Tower Records’ new owner plots return to retail

May 3rd, 2007 by Barry Caplan | Tags: , , , , , , , , , , , , ,

The Sacramento Bee reports on the revival of the online arm of recently bankrupted and liquidated Tower Records.
By DALE KASLER

Sacramento Bee
Tuesday, May 01, 2007

In an industrial-looking office in West Sacramento, Calif., a skeleton crew operates Tower Records’ still-functioning e-commerce business, Tower.com.

Tower.com represents the last remnant of Tower’s once-great retailing empire. It could also be the launch pad of a Tower comeback.

Caiman Holdings Inc., a Montreal-based Internet merchant that is buying Tower.com, is going to try to reinvigorate the Web site using a team of employees based in Sacramento.

And in a potentially tantalizing development, Caiman is mulling the idea of opening some stores under the Tower name, said George Scarlett, a former Tower executive who is Caiman’s newly hired director of entertainment. Because it also purchased Tower’s trademark, Caiman has the right to open Tower stores.

It’s possible “you’ll see the Tower shingle out there again someday,” Scarlett said. “It’s just hard to know in what form.”

Didier Pilon, Caiman’s founder and director, told the trade publication Billboard that stores could open in San Francisco, Los Angeles and New York in nine months.

But opening new stores, given the difficult climate for music retailers, may prove troublesome. Scarlett said it’s far from certain that any new stores will open.

“We’ve had very superficial discussions, just spitballing some ideas,” Scarlett said.

The online plans are more settled. The e-commerce business will operate temporarily from the current Tower.com office, located around the corner from Tower’s headquarters in West Sacramento’s warehouse district. Eventually the plan is to move somewhere else in the Sacramento area, employing an estimated five to 20 workers, he said. Two other former Tower managers have already signed on, he said.

Caiman decided to keep the operation in Sacramento because “they feel a kinship and an interest in the Tower brand,” Scarlett said. “They’re very aware of the history that’s involved.”

Tower.com will be run separately from Caiman’s own e-commerce business, most of which is conducted as a third-party merchant selling through Amazon.com. Caiman tends to traffic in hard-to-find music and other items, “the kind of stuff … that Tower really used to specialize in,” Scarlett said.

Tower’s 89 stores in the United States were liquidated in December. The Web site, which has stayed in business, was originally sold to a San Francisco e-commerce company, but that deal fell apart and a new auction was held through U.S. Bankruptcy Court. Bidding for both the Web site and trademark, Caiman won with a $4.2 million offer.

The new owner is acquiring a name that still resonates with the public. That will help Caiman revive the business.

“That name is so much a part of the music scene to this day, from a legacy standpoint,” said Lynn Upshaw, a brand consultant based near San Rafael, Calif.

Caiman has its main offices in Montreal and its warehouse in Miami. Its legal headquarters is in the British Virgin Islands, a known tax haven. Pilon, the company’s founder and director, is a French entrepreneur who was once a supplier to Tower’s stores.

In the 1990s Pilon ran a world-music wholesaling company based in Rohnert Park, Calif. Tower “gave him a shot,” signing his company on as a supplier to its stores, Scarlett said.

That company eventually became Caiman. In 2002, it filed for Chapter 11 bankruptcy protection, blaming a legal tussle over a copyright issue and a water-main break at its Miami facility, which crippled the business. After emerging from bankruptcy, Caiman reinvented itself as an e-commerce retailer, Scarlett said.

Pilon is “a well-financed entrepreneur who knows what he’s doing,” Scarlett said. “This is a very strong, stable company.” Pilon couldn’t be reached for comment.

Scarlett acknowledged that Caiman’s sales on Amazon have generated an unusually high number of complaints about customer service. Caiman is working to improve its service, Scarlett said.

“They are going to do right by the customer,” he said.

The Tower.com site will have the broad selection for which Tower was known, and will probably ramp up its book offerings, he said.

In addition, the company wants to create a diverse network of customer product reviewers, creating the sense of community that has been a big part of Amazon’s success.

“I think the dot-com is going to be a big hit,” he said. “We’re not going to do Amazon numbers, but we’re going to be a respected player.”

It may take a lot of work to make Tower.com a big hit. The company’s Web site has always been well regarded but not a major factor in online music retailing. With the bankruptcy and liquidation, Tower.com’s traffic has fallen 56 percent in the past year, according to comScore Inc.

Nevertheless, analyst Sucharita Mulpuru of Forrester Research Inc. said Caiman has a chance at making Tower’s Web site a success.

“As long as they have a good user interface and a breadth of product, they’ll be fine,” she said.

(Distributed by Scripps Howard News Service, www.shns.com.)

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