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Indie stores confront a new era

By Catherine Andrews
CNN

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(CNN) -- Late last year, a strip mall opened near Little Five Points, a hip neighborhood in Atlanta, Georgia, and home to an eclectic mix of independent stores, restaurants and pubs.

The mall, which features Best Buy, Barnes & Noble, and Target stores, is located about a half-mile from Criminal Records, an independent record store that has been a focal point in the city's arts landscape for nearly two decades.

"I thought a lot about that strip before it opened and after it opened. It was doom and gloom and everybody was full of fear," said Eric Levin, owner of Criminal Records. "The ironic thing is that I can't say we've done better, but I can't say we've done worse."

The same cannot be said for many independent stores across the country that have closed over the last few years.

There are about 800 fewer independent music stores now than in 2003, according to Clark Benson, founder of Almighty Institute of Music Retail, a market research group that maintains a database of retail music outlets.

Commercial rents in hip neighborhoods, where such stores are usually located, have risen. Retail chains, which offer cheaper pricing, have expanded. The Internet has also made it easier to find obscure books, movies, and records -- usually the niche that independent retailers fill.

Economics and migration

The problem that independent retailers are facing is two-pronged, according to Richard Layman, a Washington, D.C.-based historical preservation and urban revitalization consultant.

"The scale of retail has changed and where it's located has changed," he said.

Layman, who writes the blog Rebuilding Place in the Urban Space, cited migration by the middle class to the suburbs from towns and cities as the starting point of independent stores' decline.

"In our parents' generation, somebody probably lived on the block who owned a store. That doesn't happen anymore," he said. "People have left the cities. You've lost the support and infrastructure that supports the maintenance of independent business."

Many of the 25 counties with the highest levels of decline were home to slow-growing or declining cities like Cook County, Illinois (which includes Chicago), Wayne County, Michigan (which includes Detroit), and Cuyahoga County, Ohio (which includes Cleveland), according to a Census Bureau report published in April 2006.

Meanwhile, some of the fastest growing counties are exurban or suburban areas that surround cities like Atlanta, Minneapolis-St. Paul, Minnesota, or Washington D.C.

The biggest problem for the stores, however, may be simple economics, said Glenn Peoples, a music industry veteran who runs the blog Coolfer.

"Big box chains often sell new releases and hit titles at a loss, and at a price that is lower than indie stores' wholesale costs from their distributors," he explained. "Consumers want and expect new releases to have low prices, so indie stores get by on a very small margin on some titles while still coming in way above big box prices."

Vince Wadhwani -- who started BuyIndie.net, a Web site that allows users to list, rate and write about independent stores in cities like Philadelphia, San Francisco and Baltimore -- says financial resources available to major chains are a major cause of the decline.

"Without exception, chains have much bigger budgets than independently owned stores," he said. "That allows them to advertise on a level not available to the indies. But more importantly, they are able and willing to either purchase property outright or sign leases that are longer than their independent counterparts."

Independent stores offer more intimate service and "I don't know if enough people think about it, if they realize that every dollar they spend is a vote for the type of service that they want," Wadhwani said.

Adjusting to a new era

Barry Solan, a co-founder of Video Americain, which has six video stores along the Eastern Seaboard, said emerging technology and changes made by the large retail chains essentially represents a new business model, one to which independent stores have to adapt to.

"I used to run my company as if it was a big fat, Eastern European, socialist country," he said. "My goal was always to give away as much of the money as possible."

The bureaucracy that runs the company is leaner, he said, and there is an increased attention to the profit motive.

Video stores have been affected by online stores like Netflix and large retail chains, but they're thriving, Solan said. He attributes it to customer loyalty and the chemistry developed between a neighborhood and its residents.

"You want to settle in with a neighborhood for the long haul and they become part of what you are...Eventually, they just love you and they love what you do," he said.

Layman, the revitalization consultant, said independent stores have to find a way to compete beyond price. "You have to have loyal customers who seek you out because the combo of what you offer and how you offer it, things they can't get elsewhere -- that's how independent stores have to do it," he said.

Criminal Records' Levin, who also runs the Alliance of Independent Media Stores, a collective of 29 stores in 21 states, said independent stores have to cleverly change to ensure their survival.

"We have to create really fun, interactive, playful environments for [customers] to come hang out in. The stores that do that, I think, have many, many years ahead of them," he said.

He bought a couple of coffeehouses in the Atlanta area last year with ambitions of offering new reasons for customers to visit his stores. The coffeehouse located next to the record store features regular performances by local acts.

He hasn't completely planned out how his media store will work in concert with the coffeehouses, but he hopes to foster a communal spirit prominently -- for example, a space where customers can spin vinyl records while having a cup of coffee. "Nobody is going to gather around an iPod," he said.

The greatest reason that indie stores will thrive, Levin says, is that they make communities more vibrant and support the arts community.

"Everybody in my store is in a band, writing a comic, is working on a novel, they're in a touring band and [sometimes ask] 'Hey, can I leave for three weeks and go rock and then come back?'" Levin said. "They ask, 'Can I use the fax machine to book my gig? Can I put up artwork in the [coffeeshop]?' -- Can you imagine even asking a question like that at Best Buy?

"We are the community. That sounds very arrogant, but I believe that heart and soul."

CNN's Manav Tanneeru contributed to this report.

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