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"I see our future continuing to grow in our predominant products... There is every reason to expect this expansion to continue."

PUTTING THE AL IN ALLIANCE

President Tuchman Looks to Take One-Stop Into the Future
AEC President Alan Tuchman gives HITSMark Pearson the retail rap.

Alan Tuchman first signed on with Bassin Distributors One-Stop in 1988 and over the last 16 years has watched the company go on a roller coaster ride worthy of a Six Flags amusement park. In the mid-’90s Bassin merged with CD One-Stop and Abbey Road Distributors, changed its name to Alliance Entertainment, bought labels, independent distributors, database content providers and a host of other enterprises, only to ultimately file Chapter 11 bankruptcy. But AEC fooled everybody and became not just the only one-stop in history to emerge successfully from Chapter 11, but the largest distributor of its kind in the nation. Tuchman has now ascended to the presidency, filling the large shoes of Eric Weisman, who left last year to head the new Musicland team. What are Tuchman’s plans for the mega-weight entertainment provider? Darned if we know, but someone had to ask.

Your background has primarily been in wholesale, one-stop and rack-jobbing. What do you see as your greatest challenge in running Alliance’s other businesses—IDN, DOD (Digital on Demand) and AMG?
Our challenge is to fully develop all of our assets around our wholesale group. DOD and AMG are "best of breed" in their businesses. AMG continues to be the leader in licensing data and has entered into a new business which is media recognition which has many more applications. DOD has expanded their installations over 50% year to year. Their opportunities are multiplying. Alliance offerings encompass content and delivery as well as product distribution and fulfillment. As a company we have grown substantially over the last few years.

Aside from independent distribution, where else are you seeking growth?
Our VMI [vendor-managed inventory] business is extremely hot right now. It’s become a core competency for our group. We are managing departments of a very diverse group of retailers. All these different brands allow us to go into places where the foot traffic is strong, filling a need which enables us to customize programs. We’ve also been successful in dominating certain sectors, like the consumer direct fulfillment business and the independent mom and pop shops. Due to our long history with these independent retailers, we are probably more emotional about their continued success. They are vital to the music industry. Another area of growth for us has been enabling Barnes & Noble to continue their success in developing their music and video departments.

What are some of AEC’s core strengths that you’ll keep in place? Where do you see room for improvement?
We’ve always been successful at distribution and fulfillment. Those areas will continue to develop and to grow exponentially. VMI is now a core business. And on top of that, we’ve already started to branch out into managing distribution centers for other businesses. It’s the same systems we use at Alliance, but are now able to leverage to run other distribution centers, which becomes, for us, another new revenue stream.

AEC’s future is in vendor-managed inventory, among other things, then?
I see our future continuing to grow in our predominant products, which, right now, are DVDs and CDs. There’s no reason why we couldn’t start to adopt new products with the same abilities and distribution capabilities. Among those on our VMI roster are Sears, Meijer, Toys R Us, CVS Drug Stores, BrandsMart (a very strong South Florida electronics retailer) and a hybrid situation with Barnes & Noble. Those brands are all experiencing success with our programs and we’ve been able to evolve from total dependency on specialty music retailers to these general retailers. There is every reason to expect this expansion to continue.

Who do you see as your competition? Do Handleman & Anderson more closely match up to you now, rather than traditional one-stops?
There’s a wide variety of what I’d call competitors or suppliers. H&A do a very good job for a specific couple of customers at a very, very large scale. We have thousands of customers for whom we must perform a broader range of services, with an extremely large SKU [store-keeping units] count. They really are different businesses to a certain degree. Although we do play in the same VMI world, as far as managing SKUs, there are suppliers who can become competitors, or partners. That’s something we have to keep an eye on.

Many suppliers are now going direct. How does that affect you?
As these consolidations continue, there’s only a certain level of service they will be willing to extend. Still, Alliance’s business continues to grow, in many different fashions. There’s no set recipe. Customization is important but flexibility is probably the most important factor. You’ve got to be nimble and flexible to be able to adapt to most environments. That’s where we’ve really been able to show our strengths.

How do all the mergers and acquisitions affect the wholesale business?
Nobody wants fewer suppliers and fewer customers. That situation can always be troublesome. But there’s also opportunity as these large suppliers consolidate and merge, because they can only do so much. We have seen the fulfillment and manufacturing arms of some companies sold. The large suppliers must rely more heavily on wholesalers to do a lot of the work for them. I see a single identity for them and the opportunities will follow.

Do you see yourself stepping into one of those roles they abandon?
If it made sense for us to be able to grow and continue our business. Flexibility is the issue. At Alliance, we have to assess the opportunity, make it work for us and then build the business accordingly. It becomes part of our core business, depending on how successful we are. We have been able to evolve from being a predominately small supplier to becoming a dominant player in the recent CDF and VMI growth. We have been very fortunate to have an extremely talented team of people who have worked together for a long period of time. This senior group of professionals has the ability to keep their pulse on what is happening in the industry and to have the vision to expand our growth into other areas.

You’ve been with Bassin, which later became AEC, since ’88. As head of the one-stop division, what was it like going into Chapter 11 and coming out successfully, which a one-stop had never done before?
It took a combination of loyal employees, management, customers and suppliers to have confidence in our abilities to not only turn the company around, but to support us in becoming a dominant player in the industry. The suppliers wanted diversity and variety in the one-stop business at that time. They did not want a single supplier. Competition is healthy in any business and choices are vital.

What does the future hold for AEC?
We’re going to continue our growth and it will develop fundamentally from the core. The core is our distribution and fulfillment business and now we are expanding with VMI and new product lines. I believe we will add a new dimension with a wide variety of retailers and expanded product lines as we continue to evolve. I don’t see any limits to our growth. We will also continue to expand both AMG and DOD and adapt their capabilities as technology continues to drive our industry, content and delivery systems.

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