As digital book sales continue to gain traction, the comparison between bookstores and record stores has gotten closer. Coupled with the comparisons comes an implicit warning that bookstores could share the fate of Tower, Virgin, and HMV—record stores that are all gone. While the number of independent record stores has fallen dramatically to just a couple hundred, some are more than holding their own. To find out how one indie is doing it—and also beating the odds on maintaining a profitable regional chain, PW contacted Newbury Comics, headquartered in Boston, Mass. The indie chain, founded by two MIT students in 1978 with $2,000 and a comic book collection, is coming off the third most profitable year in its 34-year history, is debt-free, and has $11 million in the bank. That’s not because music sales have suddenly grown—annual CD sales are down close to 75%, to $10 million, from a peak of $40 million, according to CEO and cofounder Mike Dreese. “We keep morphing,” he says. “It’s always morph or die.”

For Dreese, “the key is not seeing yourself as a music seller [or bookseller]. You’re a merchant. Our name is Newbury Comics. Right now, comics are 2% of our sales. The first major morph happened in 1980. We went from 90% comics sales to 90% music sales in two years.” And the stores continue to change, moving from independent records in the 1980s to CDs, then DVDs to pop culture/lifestyle, including Tom’s Shoes. With next month’s closing of Newbury Comics’ one-off clothing store, Hootenanny, in Harvard Square, Cambridge, Mass., the company will have 30 stores. Newbury Comics outlets will pick up the slack from the Hootenanny closing and carry more clothing and fashion, as those areas become a more significant part of the retailer’s product mix. Last month, the company sold $500,000 worth of T-shirts, and together T-shirts, shoes, and jewelry account for 23% of sales, up 80% from a year ago. Newbury Comics also launched a fashion Web site,, in spring 2010, which is at the break-even point.

Along with adding more fashion items—think punk Sephora with music and attitude—Dreese is relocating stores from strip malls into larger, 10,000-sq.-ft., spaces in destination malls. “Just like on the Internet, you want to be where the eyeballs are,” says Dreese, who acknowledges it’s a gamble. “We could be dark in four years.” Last fall stores in Natick and Braintree, Mass., made the move to new locations and a third store in Portland, Maine, will this spring.

Newbury Comics has never been about a single category. The stores have long had a mix of everything from the latest graphic novels and comics—business has markedly improved since Borders closed—to Buckyballs, Squirrel Underpants, Obey hats, hair dye, used DVDs, and vinyl. “Newbury Comics is predicated on the Peter Pan principle, for people who’ve never grown up. We’re very politically incorrect: any idea, whether it’s funny or obnoxious or banal. We sell pinup posters to frat boys, and angry speech [on albums and discs]. If we make a buying error, we just sell it down. The word I do not allow in this company is ‘curate,’ ” says Dreese. “I prefer a big tent. We try to select things that are commercially viable. We’ve always been a product-driven company, and pig pile for three to nine months.”

But even with intense marketing on Pinterest and 400,000 social media fans, sales through its bricks-and-mortar stores account for only a portion of Newbury Comics’ business. Dreese anticipates a run rate of $54 million this year. Last year the Web brought in $23.7 million, up from $11.7 million in 2010. Among Dreese’s dirty little secrets: “the vast majority of our sales are through Amazon and eBay.” This is the second time around for Newbury Comics online ( “We were on the bleeding edge, and we bled,” says Dreese, referring to the company’s initial foray online as the first hard goods customer for OpenMarket. Between 1995 and 1999, Newbury Comics lost more than $1 million before giving up on trying to be the Amazon for music. It took another four years to wade back in. This time around it’s working. With only 20 staffers devoted to online operations, the company is bringing in $1.2 million a month just sourcing media, CDs, and DVDs to Amazon.

“On the music side,” says Dreese, “I run into too many martyrs. I’m not a Michael Jackson fan, but my favorite song from Michael Jackson is ‘Man in the Mirror.’ You have to do 50% of things differently.”