How to Open a Record Store

Part 1 - How to start a How to Open a Record Store business - Background

Due to the growth and success of digital and streaming music services, such as Spotify and iTunes, record stores no longer appeal to most mainstream consumers of music. Today’s successful record store businesses serve as a resource for individuals with a deep interest in a particular musical style or styles. In a record store, one can find rare albums and collectibles that are not found elsewhere easily. The customers may be collectors or just ordinary music lovers. Vintage record players are usually on display for sale. The record store owner(s) and staff are like walking encyclopedias about favorite music styles and their enthusiastic love for music is contagious.

Our guide is in 3 parts:

• Part 1 - How to start a Record Store business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a record store?

By far the largest expense when getting started is investment in inventory. In order to have a nice selection, the investment in inventory is around $100,000. Some store owners use their own personal collection of items acquired over decades and open a record store in order to liquidate their personal collection.

Equipment needed is a cash register(s), bins to hold items for sale, appropriate lighting, and decorations to make the store attractive. The other thing needed is exterior signage. These add up to an additional $10,000 to the startup costs.

Finally, a deposit is often required to sign a long-term lease. The deposit amount depends on the monthly rent and the size of the retail location.

What are the ongoing expenses for a record store?

The main expenses are rent, electricity, and staff costs. To succeed, these need to be as low as possible. For example, renting a high-traffic location in a high-priced shopping mall is completely the wrong idea. The rent needs to be very low and the location can be in a very odd place or even out of the way. The attraction is the inventory and store-owner knowledge, not necessarily the location of the store.

Who is the target market?

People who love listening to music and collecting it are the ones attracted to this business. Another customer type is a DJ looking for extended play or dance mix albums to use in clubs.

How does a record store make money?

Records sell at retail prices with sales tax. For online sales, shipping and handling charges are additional.

How much can you charge customers?

Retail sales average around $24 per buying customer. Extremely rare collectibles can sell for many thousands of dollars.

How much profit can a record store make?

There may be low sales during any particular week. Then, a regular collector may come in and buy a significant amount of items. A small record store might make $800 to $1,000 per week in average sales or $41,600 to $52,000 in sales per year. Approximately 25% of the sales are profits, which equals $8,350 to $10,500 per year.

How can you make your business more profitable?

Great strategies to improve profitability of a record store business include:

• Acquire entire collections at bargain prices from estate sales.

• Find valuable old records in second-hand stores and at garage sales at low prices.

• Take rare items in on consignment.

• Sell both from the shop and online.

• Sell CDs and DVDs in addition to records.

• Feature in-store performances.

Day-to-Day and Growth

What happens during a typical day at a record store?

The daily activities for the staff or owner of a record store include:

• Marketing efforts to find customers – A combination of selling online with a physical retail presence is most effective. The physical retail store may be very modest. In fact, it should be. However, profits do exist from managing vast catalogs of acquired materials and selling them both online and offline. The marketing budget is usually limited to free postings online such as offerings on Craigslist or eBay. Posting flyers around town and at music events or collector conventions is also helpful.

• Closing out the accounting for daily sales and updating inventory records – Every day, enter the sales from the day before in the accounting system and update inventory records to reflect the sales.

• Order fulfillment – Process any sales that need shipment and prepare the packages for pickup by the shipping company.

• Cash management – Count cash in the register(s) to verify the correct amount exists according to the transactions made. Note any discrepancies. Make change from the register proceeds for large cash bills to make sure the change is available for cash-paying customers. Deposit any excess over the baseline cash requirements into the business banking account.

• Clean the store – This includes making sure to clean all areas of the store according to a posted daily schedule. Additionally, check the bins for vinyl records for proper alphabetization and artist/genre categories to make sure the correct product, offered for sale, is in the correct place.

• Promotional materials – Put up and keep current the display of promotional materials.

What are some skills and experiences that will help you build a successful record store?

You have to love listening to music. The best ones in this business love learning the detailed trivia about the music, including information about its creation, who performed it, and why a particular record is significant.

What is the growth potential for a record store?

There are no significant franchise opportunities. The trend with record stores is that they are largely independent. This is a very niche area where there are no longer many retail chains. There is less possibility for expansion when starting with one store. Some of the best independent record stores closed down, so this industry sector is reducing not expanding.

How and when to build a team

Usually, the store owners do most of the work. If any staff is hired, the pay rate is typically close to minimum wage as revenues in this business seldom support large payrolls. It is important to hire staff that have a love for music, know a lot about it, and are enthusiastic about sharing their knowledge with customers.

Part 2 - Is a How to Open a Record Store business the right fit for you?

Part 3 - Action plan to launch your How to Open a Record Store business in 90 days