The rise, fall and rise again of Rough Trade

It's a brave man who opens a bricks-and-mortar record shop in 2013, especially one that occupies around 15,000 sq ft of real estate in Brooklyn's Williamsburg district. According to Nielsen SoundScan, sales at US independent record shops have fallen 36.1% in the last five years, while rents have soared, causing New York to lose such cherished institutions as Bleecker Bob's, Dope Jams and Fat Beats.

Rough Trade's co-president, Stephen Godfroy, is, however, bullishly optimistic about his new New York flagship store, having previously defied a plunging market with the 2007 launch of Rough Trade East on Brick Lane in east London.

"Rough Trade East was going against the grain," says Godfroy. "It was based on instinct and feedback from the trade and public, not metrics. We thought if we built it people would come, and that's exactly the same in New York."

Godfroy admits: "It's been a testing process." The shop has been four years in the making and would have been launched much earlier if not for various setbacks, including Hurricane Sandy. Rough Trade NYC, housed in a former film prop warehouse at 64 N 9th Street, is three times bigger than Rough Trade East. Opening on Monday, it contains a café, bar, exhibition space and 250-capacity live performance room as well as a vast array of records and books. (Disclaimer: the Guardian will be curating its own space within the store.)

"We've learned how what is ostensibly a store can be so much more," says Godfroy. "Visiting us is like visiting a cultural hub; it's not simply a place for purchasing. There's a relative lack of places [in New York] that allow people to hang out in an environment that celebrates the art, not the commodity."

The idea of the record shop as cultural hub echoes Rough Trade's modest beginnings in 1976. Two years earlier, founder Geoff Travis abandoned a career in teaching to hitchhike around America and became a regular customer at San Francisco's beatnik hangout City Lights. "I loved the fact it was an environment you could sit in," he says. "You could stay all day as long as you didn't spill coffee on the books. It was so different to anything in London, which was like a Wimpy bar: the lights were too bright and the seats were too uncomfortable."

A friend, Ken Davidson, asked what Travis planned to do with the hundreds of records he had collected on his travels and suggested they open a shop in London. Finding cheap premises at 202 Kensington Park Road, west London, Travis installed a secondhand Jamaican sound system, hand-picked the stock and ran the business on co-operative principles. "I wanted a place I could go to every day where I could listen to music," he says. "It was that situationist thing: turn your work into your play. We were living in squats so all that mattered was having enough money to buy meals and go to gigs. Imagine trying to do that in London today."

After a slow start Rough Trade took off with punk rock, becoming so busy at weekends that the staff had to hire a bouncer, who also fended off local skinheads. The shop had in-store appearances by the Ramones and Talking Heads, employed members of post-punk groups the Raincoats and Swell Maps behind the counter, and attracted customers as hip as Patti Smith.

"She came over and I thought, 'This is fantastic! Patti Smith's going to say some words of wisdom,' " Travis recalls. "And she just said, 'Where can I score?'" She didn't have to go far. "It was a much dodgier neighbourhood," says Travis. "You wouldn't wander down All Saints Road on your own unless you were going to score. Of course, it's full of American bankers now."

Rough Trade spawned a distribution network and record label (signings over the years include the Smiths, the Strokes and the Libertines), which gradually diverted Travis's energies from the shop. When, in 1982, the larger business's financial problems threatened the survival of the shop, it was taken over by three devoted employees who bought the stock for £7,000, paid themselves only what they would have got on the dole, relocated to 130 Talbot Road, and revived the shop's fortunes. Two of the trio, Nigel House and Pete Donne, still work there.

Rough Trade operated a second branch in Covent Garden for almost 20 years but branches in Tokyo, San Francisco and Paris all closed. The failure of the Paris outlet a decade ago brought the whole company within days of collapse before new backers saved the business and funded the second store's move to a converted brewery on Brick Lane.

Rough Trade East's launch six years ago sounded a rare note of optimism at a time when rising rents, declining demand for most physical formats and competition from online retailers had left many British towns without a single independent record shop. HMV, which survived by the skin of its teeth this year, is the last of the high street chains.

Rough Trade accepted it couldn't compete with online retailers on price and chose to emphasise the social aspect of record-shopping, from in-store performances to expert recommendations. Unlike the big chains, each branch is free to experiment and take risks. "There are people who would rather go to Rough Trade on a Saturday and spend £10.99 instead of £8.99 on Amazon," says Nigel House. "It's fun going shopping. I just want a record shop I'd be happy in."

Pundits have been predicting the death of the record shop for years, yet many of the best endure and, in the case of Rough Trade, even expand, helped by the resurgence in vinyl sales and international events such as the annual Record Store Day, which celebrates the independent sector. Even though the internet means music fans no longer need to visit a shop, it seems many still want to.

Thirty years after cutting his ties with the shop, Geoff Travis has rejoined the business as a shareholder in the Brooklyn branch. "I'm convinced people don't want to spend all their lives in front of the computer," he says. "It's important to walk in off the street and take the plunge and discover a new world. Record-buying people can be very antisocial so I think it's good for them to find themselves in a social space sometimes."

Black Friday, the next Record Store Day event, is on 29 November