THERE is an air of Trotters Independent Trading Company about Recordstore’s office in west London. Boxes of CDs, records and T-shirts clutter the floor and the only empty space — the meeting room — is about to be turned into a makeshift stock room. There are even two golden Buddhas in reception.

But there the comparison with Del Boy ends — there are no big cigars, sheepskin coats or flash jewellery here. This is a company that runs a tight ship but is struggling to keep up with the pace of growth.

Being thrifty is not something you normally associate with the record industry but, as Russel Coultart, chief executive of Recordstore, explains, this approach allowed the company to survive when the dotcom bubble burst. “We’ve had prospective investors come in and say, ‘we wouldn’t consider backing you if you were flashing the cash’,” he says.

Coultart set up www.recordstore.co.uk in 1997 with co-founders and fellow directors Simon Moxon and Tony Matthews, and sleeping partner Laurence Cook, to sell CDs and records online for his own small, independent dance- music record label. For Coultart it was a marriage of his love of music (he used to be a sound engineer) with his business acumen (he started working life as an insurance broker).

Within a year Recordstore had built mini stores for five other small record labels and now runs 200 for artists and bands including U2, Moby, Travis, Robbie Williams and Paul Weller. It also has deals with leading labels such as Universal, Warner Brothers and Ministry of Sound to build and run sites for their British artists.

Recordstore sells a comprehensive range of the artists’ music and merchandise — from tour T-shirts to calendars — with its focus on attracting the devoted fan rather than the casual consumer. It handles the transaction and organises distribution and shipping.

“We don’t compete with Amazon or HMV,” says Coultart. “We sell items that the stores will not stock because our customers want more niche products and not the latest releases.”

Online sales of music have doubled in the past two years to 5.5% of total sales, with one recent single getting into the top 20 on the back of online sales. Last year, Recordstore became one of only six e-tailers whose sales are included in the overall music charts.

Despite this growth, the company has made a loss in each of the past three years. Between 2000 and 2002 it received £230,000 of investment from two venture capitalists to fund initial development in return for 30% of the shares. Coultart, his three co-founders and the staff own the rest.

“The investors deliberately undercapitalised us so we have had to grow the business organically,” he says. “But because we’ve never had a lot of money we’ve never squandered any.”

In 2000-1, Recordstore lost £130,000, and in 2001-2 £90,000. It broke even last year and is projecting a move into the black in 2003-4.

During those tough periods the directors paid themselves “less than most of the staff”, says Coultart. Losses were bad enough for workers to take a pay cut. “But none of them has left, wages have gone back up and they have been given 3% of the shares,” he says.