Amoeba Music

New York Times

By Jim Rendon

When Glenn Ward, the chief executive of the Virgin Entertainment Group, North America, has an urge to hunt for obscure, out-of-print recordings, he passes up the Virgin Megastore on Sunset Boulevard in Los Angeles for another music retailer down the street.

Mr. Ward chooses that competitor, Amoeba Music, because, he says, it is among the best places to find rare music in Los Angeles, where Virgin North America is based.

Mr. Ward is not alone. Amoeba, a three-store chain that opened its first store in 1990 near the campus of the University of California Berkeley, is a haven for music customers and, as a result, is growing as most of its megasize competitors are shrinking.

Last year, it says, it sold $50 million of merchandise, up to 50 percent from 2001. It has had a profit every year since it started, even in recent years when the biggest names in music retailing have been closing stores or stocking their shelves with shirts and action figures—anything that might sell better than the music.

Amoeba’s selection outdistances the competition. It carries an average 300,000 titles in each store, twice as many as Virgin does, and more than 10 times the average at Wherehouse Entertainment stores. Moreover, about half those CD’s and recordings are used. Amoeba has achieved cult status as the place to sell, as well as buy, CD’s and rare records.

The company also tries to hire knowledgeable employees who can lead customers to the latest Scandinavian black-metal offering or help them find an out-of-print Freddie Hubbard jazz recording. Amoeba shoppers, even those who work for the competition, can be fanatic.

"I love shopping here," said Mr. Ward, who most recently bought an out-of-print single by the band Talking Heads at Amoeba. "They have a great buzz going and a great staff with deep product knowledge. They put temptation in my way, and I can’t resist. It’s a great place to hang out."

While Amoeba continues to grow, fueled by the opening of its 34,000 square-foot store on Sunset Boulevard in 2001, many big names in the industry have been fading. Wherehouse, based in Torrance, Calif., closed 255 stores last year, leaving it with only 149 outlets in the West. It filed for bankruptcy protection in January. Tower Records, based in West Sacramento, Calif., and owned by MTS Inc., lost $57.1 million in 2002 and is reportedly up for sale. Musicland, based in Minnetonka, Minn., and the operator of the Sam Goody stores, lost $74 million last year and was sold by Best Buy to Sun Capital Partners for the assumption of it liabilities.

Since 1999, CD shipments in the United States have fallen 15 percent, according to the Recording Industry Association of America. Music retailers are also battling rampant downloading on the Internet and growing sales at stores like WalMart and online sites like Amazon.

The largest retailers are racing to diversify. Virgin is selling clothing from Ben Sherman Ltd. and is considering incense and candles. Wherehouse and Tower are pursuing similar strategies.

"We’re in the process of overhauling our merchandise so we can have a higher reliance on things other than music to drive customers into the store," said Lew Garrett, executive vice president of Wherehouse.

But on a recent Saturday afternoon, the Amoeba Music store in San Francisco, on Haight Street, was a swirl of commerce. A long checkout line snaked around racks of bargain CD’s. The rhythmic clacking made by people sifting through bins of CD’s mixed with the soothing rhythms of "Essential Asian Flavas," a CD playing on the sound system.

Linnea Vedder, 21, and art student, flipped through a stack of used CD’s, hoping to find a bargain on the latest release from the British rockabilly singer Holly Golightly. "Amoeba has lots of music that I wouldn’t find in other stores," Ms. Vedder said.

A dozen yards away, Duane Felix, 50, a truck dispatcher, clutched a Temptations album under his arm; he owned a copy of it 30 years ago. Ryan Carlisle, 23, a student visiting from Arcadia, Calif., found a CD by the indie-pop band Pinback. "This is the best record store I’ve ever been to," he said.

Amoeba does not display any promotional material. No Mick Jagger cutouts hawk the latest Rolling Stones album. Instead, vintage posters are displayed next to records. Paco Underhill, founder of the retail research firm Envirosell and author of "Why We Buy: The Science of Shopping," visited the Los Angeles store and was impressed by how Amoeba has tapped into people’s passion for music. "It is like a temple," Mr. Underhill said.

Amoeba was started in Berkeley in 1990 by Mike Boyder and Dave Prinz, friends from college at the State University of New York at Stony Brook, and Mark Weinstein, who became friends with Mr. Prinz while working in a San Francisco record store. They were joined in 1995 by Karen Pearson.

The original, 3,000-square-foot store in Berkeley expanded, eventually to 11,000 square feet. The San Francisco store, at 25,000 square feet opened in 1997 and the Los Angeles outlet in 2001.

"Other stores think the public wants sameness, a nonliving entity," Mr. Boyder said. "Our store is vibrant; the walls have energy. The staff likes it here. It’s cool to do what we are doing, and the public feels it and responds."

Amoeba is catering to a growing need, said Tom Adams, president of Adams Media Research in Carmel, Calif. As music tastes have diversified in recent years, sales by major stars have slowed and those by mid-level artists have grown.

The Internet, often blamed for cannibalizing music sales, may also broaden consumer tastes, Mr. Adams said. People can go online to listen to free samples of songs, look up artists on the Internet and learn about music that they would never hear on radio.

Music has split into so many subcategories that large retailers have trouble keeping up, Mr. Underhill said. Fifteen years ago, the average teenager might have been familiar with blues, rock, and country music. Today, teenagers listen to Goth-industrial, hip-hop, electronica, black metal, jungle, garage, Bollywood—a broad range of music from around the world, he said.

Virgin has tapped into the trend by stocking 150,000 titles in its stores, a far wider CD selection than at other large chains. If a CD sells one copy a year, Mr. Ward says, it’s worth stocking it.

Still, profits on individual CD’s have been dropping. With tough competitors like Wal-Mart, Amoeba and other retailers have drastically cut prices on new titles. Today, many retailers make as little as 20 percent on a new CD.

Selling used CD’s is crucial to Amoeba’s success. It says it has an average markup of 60 percent on its used titles, which account for half its sales.

Amoeba’s reputation has attracted music experts nationwide. It has large collections of jazz and classical music, genres often ignored by other retailers, and has employees who can make the most serious fans feel that they are among kindred spirits.

That knowledge is something that many of the large chains are lacking, said Jerry R. Goolsby, a professor of marketing and music industry studies at Loyola University in New Orleans. If stores do not have a knowledgeable staff, he said, there is no reason to patronize them if it is easier to buy on the Internet,. Amoeba does not sell on the Web.

Amoeba’s formula may not work everywhere, however. Just a few American cities—including New York, Nashville, Chicago, Seattle, and Austin—have thriving music scenes, Mr. Underhill said. Amoeba could flourish in any of those cities, provided that it could find inexpensive real estate for its huge stores. Outside of such cities, its formula would not be as effective, he said.

Amoeba’s size can also be a liability, Mr. Underhill added. Although the staff in each store is knowledgeable, it is, by necessity, large. A customer may find a jazz expert every time she walks through the door, but she might not find the same one she spoke to on her last visit. That can lead to an impersonal feel, he said.

But so far, Amoeba has found the right cities and the right market. Mr. Underhill said that its success should inspire other retailers. "Amoeba is a beacon in the wilderness for the rest of the industry," he said.