Case Study: Not Easy Being Indie Tough time to be in the retail music business. That wasnt always the case as chains such as Sam Goodys and Tower Records competed side by side with thousands of independent record stores. Back in the day, one of the best independents was Millennium Music in Charleston, South Carolinaperennially winning awards for best CD store and best store staff. But things change. Millennium Music owner Kent Wagner had done everything possible to fight the changing tide brought on by the rise of digital music: At the apex of the business, Wagner owed seven stores, but for seven straight years, Millennium had suffered double-digit revenue declines. We always thought of ourselves as a community center, a meeting place, says Wagner. We knew the industry was in decline, but we thought we were different. It turned out Millennium wasnt different. And Wagner and his business partner, Clayton Woodson, soon faced a stark choice: fold up the business completely and walk away, or attempt to transform it into something entirely different. The once-hot business had but one glowing ember left: a small but growing online trading business that allowed customers to exchange used CDs, DVDs, and books for electronicsiPods and the like. Millennium was able to make money by reselling the used merchandise on Amazon, eBay, and other sites. Millennium was launched by Wagner in 1994 with the focus of creating a thinking persons music store. Their competitive advantage was based on an inventory of hard-to-find records with large classical and jazz sections and stellar customer service. Millennium would make music connoisseurship friendly and accessible. In the early years, that philosophy worked well, and revenue grew some 20 percent annually. At its peak, Millennium generated sales of about $10 million annually. Live bands played regularly, Millennium hosted a live-jazz happy hour, and they held book readings. Wagner opened a restaurant and a bar and expanded to book sales and DVD rentals. But the seismic industry shifts that put Sam Goodys, Tower Records, and many others out of business started catching up to Millennium. As the years rolled by, the losses mounted. Wagners empire was hemorrhaging, and he was soon ready to try anything. In 2006, he turned

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for help to his marketing director, Clayton Woodson, whose eclectic background included making furniture, teaching first grade at a charter school in New York, and teaching acrobatic yoga. Clayton tends to see looking at the abyss as a growing experience, says Wagner. Im the opposite. That glowing ember of Millenniums businessthe used-CD sectiongave Woodson an idea. Customers often came in hoping to exchange their old CDs for store credit. What if Millennium could formalize the process to entice additional customers by offering to trade iPods for used CDs? In the summer of 2005, he persuaded Wagner to give the idea a try. Woodson soon had another insight: Buying a used CD online was actually cheaper than buying an MP3 album through iTunes. If Millennium moved its iPod trading program online, it could collect discs from across the globe, profitably resell them online, and still undercut iTuness prices. Millennium launched FeedYourPlayer.com in 2006. Traffic soared from a few hundred visitors per week to more than 15,000. New customers were soon mailing in more than 6,000 items a week. By 2007, the online exchange brought in $400,000 of Millenniums $1.7 million revenue. FeedYourPlayers performance was heading in the exact opposite direction of Millenniums lone remaining store. In its last full year of operation, the store lost nearly $1 million. In September 2007, Wagner called a company meeting with his 25 or so remaining employees. He delivered the news that many had already foreseen. The retail business was dying. The future was online. The store would remain open, but resources would be put toward building FeedYourPlayer. Employees were still upset even if they had seen the changes coming. Millenniums music buyer quit when he realized the emphasis would be peddling used CDs rather than fresh releases. Wagner understood his employees anguish. He says, staff members were accustomed to being tastemakers. Wagner felt the confliction himself. He clung to the hope that the huge changes might save the store. When you spend so much of your energy fighting against the blindingly obvious, says Wagner, you can lose your focus on the big picture.

Required: 1. a. Using the strategic planning process discussed in class, describe three core problems to be solved by Millennium? b. Explain four potential alternative solutions to the problems identified?