The Roanoke Times
July 11, 2006
Record store's "last dance"
by Duncan Adams
CHARLOTTE, N.C. -- Don Rosenberg sits on a couch at one of his Record Exchange stores as customers browse through used LPs and background music plays at high decibels. At one point, Bob Dylan's foreboding tune, "A Hard Rain's A-Gonna Fall," fills the room.
The 49-year-old Roanoke native is frustrated that the industry of his dreams has come to have no place for him. The once booming chain he founded when fresh out of the University of Virginia in 1979 has been reduced to six stores from a budding empire of 15. Rosenberg announced plans in late June to shutter his remaining outlets sometime this month.
"It's not fun to constantly be scratching to survive and to innovate," he said.
The music careers of many rock stars last longer than Rosenberg's meteoric entrepreneurial run, in which his business has gone from being the toast of an Inc. magazine feature to becoming, well, just toast.
The recording industry has passed by Rosenberg as surely as compact discs have relegated vinyl albums to flea markets and store bins that attract collectors, who are usually as gray as Rosenberg these days. Most teenagers and other young music buffs who don't download their tunes from the Internet -- legally or otherwise -- shop at giant discounters such as Wal-Mart and Best Buy. Those locations, where sales volume allows owners to dictate discounts from suppliers that Rosenberg can only dream about, are driving small specialty dealers out of business.
Jim Donio, president of the National Association of Recording Merchandisers, said the closings are a sad reality.
"There's been a significant number of small retailers that have gone out of business for a variety of reasons over the past five or six years," said Donio.
Craig Rosen is vice president of the California-based Almighty Institute of Music Retail, a marketing company for retailers. Rosen said the institute's database, launched in September 2003, shows that 889 independent record stores and independent record chains have closed since the database began.
Rosenberg has been relegated to counting on the patronage of a relatively small cadre of consumer loyalists. Some are proud eccentrics. Consider Taylor Knox, 19, longtime customer of the Record Exchange, who said he has shopped at the Charlotte store since he was 13 years old. Scrutinizing Rosenberg's inventory of used LPs, Knox said, 'I like vinyl better. I think it sounds a little bit better."
But, while discriminating in his taste after a fashion that Rosenberg loves, Knox represents anything but a sales trend. In fact, Knox acknowledged that friends say he's similar to the eccentric music-snob clerk played by Jack Black in the movie "High Fidelity."
"I don't mind. I could be compared to worse people," he said.
For Rosenberg, the satisfaction of catering to such eccentricity does little to salve the feeling that the very record distributors who were once a source of his success have moved on as surely as most of his young customers, Knox's loyalty notwithstanding.
The realization of all that change and his inability to adapt, despite innovative efforts, is a psychological needle raking across the grooved surface of his life's work.
"Nobody knows he [Rosenberg] exists," said Wayne Rosso, a file-sharing software entrepreneur and frequent critic of the mainstream music industry. "He's the guy in the trenches, trying to push their product from the grass-roots level," added Rosso.
But today the record companies favor the Wal-Mart style of mass retailing, in which new CD releases are treated as loss leaders. Rosenberg said the Record Exchange typically sells new releases for about $2 more than the big-box stores. But Wal-Mart and Best Buy also slash new-release prices further simply to get people in the store. Best Buy is currently offering the new Johnny Cash CD, "American V: A Hundred Highways," for $9.99. The Record Exchange's price for the Cash CD, if the company was still ordering new inventory, would probably be about $15.95.
What's lost for consumers who buy music in the sterility of a discount department retailer, said Rosso, is the intangible benefit of dealing with stores whose sales staffs often have "a deeply personal relationship to music." The small stores typically offer more of an artist's catalog of older releases, he said, and serve as "recommendation engines" to introduce customers to new artists and other music they might like.
When Rosenberg jumped into the music retail business in 1979 he did so more as a businessman than as a music nut. "I really wasn't into music. I was into business. I was in Junior Achievement; I was into computers," he said.
As an interdisciplinary major at the University of Virginia, Rosenberg had taken an inspiring class about entrepreneurship. He was the son of Roanoke businessman Morton Rosenberg, a real estate man who was once an owner of Oak Hall Cap & Gown and once in the paint roller manufacturing business.
"I think he maybe thought I might get in the paint roller business and I made it pretty clear that that wasn't what I wanted to do," said Rosenberg.
As a student in Charlottesville, Rosenberg visited Recycled Records, a store that sold used LPs. The owner bought LPs for a dollar and sold them for two, he said, and did not rate the LPs' quality or condition.
With about $3,000, Rosenberg opened the Record Exchange's first store on May 22, 1979, the day of both his graduation from UVa and his 22nd birthday.
"I went around to flea markets and yard sales at 6 in the morning and I would buy LPs. I did that for a long time."
He checked the LPs for warps, scratches and skips and developed a rating system for each LP's condition and variable pricing. He guaranteed the rating.
He learned about music from customers.
"When I first started out someone would come in and buy an LP and I'd say, 'Well, who is Hot Tuna?' And they would tell me who Hot Tuna was. And I would listen to it the next time I bought a copy and I would pay a little bit more for it and price it a little bit higher."
Over time, the Record Exchange added new LPs to its inventory of used albums. Rosenberg added new stores. In 1984, Inc. magazine named the Record Exchange one of the fastest-growing small, privately held companies in the U.S. At its peak in 1995, the Record Exchange had 15 stores and annual sales of about $10.5 million. Rosenberg envisioned a chain of 50 stores. But then began the slide that affected many small music retailers.
The Record Exchange's addition of new and used CDs, used DVDs and computer games hadn't reversed the trend. In larger cities where the Record Exchange had two stores, Rosenberg consolidated operations into one. He acquired a machine that repairs CDs. He sold new releases as soon as he could -- at one minute after midnight -- to get a jump on the official CD release date. In 1999 he launched a Web site: www. trexonline.com. The Web site sells "physical" music products and does not offer downloading.
Rosenberg intends to continue the Web site. But he said he's tired of fighting to save the stores.
Annual sales have slid to less than $3 million.
He said he knew a guy whose business repairing VCRs died after the advent of DVDs. Rosenberg is no stranger to the concept that businesses must change and evolve or disappear.
And the Record Exchange might soon have a new owner, who would buy the company name and inherit the store leases but bring in new inventory. Rosenberg seems confident the deal will be done.
Why would a new owner fare any better in these days of downloading?
"Our business has been suffering and we have been starved for cash. We've had to cut back on our new product," Rosenberg said. "I'm thinking if they come in with a lot of new product and then build up their used inventory, they'll probably have the best of both worlds."
But he reserves such optimism for the next owner of the Record Exchange, if there is one. For Rosenberg, it's the last dance.
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