If you want to lose a lot of money, current wisdom suggests that opening a record shop would be a good way to do it. Better still, open the biggest music-only shop in Britain and spend a fortune on fitting it out with a top-of-the-range PA system and bespoke furniture created by one of Britain’s top architects – exactly what Rough Trade plans to do when it opens its new, 5,000-square-metre branch, designed by David Adjaye, in east London later this month.

The plan may seem perverse.

From big chains such as Music Zone, which collapsed in January, to tiny independents such as Covert, in Brighton, which closed its doors last month, record shops are failing across the country. Sales of CDs have dropped by 11% over the past year, as both legal and illegal downloading continue to grow. HMV, Britain’s biggest music retailer, has issued two profits warnings in the past year, and even Tesco, with the second biggest share of the music market, has admitted that it doesn’t make money on the CDs it sells. But the Rough Trade team is confident the store will succeed.

Rough Trade’s store director, Stephen Godfroy, believes that the market is increasingly polarised between supermarkets and music specialists, with high-street record shops losing money by being stuck in the middle. He hopes the new Rough Trade shop will attract richer or more committed music-lovers who treat record shopping as a pastime, enjoy owning albums as artefacts and are willing to pay more than supermarket prices for hard-to-find records sold by knowledgeable staff.

There certainly seems to be little future in selling cut-price music in large volumes. Although Tesco rang up record profits last year and increased its share of the music market, it did so by squeezing prices so hard that it lost money on the CDs it sold. Its chief executive, Terry Leahy, has even predicted that the music business will “disappear in its current form”.

HMV estimates that physical music sales in the UK will decline in value by more than a quarter in the next three years. Its marketing director, Graham Sim, has hit out at supermarkets and their price cuts, saying: “Their loss-leading strategies are ultimately aimed at boosting the food sales they make their margins on, but serve only to devalue the music formats.”

Both HMV and Rough Trade hope to beat competition from supermarkets and the internet by making their shops destinations in their own right. HMV customers of the future will sip smoothies at “refreshment hubs” while using instore computers to play games, surf the internet and download music. Rough Trade shoppers, meanwhile, will be able to pick up a coffee at the store’s cafe before sitting down on comfy chairs to take advantage of free WiFi and finally have a look at the records. To top this off, both companies will woo customers with regular, free instore gigs.

The Rough Trade plans also echo the strategies that have made Fopp a success. The chain, which started out as a Glasgow market stall in 1981, has 113 branches across the country, and has seen sales shoot up over the past six years. The company targets “50quid man”, who is rich enough to buy a couple of CDs, a DVD and a book on a single shopping trip. The new Rough Trade store is in a prime spot to attract similar browsers with plump wallets. On a busy street lined with bars and clothes shops off fashionable and rapidly gen-trifying Brick Lane, it is close enough to the Square Mile to draw in well-paid City workers as well as affluent young locals.

But where Rough Trade hopes to have an edge on Fopp and other high-street shops is in the detailed knowledge and expertise of its staff, and in the reputation of the 30-year-old brand, founded in west London and fuelled by the success of the record label, which launched the Smiths and the Fall, but is now separate from the stores. Godfroy says: “Rough Trade’s style of music retail is all about relationships with the customer over the counter. Our staff are knowledgeable enough to give authoritative recommendations. People often leave with records they hadn’t planned to buy. In a high-street entertainment store, by contrast, you tend to buy what you’ve always bought and ignore 90% of what’s on offer.”

But Mike Oliver, manager of Smallfish.co.uk, an east London record shop that closed last year to move online, believes expert staff are becoming less important. Oliver says: “When I first started working in a record shop, 15 years ago, people used to come to me for information, and that gave us an advantage over the high street. If you ask someone in HMV to recommend something, they won’t have a clue. But now customers get all their information and recommendations on the internet. That used to be one of the things I enjoyed about running a record shop – finding great music and telling people about it. Now I do that through the website.”

Godfroy is confident that Rough Trade customers will carry on buying albums, rather than cherry-picking individual tracks to download, a problem widely blamed for declining sales of chart music. “An album is a body of work, not a collection of greatest hits,” says Godfroy. “Listening to it as a whole is an experience in itself. It grows on you. It’s something you can get to know. It represents different aspects of what an artist is doing. People still want that.”

And a revival in vinyl sales suggests that there may be a future for music sold as a physical arte-fact. Six times more 7-inch singles were sold in 2006 than in 2001, and with their current single, Icky Thump, the White Stripes have achieved higher weekly sales of 7-inches than any band for 20 years. The market may still be small and based on nostalgia, but Rough Trade is in a good position to tap into it, as it already sells 20% of its music on vinyl.

If the new store fails, it won’t be the first time that a bold plan from Rough Trade has come to grief – the company’s attempts to open branches in Tokyo, Paris and San Francisco foundered. And success for the store will not herald a revival for music retail, any more than the success of farmers’ markets suggests that supermarkets are on the way out. But the good news for music-lovers is that opening a specialist record shop with a well-respected brand, expert staff and a good atmosphere may not be the suicidal plan it seems at first glance.

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