March 4, 2007
New groove for Solomon
Tower founder needs new tactics for next venture, experts say.
By Dale Kasler - Bee Staff Writer
As he prepares to open his new record store this spring, Tower Records founder Russ Solomon has a lot going for him: name recognition, industry connections and legions of fans pulling for him.
He even has a sort of home-field advantage, having leased the midtown Sacramento building that served as one of Tower's flagship locations until the retailer went out of business in December.
But consultants and competitors alike say Resurrection Records, as Solomon's new store on Broadway is tentatively titled, will face the same competitive forces that ruined Tower and a slew of other music retailers -- namely, the Internet and big-box discounters.
In other words, good will alone will take him only so far, and Solomon's comeback is hardly guaranteed.
"The reputation helps -- helps get you going," said James Tenser, principal of Arizona consulting firm VSN Strategies. "You probably have a lot of people in town rooting for his success. But then, it's about how you deliver."
His landlord Chris Gianulias said Solomon will be paying the same amount of rent on Broadway that Tower did. Experts say the similarities should end there. In their view, Solomon can't simply try to re-create Tower. He needs to create a brand new store and try new strategies.
"It can't be approached on pure nostalgia. It's got to be forward-thinking," said Joel Oberstein, president of a Studio City consulting firm called the Almighty Institute of Music Retail. "Russ is a brilliant man; I'm sure he knows that."
Among other things, experts say, he probably has to charge more competitive prices than Tower did and devote a fair amount of space to selling used records.
To a certain extent, Solomon will be marketing his name and reputation -- attributes that are "good for initial buzz," said Lynn Upshaw of Upshaw Brand Consulting in San Rafael. Upshaw compared Solomon to Wendy's late founder, Dave Thomas, whose personality helped draw customers to his restaurants.
Solomon is "going to get a lot of people showing up just to see what's going on," Upshaw said. "But they'll go down the street to Blockbuster or wherever if there's nothing else to it besides 'he used to own Tower Records.' "
Exactly what Solomon plans for the store is unknown; he couldn't be reached for comment for this story. In an interview last October, in which he first announced plans for a comeback, Solomon said he can succeed "even though everybody thinks retail (music) stores are dead."
Resurrection Records brings Solomon full circle. He began as a teenage entrepreneur, blossomed into a self-described "aging hippie" overseeing a $1 billion-a-year empire, and now starts fresh as an 81-year-old. He joins the ranks of independent retailers, or indies -- the scrappy, scruffy merchants on the fringe of the music industry.
"Indies live by the seat of their pants in every way," said Dilyn Radakovitz, co-owner of Sacramento's five-store Dimple Records chain. "You work right on the edge, right out there with the customer."
Dimple and other Sacramento independents have shown it is possible to survive as a brick-and-mortar retailer in the age of the iPod and Best Buy. They say the key is quick reactions to the public's ever-changing musical tastes.
For instance, The Beat, an independent in midtown Sacramento, recently sold out its allotment of singer-songwriter Patty Griffin's new CD. A chain store would have taken a week to restock; The Beat did it in two days, said the store's owner, Rob Fauble.
"Independent guys are a little more nimble," Fauble said.
Well-run indies can prosper by promoting musicians who fly under the national entertainment radar but have developed good-sized local audiences.
Case in point: Two weeks ago Dimple's best-seller was an album by a Northern California rapper called Keak Da Sneak, who's fairly well-known in the region but is hardly a household name.
Dimple is a $10 million-a-year business whose co-owner -- Dilyn's husband, John Radakovitz -- scoffs at the "so-called death of retail" and notes that some 90 percent of music is still sold as CDs. The company caters to collectors and music enthusiasts who enjoy the experience of browsing for recordings at a store.
"I like dealing with people rather than going online," said Jan Marshall, 50, of Roseville, as she shopped the other day at Dimple's new Citrus Heights store.
Citrus Heights is a testament to Dimple's health. The store used to house a Tower and still bears some leftover Tower signage.
Dimple may not be done expanding. Having lost out to Solomon in the rush to lease the Broadway store, Dimple is also competing with Solomon and others for the lease on Tower's old store on Watt Avenue. Dimple says it needs to increase its footprint to head off Rasputin Music, a Bay Area indie chain that is believed to be sniffing around the Sacramento region.
Rasputin took over Tower locations in Concord, Mountain View, Stockton and Fresno. Company officials couldn't be reached for comment.
Running a successful indie means paying close attention to product selection. Though they are literally a mom-and-pop operation, with two sons active in the business, the Radakovitzes use sophisticated software to track Dimple's sales. That helps them offer a wide variety of CDs and DVDs that appeal to niche audiences but don't bury Dimple in esoterica that hardly sells.
Another factor is the Web, which provides about 5 percent of Dimple's revenue. Many experts believe every record retailer needs to build a vibrant Internet operation, even if it's merely to drive traffic into the store.
And the product has to be priced right. There's probably no way to fully compete with the big box stores on price. But price does matter, as Dimple's experience shows.
Four years ago Dimple joined a group of independent retailers suing Best Buy, accusing the big chain of illegal, predatory pricing. Other retailers as well as the major record labels have been added as defendants.
But while the case is pending, Dimple has modified its tactics. The company now matches Best Buy and other discounters -- for a week or so -- on selected new releases. Dilyn Radakovitz said the idea is to use the hot hits as loss leaders to snare customers.
"You've got to get them in here," she said, adding that Solomon should do the same at Resurrection.
"People stopped buying at Tower," she said. "The prices were too high."
While they lose money on certain new releases, indies rely on older or "catalog" music, as well as used CDs, to generate profits. The Beat's Fauble, who gets 30 percent of his revenue from used records, said Solomon would do well to emulate that model.
Tower dabbled in used records but never made it a substantial part of the overall business.
Fauble said Solomon's new venture, devoid of the corporate structure that governed Tower, will be free to innovate.
"If you're working for Coca-Cola and you want to change the formula, it's not always easy," Fauble said. Solomon "is going to have a chance finally to showcase some of the ideas he's had the last few years."
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