It's what people say in a lot of industries these days: Use technology to share information and everybody benefits.
Or do they? What if you're a trendsetting retailer and want to keep a product that you've introduced under wraps--Kangol caps, say, or Guster's latest CD--so customers can buy it, for a time at least, only in your shop? What if you're dominant in your marketplace and the information you release can be identified by your competitors, including major chains that can undersell you, as coming from your store specifically? What if you don't know for sure how your information is being used, or who is using it, after you zap it by modem, week after week, to some giant server on what might as well be the other side of the moon?
To gain a competitive edge by sharing information, it seems, you may risk losing one. Mike Dreese certainly thinks so.
Dreese, the co-owner of perhaps the hippest music and pop-culture outlet in the Boston area, is a study in contrasts. With his straight brown bangs just grazing his black plastic glasses and his gray cotton socks tucked neatly beneath his lean black jeans, he looks like a straight-A grad student in economics or computer science. (He did, in fact, study economics at MIT in the 1970s.) But his bland, almost-collegiate appearance is radically offset by the paraphernalia coloring his surroundings: photos of the alternative-rock group Barenaked Ladies in concert at Boston City Hall Plaza, plaques commemorating record sales of groups like the Gigolo Aunts and the Squirrel Nut Zippers, and posters of the Beastie Boys and Portishead pinned to cubicle walls. And then there is the stuff he sells, spilling out of a zoo of boxes in the company's 44,000-square-foot warehouse/headquarters in Allston, Mass.: items like inflatable South Park pillows, Doc Martens boots, Spice Girls dolls, hot-pink beanbag chairs, Manic Panic hair dye (purple among the shades), and of course miles and miles of CDs--the new artists (Rancid, Godsmack, Blood for Blood, Rob Zombie), the old artists (Derek & the Dominos, the Beatles, the Beach Boys), and the old, old artists (Handel, Pachelbel, Mozart).
Cool quotient notwithstanding, Dreese, 43, and his partner, John Brusger, 42, are such rigorous businessmen that the $55-million Newbury Comics was an Inc. 500 company for two years running (1986 and 1987), and it's also the dominant retail account in the Boston market (in SoundScan lingo, the Boston "designated metropolitan area," or DMA). Newbury Comics --like John Kunz's Waterloo Records, in Austin, and Terry Currier's Music Millennium, in Portland, Oreg.--is one of the places where the industry turns to see what trends are being set, which artists are breaking out, who might be the next big thing. "They are the king," says Don VanCleave, president of the Coalition of Independent Music Stores (CIMS), which represents 27 small retailers across the country, and owner of Magic Platter, a $1-million record store in Birmingham, Ala. "They're the dominant player in that market. They could realistically sell 60% of all the [point-of-sale] scans on a first-week new release for the Boston market, regardless of all the Strawberries and Tower Records and HMVs and Wal-Marts and Best Buys and whoever-God-knows-else is up in that area."
Being dominant in the music business, however, is not just about numbers. It is about knowing. It is about having your ear to the ground (that is, listening to your customers as well as to reams of music) so that you can pick out which new acts will fly--whether they've received radio airplay or made their debut the night before in a local club or are selling a self-produced CD out of the trunk of a car. It is about bringing the artists you've found into your store to play and promoting them, literally, to beat the band. In short, it is about helping to create a marketplace rather than just reacting to one. "There are always retailers who sell what they stock, like a Newbury," says Harvard's Raman, "whereas others stock what they sell."
The competitive edge for a trendsetter like Newbury Comics is, essentially, time. There's a window of opportunity during which that retailer aggressively, and exclusively, sells new acts it has targeted--say, Days of the New in Dreese's case or Lyle Lovett in Kunz's--before they show up on the radar of larger retailers. "An account like Newbury really feels the sales on the front end of the record, in the initial stages of it," says Mark Cope, formerly senior vice-president of retail at the music-trade magazine Album Network. "They're out there at the edge, helping to break these artists. And their real profit comes in those first weeks, or whatever it is, of the process of breaking these artists."
In 1978, when Newbury Comics launched its first store (a converted studio apartment on Boston's trendy Newbury Street), that window was generally open for months. Record labels had to wait for retailers to begin shipping back returns to compile even rough sales figures. And news about actual sales that passed from sales reps to the labels or even to other retailers took time to react to and could be subject to distortions. (George Daniels, of 30-year-old George's Music Room, in Chicago, puts the lag at that time at one to two months.) But then, in 1991, SoundScan--with its POS systems and bar-coded CDs and dial-up phone lines--entered the picture. And that window began to close--so much so, says Dreese, that today the lag can be as little as eight days.
