Tower Of Power
Russ Solomon's dream of a record supermarket set the groove for today's music megastores.
Russ Solomon is the president and founder of Sacramento, California-based MTS Inc., the corporation that owns Tower Records--a company that racked up sales of just under $1 billion last year. He is also living proof that anyone with a clear and innovative marketing concept--and the passion to make that dream come true--can transform their concept into a reality.
Ply him with intelligent questions about his record empire and he'll spin a saga spanning 28 years that not only chronicles the rise of his trend-setting entrepreneurial empire, but the growth of the modern recording industry.
Solomon enjoys coming off as a regular guy who just happened to be in the right place at the right time. But that's only part of the story. When "Flower Power" swept the nation in the mid-'60s, Solomon, who was in his 30s at the time, fantasized about opening a "record supermarket," a megastore selling everything from Wagnerian opera to psychedelic rock. So began the Tower concept, and the ascendance of a pioneer record chain which now boasts 120 national and 61 overseas stores. Yet there's a lot more to Tower's story than luck and timing.
While Solomon strikes the pose of the laid-back and freewheeling entrepreneur, a couple of the time-tested secrets of his success were patience and persistence. "I've been in the record business for 55 years," he chuckles. "That's not what I call `overnight success.' There was no secret formula. I just kind of did it. I climbed up the hill by putting one foot in front of the other." Unlike many successful entrepreneurs who built their companies on elaborate business plans and calculated visions, Solomon had no clear direction when he started. "It was all kind of seat-of-the-pants; I just kind of took things as they came."
He does admit to entertaining visions of selling different kinds of music, catering to people's diverse tastes. His dream grew out of a deep love of music which can be traced to his mid-teens, when he sold 78 rpm records in a corner of his father's drug store, the Tower Cut-Rate Drug Store in Sacramento.
Yet Solomon cavalierly plays down his modest start in the record business. "Forget all the stuff you've read about entrepreneurs working around the clock and entertaining the grand fortune-making visions they've had since they were kids," he says. "When I was a teenager, I couldn't see beyond the next 24 hours. Girls and listening to music were my biggest priorities."
School certainly wasn't high on his list, either. Unlike many famous entrepreneurs who are embarrassed about having quit school to build their fortunes, Solomon boasts about being kicked out of school. "I was bored and didn't go to class," he says. "I certainly didn't have any big plan up my sleeve."
The young Solomon did demonstrate a flair for merchandising, however. Working the record counter in his father's store, he bought used jukebox records for 3 cents and sold them for a dime. When 45 rpm records were introduced, he gave away $6 worth of singles to each customer who bought a 45 rpm record player for $12.95, thus building an audience for the new singles.
Before he got serious about record retailing, Solomon tried junior college for a few months, then joined the Army. After his discharge, he went back to selling records in his father's drug store.
In 1952, the 26-year-old Solomon took over his father's record inventory and opened a music wholesaling, or rack-jobbing, operation. "A rack-jobber sells discount records in mass-merchandise stores," he explains. "I quickly discovered that you can't make a profit if you're undercapitalized." After eight years of lacking the funds to beef up his inventory, distributors moved in and liquidated his business. He shrugs it off as a learning experience: "I was humbled, but not defeated. I came away more determined than ever."
In 1960, he borrowed $5,000 from his father and reopened his business under the MTS corporate banner in his father's drugstore. A month later, he opened a second Tower Records store. "The record-retailing business suddenly made a lot of sense," he says. "It was just a question of building an inventory and selling it."
By 1967, he had opened two Tower Records stores in Sacramento. At 42, married and with two children, Solomon realized his grand vision of a supermarket-style record store. In March of 1968, he took a five-year lease on an enormous vacant storefront at San Francisco's Fisherman's Wharf and opened his first San Francisco Tower Records. He filled 6,000 feet of space with records from all over the world. Prior to that, records were sold in small stores with limited selections in major categories. "As soon as the store was stocked," he says, "I realized this was the only way to sell records."
With the opening of that first sprawling store, featuring colorful, six-by-six-foot paintings of record covers as window displays, Solomon had opened what he felt was the ideal record store for music lovers, a veritable smorgasbord of listening pleasures.
The new store was an instant success, attracting serious record buyers from all over the state. If Tower didn't have an obscure record in stock, Solomon promised to find it. And, by monitoring the output of tiny, obscure record companies and wholesalers, he usually did manage to find those hard-to-get items, scoring lasting points with music cognoscenti.
With the success of the San Francisco store, Solomon once again became excited about his business, and dreamt of growing even bigger. "What better time to be in San Francisco?" asks Solomon, fondly remembering those exciting times. "Woodstock was a year away and the music scene was bursting with new music."
Two years later, in 1970, Solomon opened his second superstore on Sunset Strip in Los Angeles. Over the next decade, he opened 26 more stores in major cities across the country.
When video became hot in 1981, Tower began selling and renting videos. By the early 1990s, Solomon had expanded his product line to include books and CD-ROMs. But it's still music, now on compact discs, that accounts for the bulk of Tower's sales.
Solomon has taken his record supermarket concept to new heights. "In the early years, our biggest obstacle was not having enough capital," he says. "Today, we have the track record to strike good banking arrangements." With plenty of capital, he spares no expense in renovating and designing stores, which range in size from a modest 3,600-square-foot location in Sonoma, California, to Tower's largest store (53,000 square feet) in Tokyo.
However, Solomon encounters more competition each year. With 181 stores worldwide, he finds himself surrounded by copycats. His biggest competitor is Minneapolis-based Musicland Group Inc., with a whopping 1,472 stores and 1995 revenues of $1.72 billion. Despite their size, Solomon says he doesn't lose any sleep over them. After all, he was first. More importantly, Solomon is convinced he offers his customers a unique and more eclectic selection. "We're the best," he asserts, immodestly.
Being the best means mastering the art of competitive retailing, something Solomon has been doing all of his life. "I was doing it when I ran the record counter in my dad's drug store," he says. "I'm still doing it today, but on a much larger scale."
Solomon has never strayed from his original retailing concept, which is "giving the public lots of stuff that they want at a price they want to pay." He explains, "That's what good retailing is all about."
Even deep discounters like Wal-Mart, K-Mart and Price Club don't faze Solomon. "We can compete with anybody," he says, insisting that his success also rests with smart buying and creative handling. "Nobody can buy records cheaper than we can."
More upsetting to Solomon are changes in the industry. "Music has become a commodity, and everyone is trying to feed from the same trough," he says. "Besides the discounters, a lot of the electronics retailers, like Circuit City and Best Buy, and booksellers like Borders Books and Music, have jumped into the market as well."
Solomon forecasts an industry shakedown over the next few years. "Some of the companies will go away," he speculates. "The good ones will get bigger." Despite a crowded marketplace, Tower consistently manages to rack up a 15 percent annual revenue growth rate.
"The business is exciting because music never stops coming," he adds. "There is more variety and more accessibility to music than ever before."
Solomon spends most of his time overseeing new business developments, but has little to do with the day-to-day running of the company. His management philosophy encourages Tower managers to do their own thing. Solomon calls it the "Tom Sawyer School of Management." According to his interpretation of the classic tale, "It's based around doing as little as possible. Just like Tom Sawyer had the good sense to hire Huck Finn to paint his fence, my secret is to hire good people and let them do what they do best." (What does it matter if Solomon rewrote Tom Sawyer to suit his own purpose?)
Solomon explains that Tower was built using what he calls a horizontal management concept: "I'm involved in one way or another with everything Tower does, but I'm not autocratic to the point where they can't do things without me. The management team can do everything they need to do without me. I like to be informed, but they don't need my permission. Many decisions are made at the store level."
The general operation is based on a regional-manager system. Each regional manager (all of whom have come up through the ranks) is responsible for 10 to 15 stores. The managers report to a few senior executives. Company ranks have swelled to more than 7,000, yet there is little turnover within the supervisory and management ranks. And Tower promotes from within; most managers started as clerks.
As for the future: What's next? A superstore the size of an airport? Solomon refuses to comment. One thing is certain: This cantankerous entrepreneur says he'll never retire. That's easy to believe, given his past record.
New York City writer Bob Weinstein is the author of 10 books; his latest is Who Says There Are No Jobs Out There?, from McGraw-Hill.
MTS Inc., 2500 Del Monte, P.O. Box 919001, W. Sacramento, CA 95691, (916) 373-2500.
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