The great F Street war

Picture this: You’re a tiny independent music retailer in an increasingly challenging landscape for music retailers. Your primary competitor is a national chain that owns a cavernous music store across the street. After years of direct, sometimes ugly rivalry, they go belly up. You win. Six months later, a new business opens in their old space. A bike shop? A bowling alley? Nope, another music retailer. Ouch.

That’s what happened last year to Armadillo Music in Davis. Even residents were puzzled by the decision of Sacramento-area Dimple Records to open their sixth store on F Street, inside Tower Records’ carcass, in June.

“It’s a shock that Dimple’s here,” said the affable Dylan Warner, Armadillo’s former manager. Warner, a boyish 33-year-old, sold records in that same storefront since he was 18. Speaking in his cozy shop a few months after Dimple’s opening, he seemed upbeat, not at all bitter. But still, it’s hard not to look back on those recent six months of Armadillo’s F Street monopoly—after 11 years of sparring with Tower—as halcyon days.

“We felt very good when we were the only record store in Davis,” he said. “And you can go ask anybody, we didn’t go and raise our prices. All we did was expand our inventory.”

According to Warner, through the first half of last year, Armadillo was set to actually make money in retail music, as the tiny store reaped the monopoly borne from Tower’s demise. Then, the stomach punch. One day last spring, Warner said, he happened by the vacant storefront and saw a clipboard. On it, Dilyn Radakovitz, co-owner of the small chain Dimple Records, was listed as the new tenant. He took a deep breath.

“Everybody wants to talk to us about iPods and the Internet,” said Warner, “and although that’s certainly a force in the [music retail] industry, that has nowhere near the effect of someone opening up a giant record store across the street.”

And what Warner calls the “Great Music War on F Street” was launched.

Yet this isn’t a typical indie sprite vs. corporate behemoth story for many reasons, the first being that Dimple Records is not exactly Wal-Mart. Although a chain, Dimple is regional and sells primarily new and used CDs and DVDs, just like Armadillo. In 2003, Dimple was part of a small group of California independents who filed a class-action lawsuit alleging that Best Buy stifled competition by illegally pricing CDs below wholesale. Also, it’s literally a mom-and-pop endeavor—the company is owned by Radakovitz and her husband, John.

We all know bricks-and-mortar music retailing has a very uncertain future. Dimple even points this out, perhaps unwittingly, in a window display featuring a collection of obsolete home-stereo equipment. An 8-track player, a reel-to-reel tape, turntable, laserdisc and so on are arrayed in chronological order. It’s a nostalgic and engaging tableau, but it begs the question: In the age of file-sharing and streaming entertainment, shouldn’t Dimple be clearing space in the display for a CD player as well? And when we move completely away from shiny plastic discs—indeed, some consumers already have—won’t Dimple and its 5,500 or so square feet of lights, heat and employees become dusty relics too? Armadillo as well, for that matter?

Well, that day has not yet come. And Warner is convinced that the greatest threat to his store is Dimple, and what he says is Dimple management’s strategy to put Armadillo out of business.

“They’re selling CDs at a very aggressive price structure,” he said. “Their prices are similar at all of their stores, but part of their idea has to be to put us out of business because we’re 20 feet away. We’re the oldest record store in Davis.”

Warner said Armadillo has been forced to sell some CDs “almost at a loss” to compete with its new neighbor. He sees no dark conspiracy, just the vagaries of free enterprise. “It’s capitalism, man,” he said. In true Davis fashion, some have suggested to Warner that Dimple should have been blocked from coming. “People have said to me ‘Why didn’t the city get involved?’ [But] it’s not really the city’s business.”

As one might expect, Radakovitz, reached over the phone, doesn’t quite acknowledge the fierce capitalist competition of which Warner speaks.

“If [Armadillo] could work around Tower,” she said in response, “I would think we would more complement each other than anything else. It’s not like we do all the same stuff. I think [Armadillo’s] gonna be fine.”

Dimple’s franchise-wide strategy includes matching Target and Best Buy’s weekly advertised CD specials. In effect, this means selling for $9.99 discs that cost Radakovitz $12.05.

“You have to,” she said. Before price matching, “I would go into Best Buy because they would be advertising something that we couldn’t get, and I would go over there to buy it and my customers would all be there.”

Thus, she feels Dimple has no choice but to take the loss. “You’re hoping that they buy something else, or they buy some used [merchandise]. We’ve been doing it for years, and I think it really helps us keep our customers.”

“I don’t really care if someone buys two back-catalog CDs at Dimple,” counters Warner. “If you’re losing two bucks and making four bucks on something else, you still only made two dollars at the end of the transaction. I would be surprised if they make it more than a few years unless they raise their prices.”

In the past, when Tower sold a new release below wholesale, Warner and his cohorts would walk across the street and buy them out, then resell the CDs at Armadillo. “We emptied their shelves a few times at Tower. That kind of pissed off one of their managers once, because they only had, like, six copies.”

Cramming 38,000 titles in just 900 square feet probably had something to do with his store’s endurance (Armadillo opened in 1996), according to Warner. To accomplish this exercise in efficiency, patrons flip through racks of liner notes in thin plastic sheaths, not CD cases. Once they find a new or used title to listen to or purchase, an employee fetches the actual CD and jewel box from a locked case below. There is almost no packaging, and little wasted space. One employee can mind the entire store.

However, the most crucial aspect of Armadillo’s endurance is probably not the diligent use of space. According to Warner, the owners of Armadillo don’t depend on the store making money. A few bad months in a row don’t faze them at all, he says. So is it merely a hobby for them?

“I wouldn’t call it a hobby, but it’s not a source of needed income, you could say that.” When pressed, Warner is reluctant to discuss it further, allowing that the owners are “independently successful.”

“Their interest is in downtown Davis, Davis as a city, owning a successful small business. If we’re making money on the books or not, no one’s going to run and say, ‘Oh God, we had a bad summer, we’re done.’ That’s just not going to happen.”

Dimple, for its part, sees itself as an adaptable merchandiser (it surely will have to be, with the arrival next spring of Davis’ first Target store on the outskirts of town. The name may say ‘Records,’ but inside there are plenty of items unrelated to the music business, like incense sticks. According to Radakovitz, Dimple is seeing more movement lately in items such as video games and game systems than CDs. The curiously thin inventory of Borders on First Street, Radakovitz offhandedly surmises, might pose another opportunity.

“I think we’re going to start bringing in books,” she said cheerfully. “I think I’ll feature more music-related books, but I think I’ll get books and things like vegan cookbooks and some punk things, maybe some tattoo things. I’ll just get some things that might work for us. I think it would be fun.”

In an odd way, both sides are relieved that the other is so nearby.

According to Radakovitz, shortly before opening the Davis Dimple, an Armadillo employee told her that a few months after Tower left, business was actually slower than before, as the customer base had shrunk. Dimple’s presence, she said, “can only help.”

“Thank God they opened across the street instead of across town,” Warner said. “Because you do at least get the music sold on F Street, and people go back and forth. At least we can share the pie this way.”

Reached in late January, Warner said he was leaving Armadillo at the end of the month. With all the changes in the industry, he thinks now is a good time to get out and take advantage of his degree in managerial economics.

Yet Dimple’s arrival still puzzles him. “I really have to question where Dimple is going to be in three years. The economy’s not looking good. The Internet’s not going away, the box stores aren’t going away. The only thing going away is retail record stores right now, and [Dimple is] expanding.”

But in the end, he said, the winner of the war between Dimple and Armadillo probably won’t glean much in the way of spoils. “It’s kind of like two best friends going after the same girl,” he said. “And nobody gets her.”