Sharer Beware

Sharing information prevents the distortions from ever slipping into the supply-chain waters. And when the distortions are gone, businesses can read consumer demand more accurately. Supply and demand begin to align. The manufacturer stops responding to phantom orders and its own (mistaken) linear predictions for more product. The retailer reduces its inventory investment (often by as much as 25%, says Raman) and runs out of stock less often (increasing sales by 4% or 5%, he says), because a manufacturer that can predict demand needs less lead time to get product to the retailer.

The music industry is no exception. And given its hit-driven nature, the benefits of sharing information are even more pronounced. If the record labels are aware of how many of which records are selling where, they can identify breakout artists and breakout markets and know where to concentrate their marketing and promotional efforts (in which regions to lobby for radio play of a particular band, for instance, or to push a new CD). For the retailers--the suppliers of the raw material upon which the labels base those decisions--the benefits are twofold. They get promotional dollars from the record labels as well as boxes of free CDs, and they help propel the artists they believe in up the Billboard music charts, because SoundScan sells its figures to the charts' compiler, Billboard magazine, in addition to the labels. "SoundScan is the best thing that's happened to this industry, labels and retailers alike," says Jordan Katz, vice-president of sales for Arista Records.

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."

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