Greg Tonn looked at the tally for a week and noticed a continuing decline in the number and dollar value of compact discs being sold at his Winnipeg store, Into The Music. There was no doubt about it – the market for CDs appeared to have peaked. Given that a large part of his bread and butter came from the sale of new and used CDs what, if anything, could he do about it?
In 1987, Winnipeg entrepreneur Mr. Tonn turned his personal LP collection of more than 2,000 albums into a specialty venture, which he called Into the Music. According to Mr. Tonn, his strategy was to be "short on junk and long on gems." The establishment originally opened its doors on Corydon Avenue in the middle of Winnipeg's Little Italy, with the store relocating in 1990 to the Osborne Village area. This was where business really took off as used CDs poured into, and out of, the store.
In short order, Into The Music effectively developed a city-wide following, making it one of the places to go for music. Given the store's eclectic focus on specialty jazz, classical, punk, blues, deleted recordings, and new hard-to-find imports, it was no surprise when the store received the 1999 award for "best retail store for the Prairie provinces" at the 1999 Prairie Music Awards.
In 2003, the store relocated to Winnipeg's rejuvenated Exchange District, after Mr. Tonn and his Osborne landlord were unable to agree on a new lease. Located just three blocks from the city's epicentre at Portage and Main, the move was a very good decision. With Red River College opening its downtown campus just a few blocks away, a lot of tech-savvy businesses in the area, and some complementary retail in close proximity, the store had again become one of "the" places to go for music.
CDs made a big splash in the 1980s, resulting in the rapid marginalization of vinyl. As a result, many LP collections were dumped en masse in the 1990s, with Mr. Tonn buying several at rock-bottom prices. Demand for CDs has recently started to cool. While they had accounted for about 65 per cent of the store's unit sales in the early 2000s, CD sales as a percentage have been sliding, with recent estimates somewhere in the low 40s.
Mr. Tonn noticed one other development along with the decline in CD sales: a rediscovery of vinyl LPs as format for music hobbyists.
While the music industry had changed in a number of ways, including the emergence of an online market for downloaded music and the housing of personal collections on iPods, a less conspicuous development was the quiet re-emergence of the serious collector. These individuals, Mr. Tonn believes, still value music as a physical artifact that sits on their shelves and not just on their computers. He also believes these customers are "into vinyl," as something to collect and also to act as a protest against an increasingly digitized culture.
This penchant for collecting is not age-related, Mr. Tonn says, with both young and old picking up the bug. While one group, say the 50-plus oldsters, might prefer one format, such as CDs, another, like the Goths, might prefer a specific genre, such as British heavy metal. One key commonality for all groups was a renewed appreciation for music as a physical artifact that provided a source of personal identification.
In response to this development, Mr. Tonn sought to reorient the store as an indispensable middleman for the serious collector. While some less volatile segments, such as jazz and classical, were especially well suited for collecting, it appeared the opportunity for such a service existed across virtually all segments. The move also had implications for his online business, where he had recently sold musical rarities such as the first 45-RPM recording released by former Winnipegger Neil Young and The Squires.
Mr. Tonn reports that his last year-end was his best since the mid 1990s, with the store widely recognized as one of Manitoba's go-to places for rare and interesting music. While he recognizes vinyl will never regain its former prominence, he's convinced it will remain a strong hobby format.
He has further enriched his in-store offerings with a variety of events, including performances by musicians from the city and beyond. Into the Music also refreshes its website at least twice a week. Letting customers know about recent arrivals is critical: Mr. Tonn estimates 300-plus LPs and 400-plus CDs get added each week to the store's collection.
The CD market may be getting a bit more compact, but the opportunity to help music collectors collect doesn't seem to be going away any time soon.
Special to The Globe and Mail
Reg Litz is a professor in the Asper School of Business of the University of Manitoba.
This is one of a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.