News Feature

By The Drum | Administrator

April 10, 2002 | 10 min read

Russ Grainger is the Pied Piper of pay cheques. He picks a location, opens a store and, as soon as the word wafts out of the door that the majority of his CDs retail at £6.99, local music lovers are powerless to stop the exodus of cash out of their accounts and into his tills.

By developing such a cost-conscious proposition he has created a parallel universe on the high streets of the North. A place where logic is turned on its head so entrants think in terms of \'money saved\' rather than \'money spent\'. A place where half-an-hour passes in the blink of an eye and the phrase \'just browse\' doesn\'t exist. Russ Grainger calls this dimension The Music Zone and every time I pay a visit I return to the real world £13.98 lighter.

But this isn\'t science fiction - this is retail fact. Music Zone is now the largest independent music retailer in the UK, after overtaking Andy\'s Records, and is now gunning for the big boys.

It has grown, over the past 17 years, from Grainger\'s market stall into a chain of 28 shops with a projected turnover of £50m this year. Seventeen more stores are scheduled to emerge before the end of 2002, as Grainger looks to move away from his traditional Northwest base into the Midlands and beyond.

Upon meeting, I don\'t know whether to kiss or kill him. Since opening his store on Market Street, Manchester, my CD collection has acquired a healthily robust countenance, as my bank balance grows ever more emaciated. With most chart CDs at £9.99, and just about everything else at £6.99 or below, Grainger\'s brand of retail euphoria is a dangerously addictive one. One fix and he\'ll be your dealer for life.

\"Once someone is a Music Zone customer they stay a Music Zone customer,\" he confirms from the leathery depths of one of his office\'s opulent armchairs.

\"I mean, who in their right mind would want to go back to paying between £3 and £6 more for a CD, when they know we\'re on the high street right next to our competitors.\"

He has a point. Grainger\'s price crusade started during his market stall tour of duty and has endured ever since. He opened his first shop in Stockport after \'bullshitting\' the naive landlord into believing he had a business and, according to the man himself, has been \'lucky\' ever since.

But if it were just down to \'bullshit\' and \'luck\' a lot more of us would be millionaires (they are, after all, the two founding principles of my own small business plan, and I\'m finding it rather difficult to attract investors).

Bearing this in mind, there must be a bit more to it than that.

Common sense dictates that the first question to raise its hand and say hello should be - how can he afford to undercut the big boys so heavily? How can he, a relative minnow, even contemplate competing with the buying prowess of HMV, Our Price and Virgin?

The answer, says Grainger, is a simple one: \"They could charge a lot less if they wanted to but they need to make a lot of money. They\'ve got shareholders they need to satisfy, investors, and various structures of management all on very large salaries - and we haven\'t. Simple.

\"They\'re entrenched in their trading styles. They need to sell everything at what I think are outrageous profits. I\'d be embarrassed to sell our products at such \'rip-off\' prices. I\'m not prepared to do it and I never will.\"

Strong words. Sinking into my own example of cowhide quicksand, I\'m getting the impression that Grainger doesn\'t much care for the HMVs and Our Prices of this world. I get the feeling he probably isn\'t top of their Christmas card list either.

\"I think we piss people off a hell of a lot,\" he says with the merest suggestion of a smirk. \"But they can\'t change their whole pricing policy when we open up because it would destroy their business model.\"

Grainger insists that every retailer gets their products from the same sources for roughly the same price - the fact that they don\'t try to undercut each other is endemic in the culture of \'rip-off Britain\'.

By this, is he trying to say that high-street music retail is a protectionist racket surviving on tacit price agreements? \"Well, of course they would deny that,\" he responds. \"But yes.

\"Just look around the different shops for proof - they\'ve all got the same offers, it\'s all two CDs for £22 etc, none of them undercut each other.

\"I\'ve been asked over the years to have various conversations about prices and I\'ve basically told them to get stuffed. I\'m just not interested in playing their game.\"

As discounting is Grainger\'s USP, he\'s probably quite happy to be playing with himself at the moment (ooh I say), but it\'ll be interesting to see how long it takes the rest of the industry to catch on.

The past few years have given rise to a nascent trend of revolting against inflated high-street prices, with retailers such as TKMaxx, H&M, UniQlo and Primark driving to shift more products at less margin and ostensibly provide the consumer with better value.

Grainger\'s business has been swept along by this frugal flow and, if it continues, HMV and friends may soon find it impossible to carry on swimming against the tide.

For the time being, our Music Zone man remains focused on his own business buoyancy, rather than worrying about his competitors staying afloat. It\'s a practice that seems to be paying off, with him already predicting a turnover of £80m-plus for 2003.

However, it\'s not all been Pop Idol-esque success for Music Zone. Grainger is the first to admit that he\'s had his fair share of Chesney Hawkes too. The e-commerce side of the business is one such occasion where a promising start didn\'t quite live up to expectations.

\"We had to close the trading side of the site last year because it was going to lose us too much money. It cost a lot to set up and we had to advertise alot to generate a significant amount of business. But the extra revenue we\'d drum up through the advertising was never actually enough to pay for the online service. I didn\'t see the sense of ploughing more and more money into advertising, trading well, but not making any profit.

\"All the stores were contributing to the profitability of the business whereas the website wasn\'t. We ended up taking the decision to close it and get on with what we were doing best.\"

If Grainger got his fingers gently singed on the most contemporary of marketing media, he has reverted to one of the most traditional to soothe any discomfort.

He is now looking to the future by borrowing from the past, with the launch of a free in-store music newspaper called The Zone.

Originally planned to sit at 16 pages, the paper\'s first issue (which has just hit the stores) has been augmented by advertising and emerged as a healthy 24-page newly born publication.

Boasting a circulation of 200,000, the paper is written from a largely neutral perspective, concentrating on features and interviews rather than the blatant promotion of all things Grainger.

With typical confidence, he comments, \"I\'ve no doubt that the paper will be a great success. We\'ve been fantastically well-supported by advertisers so far, with the majority giving us a contract through to the end of the year. That gives the paper a reassuring backbone and allows us to concentrate on making sure that it provides real value to the customers.\"

Despite being such a traditional format, the concept of an in-store music paper is still quite a novel one. If they can ensure its survival through advertising (a la Associated\'s Metro), it provides the chain with a valuably tangible marketing opportunity, whilst its competitors continue to put all their chips on the virtual table.

With the burgeoning popularity of retailer magazines, it will be interesting to see if the music big boys decide to produce a \'cover version\' of Grainger\'s release. Time will tell, pop-pickers.

Grainger\'s other marketing strategies are equally focused, yet more conservative in their scale. His core customer group of discerning 25-45-year-olds immediately warm to the store\'s back catalogue treasure trove and are unconcerned with gimmicks. This allows him to keep the design basic and in-store costs down. With some stores he admits to \'just opening the doors and letting them get on with it\', whereas for units such as his new flagship store in Birmingham he\'s investing in a local radio and newspaper campaign.

The national brand-building brief is handled by hotly tipped Atom of Leeds and has produced a host of memorable TV, cinema and magazine executions. Atom also handles the POS, consolidating a sense of synergy. Grainger values the agency because (like him) they\'re \'irreverent and full of good ideas\', although I suspect that he also uses them because their ads make him, and his target audience, laugh.

If I had to compare Russ Grainger with another entrepreneurial figure, only one bearded, balloon-flying music fan really springs to mind. As Noel Edmonds has had his beard shaved off and, to my knowledge, the members of ZZTop aren\'t rich in business acumen, it can only be Sir Richard Branson.

Considering his example, will Grainger be tempted to extend his cut-price philosophy into different retail arenas and perhaps start a Mobile Zone or Clothes Zone?

\"No, no, no,\" is the emphatic answer to that question. \"I\'m not on an ego trip (surely he\'s not suggesting that Mr Branson is), I don\'t have a clue how to sell anything else and I don\'t particularly want to. We\'ll stick to what we\'re good at.\"

Which is good news for other retailers, bad news for HMV and disastrous news for those music lovers with savings plans.

The Pied Piper is coming to a shopping centre near you folks. Don\'t say I didn\'t warn you.


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