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Memo to: The Big Bosses at Virgin Megastores Re: Your Next Big Source of Competition

These days, it's hard for monstrously big music retailers to whistle a happy tune. The major labels are turning out major flops. When they do get something to sell, they're up against other monster chains (Tower Records, FYE, Sam Goody), as well as even bigger merchants (Target and Kmart) that are happy to sell CDs as loss leaders. Well, I'm here to add another sour note to your medley of challenges: There's a new form of competition that is especially vexing -- because it is so original and exciting.

On a Saturday afternoon in late October, I dropped by your Market Street Megastore in San Francisco. With its giant black-and-white portraits of jazz and blues greats and its sleek listening posts for sampling CDs, the place was gorgeous -- and nearly empty. No doubt the World Series showdown between San Francisco and Anaheim, airing later that night, had shut out many shoppers. But when I headed across town, I found an aggressively anticorporate, outsized emporium, where roughly 300 music fanatics were joyously assailing the record racks as a Bay Area grunge band thrashed away on a makeshift stage. Perhaps you've heard of the place. It's called Amoeba Music, and it's arguably the largest -- and almost without question, the best -- independent record store in the country.

Twelve years ago, Amoeba raised the curtain on its original outlet, a pint-sized storefront in Berkeley packed with about 11,000 new and used CDs. It was not a great time to launch a mom-and-pop record store. Major labels were drunkenly churning out megahit makers such as Michael Jackson. In a desperate bid to get bigger faster, many national chains gobbled up smaller chains and independent stores and geared themselves to the casual music consumer. But Amoeba chose a different route: to serve the dedicated fan. And it has grown, amoebalike, since its first year. It expanded its Berkeley store until it ran out of room, launched the San Francisco outlet in 1997, and, just over a year ago, added a third store, on Sunset Boulevard in Los Angeles. This past fall -- a period when the music-industry recession hammered the national chains and the independents alike, and mass merchants barely eked out a sales gain -- Amoeba was projecting year-over-year growth of 75% (due in part to the successful launch of the L.A. store).

Mike Boyder, Amoeba's cofounder, likes to recall that he was a rookie retailer when he helped launch the Berkeley store. He brags that he never got an MBA. But Boyder and his partners have proven to be shrewd innovators who devised a three-part, rule-breaking formula to outfox -- and sometimes even outgun -- the industry giants. "First and foremost, Amoeba is a business," he says. "But we never forget that the business succeeds because of the music. Music is the essence of everything we do."

Here's the first part of the formula: Just because it's independent doesn't mean it's small. Amoeba's sprawling San Francisco outlet, which occupies an old bowling alley on Haight Street, takes up 25,000 square feet. Between CDs, LPs, 45s, 78s, cassettes, 8-tracks, videotapes, and DVDs, it stocks roughly 250,000 titles. Compare that with Wal-Mart, whose average store carries about 350 titles, most of which are this month's flash in the pan. Amoeba even towers over the national chain that's best known for its selection, Tower Records, which on average stocks about 60,000 titles at its stores.