Friday, April 03, 2009

Origami Vinyl Opens Today in Echo Park

Today marks the opening of Origami Vinyl in Echo Park [1816 W. Sunset Blvd.]. The store will sell new vinyl (up to 3,000 records in stock), turntables, vinyl supplies and advance tickets for Spaceland Productions shows (Spaceland, Echo, Echoplex). They're celebrating the opening with in-store performances by Wait.Think.Fast and Nico Stai. The LAist has an interview with owner Neil Schield.

Origami is the second vinyl (mostly) record store to open in the area in recent months. It joins Vacation Vinyl which recently opened at 4679 Hollywood Blvd. Vacation was started by the guys behind the Hydra Head record label and the excellent Secret Headquarters comic book shop. My understanding is that they stock a little bit of everything, but focus particularly on non-mainstream, heavy music. They're cool enough to post their entire inventory online HERE. Vacation buys very select used vinyl.

Little Radio will be opening a third vinyl (mostly) record store soon. The store will be located next to the Regent Theatre downtown. Blogdowntown has the scoop HERE. They plan to stock around 2,000 titles.

Before you jump on the bandwagon and open one yourself, consider the economic prospects. I did some back of the envelope, unit economics calculations:

Assumption #1: Conservatively assume that rent/utilities/other expenses are $2,500/month.

Assumption #2: Store is open 63 hours/week and an employee makes $10/hr to work ($10/hr x 63 hrs/wk + 30% payroll taxes/workers comp insurance) and your labor cost is $3,522/month.

Assumption #3: Working capital/inventory/start up costs are $30,000. Investors/debt holders expect at least a 10% return on the investment. Cost of capital is $250/month.

Assumption #4: The average record sells for $15 and the profit margin is 25%. The store makes $3.75 per record sold.

Calculation: In this very simplified/hypothetical scenario, the store needs to sell 1,672 records per month to break even (roughly 55 records per day).

I'm assuming some of the stores will be taking record label cash for listening stations, poster placement, etc. They're also selling some equipment and Origami will be selling concert tickets (which is 100% profit). On the negative, vinyl is non-returnable to distributors. Every piece of vinyl you don't sell hits your bottom line.

Somewhat Unrelated Observation For Aspring Shopkeepers: The hottest retail concept going right now is Game Stop. Profit margins on used products is much more attractive (up to 50%).

Conclusion: It's not going to be easy for these guys. If you want these businesses to survive (and compete with Amoeba and each other), you need to spend your dollars there.

4 comments:

Anonymous said...

Amen

Anonymous said...

I wonder how long game stop will chug on - the game by mail service will likely take a "Netflix" sized bite out of them...

Satisfied '75 said...

ive bought from both. i hope they make it.

Steven said...

This is a really good post, Duke, even by your very high standards. I'll make it a point to support them, even more than I would have otherwise.