"We will buy everything that comes through the door," boasts Jeff Clark, owner of Mojo Sounds, the newest entry into the flailing used CD industry.
Wham!? MC Hammer? Warrant? Everything?
"I'm in. Yes, everything."
For Clark, that's not a naive statement. He was the local entrepreneur who created, owned and operated the San Diego-based Music Trader chain, which, at its peak, entailed 16 successful stores.
In February of 1999, Clark sold all 16 stores to Oklahoma-based company, CD Warehouse. Clark initially stayed on as an employee, paid what he calls "a very hefty salary" to work a maximum of four days a month. As part of the deal, however, Clark signed a five-year non-compete agreement, which meant that he could not open another used CD store in the area.
Clark says that almost immediately, he offered to buy himself out of the non-compete agreement, but CD Warehouse wasn't interested. So Clark created the Movie Trader chain-a used movie resale company based on a model similar to Music Trader's.
Establishing a pattern, Clark later sold the successful chain of Movie Traders to Portland-based Django's/Moby Disc. After the new owners couldn't repeat Clark's success, the company filed for bankruptcy protection and sold the Movie Traders back to Clark.
Meanwhile, on the music side, CD Warehouse was also experiencing problems. Caught in the firestorm of file-sharing and the recent national drop in CD sales (11 percent in 2002), they began shutting down Music Trader locations early last year. In July, they too filed for bankruptcy protection.
"Now there's seven [stores left]," Clark says. "So they were closing Downtown, Oceanside and [Pacific Beach] and I approached them about the possibility of taking over P.B. and getting rid of my non-compete agreement."
Clark's non-compete agreement expired last Tuesday, however. And he worked a deal with CD Warehouse to purchase the P.B. location of Music Trader. He plans to close down his P.B. Movie Trader, transferring all product and employees over to the new store, which will be called Mojo Sounds.
"I used to believe that it made sense just to have one product in the stores, that being CDs or whatever. But I now believe in this environment it probably makes sense to have the CDs, DVDs, videos and games all in one setting."
Clark will also be changing the name of his Chula Vista-based Movie Trader to Mojo Sounds, adding CD product there as well. At each store, both of which he plans to open "no later than March 1st," he will offer 30,000 titles.
The economic climate doesn't appear to be in Clark's favor. Music Trader went bankrupt. Tower Records has come close-many times. The original owners of Off the Record just sold. National CD sales continue to drop. So what gives Clark the idea that he can succesfully re-enter the used CD business after five years?
"I read Billboard magazine every week and I'm not naive to the horrendous news," Clark says. "But I believe that once the people come in and see what exciting product we have at the price we'll have it at, that it'll become more than a store-like it was. It'll be a place that they look forward to every week."
One has to wonder if Clark isn't driven more by emotion than economic clarity-to save the company he created. "There's something of an emotional attachment," he admits. "But I authentically believe in the viability of it as well.
"[CD Warehouse] cut the advertising in half right off the bat when they took over," he says. He also points to the fact that the company didn't actively search out liquidations and other bargains, relying entirely on what customers brought into the store. Even so, Clark says, "they turned down a lot of product, and they were always low on money.
"The stores that are open now haven't been buying for three months. We never, in 12 years, had one day when we didn't buy everything that came through the door. It creates an enormous diversity and enormous quantity and that works for us."
Clark also believes that the atmosphere of the Music Traders suffered under CD Warehouse's management. "I don't think the family vibe that we tried to have remained after we sold, unfortunately, although I was assured to the contrary."
Save for the Pacific Beach location, the remaining assets of CD Warehouse (including all other local Music Traders) were purchased by the company's former CEO, Christopher Salyer.
"The former CEO who had taken it into bankruptcy resigned and bid for the assets and they accepted his bid," says Clark, audibly perplexed. "Whatever sense that makes, I have no clue."So with Mojo Sounds, the once non-competing Clark has entered the competition again. And he's buying everything.