Case Study: An Indie Record Store Fights for Survival

Tweet

The Decision Early in 2008, Wagner and Woodson finally agreed to pull the plug. The store closed that summer when its lease ran out. The pair would relaunch the online business as a standalone operation. With a blue marker, the duo wrote out possible names on a windowpane in Wagner's office and hit on AbundaTrade. Says Woodson: "We wanted people to get it the first time they heard it."

A few weeks before closing, Wagner hosted a goodbye party for Millennium's customers. The Charleston community turned out in droves. There were students from the College of Charleston and cadets from the nearby Citadel military academy. Symphony lovers filled the store's massive classical section, sipping champagne. Salesclerks and their friends shared beer and hamburgers. It was a bittersweet moment.

The transition has been swift. A business with origins as a cozy cultural retreat is now high-tech, methodical -- and profitable. AbundaTrade, like FeedYourPlayer, takes used CDs, DVDs, and books in exchange for electronics, including iPods, flat-screen TVs, and camcorders. Or customers can opt for cash -- an average of $2 per CD. The company also gets used discs from wholesalers and defunct record stores. It relies on sophisticated software that scans the Web to determine a fair price for the used products. Then the company offers the merchandise for resale on the Web, again relying on software to undercut other sellers on Amazon, eBay, and elsewhere. "The online world is so much easier in a lot of ways," says Woodson. "If you're not the cheapest, you're not selling."

The transition hasn't always been easy. Wagner and Woodson were able to move 12 of Millennium's final 30 employees into new roles at AbundaTrade. But it's an entirely different world. AbundaTrade operates a lot like a logistics or order-fulfillment firm. In its 6,000-square-foot warehouse, half of the company's 20 employees review incoming items, checking for scratches or defects. Shipping occurs around the clock. Customer service is entirely online. Former record-store employees like Robert Bondurant are happy to have jobs but sometimes long for the good old days. Bondurant is again product manager, but he is now also in charge of inventory management. "It was tough from an emotional standpoint," he says. "We're no longer selling our appreciation of music -- it's all about moving product out the door now."

Early results are encouraging. AbundaTrade receives about 15,000 used products a week. About a third of its used-product sales are to overseas customers. (Japanese customers buy lots of heavy metal.) Revenue is on pace to hit $3 million in 2009, about 50 percent more than Millennium Music's flagship store ever pulled in.

If it's a little bit ironic that a company that once boasted the latest new releases now sells secondhand music in an outdated format, Wagner and Woodson don't seem to mind. The partners have their sights on extending AbundaTrade's business into other used products. "Clayton and I have learned that one of our strengths is adaptability," says Wagner. Adds Woodson, "I think the future is a really wide-open question."

The Experts Weigh In

What's the Long-Term Plan?

It sounds like what Woodson and Wagner did is working. I am concerned, though, about how AbundaTrade will scale. Though there are thousands of small and medium-size businesses selling through sites like Amazon, there is a finite supply of used CDs. Are there enough used CDs and DVDs to support this business long term? I also wonder why AbundaTrade abandoned all the cultural skills of its retail employees instead of trying to find a way to incorporate them into their new company.

Marty Anderson
Senior lecturer
Babson College
Wellesley, Massachusetts

Know Your Audience

My big concern is that AbundaTrade is positioning itself against the growth of digital music. Eventually, CDs will be useless as a storage medium for mass music sales. I also wonder if Wagner and Woodson really know who AbundaTrade's audience is. Unlike eBay, online marketplaces that support niche segments are growing. So, they might have focused AbundaTrade on a more narrow audience, like jazz-record collectors. Still, their willingness to do anything to survive is a good sign. They were able to do away with everything they believe in and still stay afloat.

Jason Crawford
Founder and CEO
SwitchGames
New York City

Keep It Simple

I like that Wagner and Woodson have come up with a unique model of e-commerce. But the model may be too complex. They have a lot to worry about: acquiring customers and their used products, obtaining electronics for trade and then reselling used products on a secondary market. If any of these markets falters, Wagner and Woodson are in trouble. There are millions of Internet businesses that rely on a much more basic business model. To be successful, Wagner and Woodson are going to need to keep things as simple as possible.

Jeremy Hanks
Founder and Chairman
Doba
Orem, Utah

 PREV  1 | 2 

Read more: