What's Selling in America: part 1 of 5

By: Bill BreenWed Dec 19, 2007 at 12:38 AM

Right from the start, Amoeba's founders saw that they could exploit the record industry's hit-obsessed, me-too mind-set by helping people find the music that the big labels failed to offer. They signed on obscure import labels and indie producers. They promoted the recordings of Bay Area musicians who lacked the corporate clout to get their music into stores. They took a risk on stocking innovative, noncommercial recordings. "There's very little diversity in the music that gets pushed to the public, but there's tremendous diversity in music," says Boyder. "That's why we try to carry the broadest range that we can fit onto our shelves. And that's why we fill these giant spaces and still run out of room. We could always fit in more."

The Amoeba formula has a second ingredient: It's not a music store -- it's a music exchange. Walk through the front door of Amoeba's San Francisco outlet, and you'll run smack into a line of customers toting battered boxes of used records and CDs. This is Amoeba's secret weapon: the trading post, where customers can swap the flotsam of their collections for credit or cash. For a long time, the big retailers looked down on merchants who carried used product. But that hoity-toity attitude blinded the majors to a gold mine. The gross margins on a used CD run as high as 70%, compared with about 20% on a new CD. In a very real sense, used music allows Amoeba to bring Wal-Mart - like pricing to its new music.

"Amoeba has brought to bear a completely different financial model that cuts the big studios out of the action -- the very people who have been raping the retailer for the past 50 years," says Paco Underhill, author of the best-selling Why We Buy: The Science of Shopping, who was knocked out by Amoeba's innovations when he visited its Hollywood store. "As soon as the customer walks in, he sees that there's an opportunity to trade. And that makes him feel a hell of a lot better about buying. If he buys something he doesn't like, he knows that he can trade it in for something he does like. Ultimately, Amoeba has turned the music industry's conventional wisdom on its head. The industry views music as a consumable product: You consume music in the same way that you'd drink a Pepsi. Amoeba thinks of music as a tradable commodity, a durable good that has long-term value."

Seeing the error of their ways, some of the big chains are scrambling to market used CDs. They might be too late. There's no easy formula for creating a music stock exchange. Success depends largely on the traders' experience. The lead buyer at Amoeba's Haight Street store, Tony Green, has been in the used-record business for more than 20 years. Few chain stores have access to that kind of talent. "The chains won't be as successful at moving used product as the independents have been," predicts Ed Christman, retail editor at Billboard magazine. "They simply lack the sophistication and the depth of knowledge. You really have to know what you're doing."

There's a final element to why Amoeba works: The retail business is a people business. "We are social creatures, and shopping is a social experience," says Boyder. "To work here, your music knowledge must be good -- but so must your people knowledge. Success depends on blending the two."

The punk-rock offspring who make up Amoeba's staff are hardcore music junkies. Many are semipro musicians, producers, and deejays whose personal record collections tip into the five-figure range. They are passionate (at times delirious) about their music. Combine that unassailable fact with the sheer energy of the place -- the swirl of art, live music, and people -- and it all adds up to a combustible mix that on a good day sparks high drama.

"The cross section of people that I saw shopping at Amoeba was both shocking and wonderful," recalls Underhill. "Over in the vintage-reggae section, you'd see some pierced, tattooed 19-year-old looking to spend his hard-earned money from selling clothes at the Gap, and a 43-year-old collector with a six-figure salary who's hunting for a Maytals record. They'd meet at the same bin, and chances are it's a happy meeting, because they both love the music. There are very few places in retail where that ever happens."

And that's the way it was as night fell on the city, and that fateful (for San Francisco) game six of the World Series got under way: Virgin's Megastore was nearly desolate, but at Amoeba, the joint was jumping.