl with the free MP3 bonus. A week later, it was released on CD.
"We had about 15 customers put a vinyl record on hold and wait for it, even though we had it on CD, too," Labeau said. "They weren't interested in the CD."
Not everyone is sold on the idea that vinyl is the B-12 shot that will revive record stores and labels. Wilson said Kief's is being cautious about buying new. Used, however, is another story.
"We do fine with the new vinyl, but honestly, it's a risk," he said. "With used (vinyl), we buy smart. We can make good money on it. With new, if you buy it, you have to sell it because most manufacturers won't take it back like they do CDs.
"So to some degree, we've conceded new vinyl to Love Garden. We're still not sure how big the market is, and we're not willing to be that speculative."
Corcoran said new vinyl has been a featured attraction at Love Garden for years.
"People know that if it's available, we'll have it," he said.
New vinyl started doing so well at his store that it was one factor that prompted Corcoran to change the way his store orders music.
"We used to stay away from the major-label, corporate world of alternative music," he said. "We wouldn't carry the new Kings of Leon, for example. Or Radiohead. ... But hesitantly we got into the major-label business."
He and his staff noticed that customers who came in looking for new music from big-label acts also shopped for other music, and some became loyal customers. So the store made a concession, especially when it came to new vinyl.
"There's a chunk of our customers who only come in here to buy the new cool, major-label records on vinyl, like Kanye West," he said. "They just want it, and they'll pay $25 for it, no questions asked.
"So though we may not carry the new Bruce Springsteen on CD, we will carry it on vinyl. And people will come in asking for it. And we'll sell it."
Who is buying all this vinyl? Goodman said it's a combination of high school and college students and older customers who have either "pulled out their turntables or never put them away."
Some are like Nick Dormer, 24, a faithful vinyl buyer at Love Garden.
"Most of the time vinyl is priced within a buck or two of a (new) CD, and you get larger artwork, a better shelf life and, commonly, a digital download," he said. "I buy vinyl records when I want to listen to an album in its entirety."
Labeau said a few of his customers are collectors who want the vinyl record as an artifact, like a concert T-shirt or a poster.
"They make (picture) frames for album covers," he said, "so you can hang them on the wall."
Dormer said he doesn't "collect" per se, but he does respect the limited-edition LPs he buys.
"About six or seven months ago I purchased a limited-edition Murder City Devils record on yellow vinyl for $40," he said. "I listened through about four times before framing it to hang on my wall."
Despite his store's success with new vinyl, Corcoran is skeptical about its current status and dubious about its long-term future. However, he is not worried that the big chains, like Best Buy, have started selling new vinyl.
"The transition to vinyl is not a real transition," he said. "It's also an act of desperation by the labels, not an altruistic interest in the format.
"I love the format. We do records, new and used. New records are there because customers want them, but we don't make a lot of money on them. Used CDs and used vinyl pay the bills. If you're going to sell new vinyl, you have to be smart. You have to have a sophisticated system set up. You really have to know what you're doing and know your customers. I know the chains are carrying LPs, but they don't know what they're doing."
The future for some record stores may be in someone's basement.
In 1994 Lavery and Carrel combined their stores into one at Village Records in Shawnee. After a few years they noticed a clientele emerging that appreciated the same music they did, what is widely known as "roots music" or "Americana". They also noticed that they were doing a decent word-of-mouth mail-order business with out-of-town customers, people willing to look a little harder and spend a little extra to get music from songwriters like Tom Russell, John Hiatt, Lucinda Williams or Dave Alvin. It was music those customers could no longer get at their local record stores.
"That was before the Internet or e-mail were big," Lavery said. "We were taking orders over the phone, sometimes writing them down on loose scraps of paper, and hand-labeling everything. At first the mail-order part was supplementing the store. But that flipped after two or three years."
Carrel had been working exclusively with Russell since his days at Corky's Records. He got permission to use Russell's mailing list and sent a Village Records mailer to each name on that list. The response was quick and encouraging.
"We never looked back after that," Carrel said.
In 1999 he and Lavery closed the brick-and-mortar store, moved their operations into their homes, and watched their business grow via the Internet. They estimate their customer base is 400 customers, many of them regulars who spend decent money each month. For them, all is good, even now.
"Since the economy tanked, our sales have actually gone up," Carrel said. "Ninety percent of what we sell costs less than $15. And what are you going to do -- not get the new Dylan CD or buy it and not spend that money on a meal or at Starbucks?"
What of the brick-and-mortar stores? Corcoran thinks the future will come down to survival of the savviest.
"You have to be smart," he said. "Ten years ago anyone could make money running a record store. And they did. Now stores who don't have sophisticated systems set up are either closing or selling toys and bongs to make ends meet."
He also thinks the labels will continue to produce hard products but will have to make some concessions to save themselves.
"I don't think they'll stop putting out records or CDs," he said. "But I think they'll lower prices of CDs, and we've already seen movement that way. If they sold them to me for $6.50 or $7, I could sell CDs like candy for $10. If it's a double-CD, OK, then $15 or $16 is reasonable. But unless the artwork mows your lawn, a single CD needs to be $10."
Anne Winter saw some of this coming three years ago.
For 18 years she sold vinyl records, CDs, cassettes, posters, magazines, T-shirts and other music merchandise at Recycled Sounds on Main Street, just east of Westport. In April 2006 the store closed.
"The last few years we saw that the hard-core collectors were still very much into the vinyl," she said. "What was going away were the younger customers who no longer came out to record stores to interact with our staff and other customers to learn about music."
Voeks notices the same thing. He has been in the retail music business for more than 25 years. While living in Australia in the 1980s, he spent his weekends off from his 40-hour-a-week bureaucratic job working at a hardware store that had a music section. He got paid in albums. Voeks moved to St. Louis in 1989 and went to work at its Streetside stores. In 1997 he moved to Kansas City and worked for the CD Warehouse chain.
He remembers the days when stores were like salons or live chat rooms, and customers came in "to hang crap on each other's tastes and talk about music."
"But you had to do it real-time, instantly. You couldn't stop and look something up on Google. You had to know then."
At Kief's, Wilson said he shares his vast knowledge of music with customers less these days. He spends it on other duties instead.
"When you're buying used vinyl, you need to know what to buy and what you can charge," he said. "So you get paid for knowing something. But your expertise can be pretty worthless on some days, unless someone comes in and wants to talk about music. And those people are not coming in like they used to."
Wilson laments what is happening on a broader level to the pop culture: the death of mystique, the end of the underground. These days, he said, everything is everywhere for its 15 minutes of limelight, whether it's a song, an album, a band or a video on YouTube.
"Then people move on to the next thing," he said. "It's hard for things to grow deep roots.
"If I tell kids how in the '70s I got the two-disc CBGBs compilation by getting Hilly Kristal's phone number and calling him, they'd look at me like, 'What? Did Wells Fargo bring it to you?'"
The Web has played an enormous role in taking some of the mystique out of music. Songs and albums are sometimes leaked or streamed long before they are released in stores. Nine days before the album's official release, NPR.com was streaming nonstop the entire Working on a Dream album.
"People know two weeks before it comes out whether they like a record or not," Corcoran said, "because they've heard it several times."
The Tuesday that Springsteen's album went on sale, business was light during lunch hour at Streetside Records. One customer -- a male in his 40s -- came in and bought two copies of Working on a Dream on CD. A woman in her 20s flipped deliberately through the store's new-vinyl collection without selecting anything. The employees chatted casually behind the counter. And for the most part, this Tuesday felt like any other day in the retail-music world.