Music China 2008: Strong traffic at Asian event

Despite the worst week ever recorded in the worldwide economic markets, the Music China and Pro Light & Sound Shanghai Show, which took place October 9-12, bucked the trend and provided a strong flow of buyers and reports of positive business.

In this bustling metropolis of nearly 20 million people, the burgeoning middle and upper classes were widely visible in their Audis, Mercedes Benz, BMWs, and especially Buicks, which have a special cache in China. Shanghai is undergoing a tremendous economic growth and you can see new bridges, roads and buildings being built throughout the city. There is a unique blend of traditional Chinese history offset by ultramodern, western style skyscrapers that highlight the landscape and make a powerful statement that Shanghai is on the cutting edge both economically and culturally.

International Presence
According to a number of exhibitors, the mainland Chinese market represents one of the largest opportunities for the musical instrument industry in the coming decades. The show, sponsored by Messe Frankfurt, was held at the Shanghai New International Expo Centre. Over 1,100 exhibitors were visible at the Music China show and 300 exhibitors were present at the ProLight show, which continued a six-year pattern of growth.

Exhibitors from over 22 countries were present – pavilions from France, Germany, Italy, Spain, Austria, Czech Republic, Taiwan and the UK, were among those set up at the show. According to Veronique Noury, market manager of the French Agency for International Business Development, the French pavilion featured 23 companies, more than at any time during the past four years. Franck Bichon, of BG Intl., reported that his company is selling more products into the Chinese market and is building a network of distributors who can support dealers in the Asian markets. Bichon also expressed some concerns about gray market goods reaching China as currency fluctuations affect the costs of goods. Additionally, Udo Heubeck from Meinl mentioned a strong flow of South American distributors who were also in attendance.

NAMM in China
In addition to a variety of concerts, seminars, drum circles and other events, NAMM’s reach was felt at the Music China show as they sponsored a variety of NAMM University sessions for both domestic Chinese dealers, as well as the international attendees. One particularly pertinent session was focused on the impact of weakening economies on the global MI industry, moderated by NAMM’s Betty Heywood. It featured such luminary international industry leaders as Huang Weilin, chairman of Guangzhou Pearl River Piano Group; Jon Gold, senior VP of Fender Musical Instruments; Werner Husmann, director of Marketing and Sales, Steinway & Sons; Joe Lamond, chairman of NAMM; Wu Hsieh, president of KHS; and Cheng Jiantong, president of Roland Shanghai.

There were a variety of points brought up by these leaders and Wu Hsieh suggested that the current economic cycle is now coming to a low and that there’s not much that the industry can do to change that reality. However, he did indicate that the primary function that any company needs to address, especially during a downturn, is the management of cash flow, which is like the blood flow to a human being. Managing cost must be well-controlled during both down and up cycles and a company must stay focused on their core business, as the music industry seems to suffer a delay in recovering than the general economy.

John Gold of Fender discussed the value of what our industry offers, something he calls, “human happiness, which is good for the soul. It’s essential to protect your brands and reputation even when times are tough. Consumers will always find the money to make them feel better and in particular, people will buy blue chip brands as they recognize the value that is intrinsic in those products.” He also encouraged retailers to help consumers enjoy the experience of buying.

Joe Lamond indicated that “as you look across all categories and countries in NAMM’s history, they have seen many different downturns and that overall sales have dropped along with NAMM membership.” Joe’s personal experience while working at Skip’s Music during the early 1980s recession was that they paid their bills using a dartboard. Each month a different supplier was paid and they did their best to control their cash flow. As the general economy improved, he has seen new growth which exceeded previous highs and, over NAMM’s one hundred year history, there has been a trend of overall growth. There are many important reasons to be optimistic about the future of the music industry, as there is more research than ever linking improved test scores, overall health, and a variety of other benefits for music making. The adult recreational music making market is ready for our products and represents a significant growth area in the USA and around the world.

Lauren Keiser of Carl Fischer Music Publishers with MMR’s Rick Kessel

According to Werner Hussmann of Steinway & Sons, in the past the company sold 70 percent of their instruments to professional musicians but now 50 percent are sold to people who enjoy music making. The industry must continue to work closely with educators, as there is a common goal of offering music education to people who love music. To enlarge the customer base is day-to-day work with retailers to help them find new customers as part of a long-range strategy.

In another session, Harvey Levy of Levy’s Leathers in Canada presented a session to Chinese dealers about merchandising accessory products called “Accessories: the Cornerstones of Every Healthy Music Store.” Levy highlighted the benefits of selling accessories during difficult economic times as they provide very high profit margins in comparison to more expensive instruments. Since they are impulse items that are often purchased without previous plans, they represent additional business for the dealer. There has been an explosion of accessories on the market in the last ten years so it is important to be selective. 30 years ago there was only one type of capo available on the market but now there is a tremendous variety in a wide range of prices, offering many profit opportunities.

Levy also encouraged dealers to look at different industries and how they merchandise accessories. Clothing retailers are masters of cross merchandising as, for example, when purchasing a suit, they always offer ties, belts, and shirts. Another industry that is effective at selling accessories is the sporting goods market, which, like our market, deals in leisure products that are focused primarily to hobbyists and only a few professionals. They offer many impulse items, including golf balls, putters, tennis balls, and many other accessories. Most interestingly, Levy cited a study from Williams & Sonoma, which sells kitchen-oriented products. He discussed how they offered a range of bread makers in three price points. They had four price points available, for $150, $250, $350, and $500, but they didn’t offer the most expensive price point at the beginning as they thought people would not purchase the most expensive unit. The study found that people most often purchased the mid-priced unit at $250. However, they later decided to add the $500 unit, and then the $350 unit became the most widely sold. By adding to the top, it increased the middle priced unit. Consumers tend to spend as much as they can afford and the store owner doesn’t know that level, so it is critical to give the customer the best range of product that they can practically offer.