Rose Regroups

Like the once-vaunted Kroch’s & Brentano’s, Chicago retailing legend Rose Records is undergoing a wrenching downsizing and reorganization. The 63-year-old chain is reeling from the effects of cutthroat price wars, overambitious expansion, and an inability to adapt in a rapidly changing retailing landscape. Within a few weeks all that will remain of the chain that as recently as a year ago numbered 49 outlets will be four stores: the flagship operation at 214 S. Wabash and stores in the west Loop, Hyde Park, and Lakeview. Those four will continue under the management of Jim Rose, who has long been a fixture at the Wabash store and helped develop the impressive classical music department there.

Operating three former Rose Records outlets in Evanston, Downers Grove, and Milwaukee will be Rose’s cousin, Jack Rose (their fathers founded the company), and Dave Roger, an executive with Sterling Ventures, the umbrella company the Rose cousins established before they started expanding the chain in the early 80s. Those three stores will have a new name that is expected to be in place within three weeks. Many of the now-shuttered Rose Records outlets were in malls, where the chain negotiated its way out of leases. Neither Roger nor Jack Rose returned phone calls. But Jim Rose says the decision to split up the remaining stores and rename some was in part due to his desire to emphasize classical product in ads.

Rose is quick to attribute a large part of the chain’s woes to the arrival of Best Buy and Circuit City. Chicago is one of a handful of markets nationwide where the two large electronics chains are in direct competition with each other. In circulars distributed in last Sunday’s Trib, Circuit City advertised almost every compact disc in its stores at “$11.88 or less!” while Best Buy offered the Eric Clapton album due out this week at $9.96, below the disc’s wholesale cost. Offering new releases at below-cost prices has been a key marketing ploy at both stores, which hope that once customers are in the stores they’ll also buy other, bigger-ticket items. It’s sales of those items that give the stores the cushion to sell CDs below cost.

Rose says his stores can’t compete with that kind of operation. In an attempt to stem loss-leader pricing and give smaller stores a chance to compete effectively, PGD, a major record distributor whose stable includes Motown, A&M, Island, Polygram, and several other classical labels, announced that as of September 6 it would suspend business for 90 days with any retailer selling albums at less than wholesale cost. But as of late last week no other major distributor had announced such a policy. And local record industry sources are skeptical that others will follow suit, which could ultimately weaken the impact of PGD’s move.

Though pricing certainly contributed to Rose Records’ predicament, other factors were involved as well. Sources say some distributors were holding up shipments to Rose stores because of bill-payment problems and were demanding payments on a week-by-week basis. Many of the stores opened during the chain’s expansion were in suburban malls with high traffic flow, but rents at those locations were high, and spaces too small for the stores to maintain the wide selection Rose was known for. Says one store manager: “I’d rather have the reputation of low prices [than the location].” When Rose moved into outlying markets like Milwaukee and Madison, where it wasn’t as well-known, it had trouble capturing a significant market share. Selection in all the stores diminished as the chain’s finances deteriorated. One source claims Rose’s rapid expansion was intended to make the chain an attractive buyout candidate for major record retailers looking to enter the midwest. Jim Rose says the expansion was intended to “decrease overhead.”

More importantly, say industry observers, Rose didn’t take aggressive measures quickly enough to compete with newcomers like Best Buy, Circuit City, Tower Records, and now Blockbuster Video, which has opened an all-music store down the street from the Evanston Rose–eerily, on the site of a former Kroch’s & Brentano’s. While attempting to compete on pricing with other record retailers, both Tower and Coconuts also have expanded their product lines to include videos and related merchandise. Tower now offers a range of trade books (many sold at 20 to 30 percent below list price), videos (for sale and rental), T-shirts and other clothing, and a wide selection of newspapers and magazines from around the world. Notes Phil Myers, manager of Tower Records in Lincoln Park: “From my point of view [the Rose stores] simply didn’t try to improve themselves.” Jim Rose says his chain never made a major expansion into such merchandise because of a lack of expertise in those areas.

Though it’s unclear what approach Jack Rose and Dave Roger will take with the three renamed stores they will operate, Jim Rose says he plans to pursue a strategy of widening his selection and maintaining good service. “We’re in the process of restocking our stores now, and we’ll have the same staff that has been so helpful to customers in the past.”

Department of Overdue Accounts

The League of Chicago Theatres has been left holding a bill for $15,000 for an International Theatre Festival of Chicago ad placed in the Trib through league offices. The hit comes just as the local trade association was climbing out of a difficult financial situation that started back in the late 80s. League executive director Tony Sertich says the organization has deferred some internal expenditures to cover the unexpected bill while it waits to see if the theater festival can make good on the debt. The league’s normal policy is to demand payment up front for ad placements, he says, except with a few larger organizations such as Steppenwolf, the Goodman, and university-affiliated groups. The public relations agency Cheryl J. Lewin Associates is also out what agency president Cheryl Lewin says is “several thousand dollars” in fees and out-of-pocket expenses for work done on behalf of the festival. Though Lewin says she has known festival director Jane Nicholl Sahlins personally for a number of years, she only found out she would not receive full payment for her services when she got a xeroxed “dear vendor” letter informing her of the festival’s financial problems. Adds Lewin: “We’re a small company, and I can’t afford to take a hit like this.”

Art accompanying story in printed newspaper (not available in this archive): photo/Nathan Mandell.