Looking for Options

…margins, terms, quality drive trend toward guitar alternatives

What a difference a year makes.
When MMR ran an article on guitar trends last year, everything seemed to point to sticking with the “tried and true.” Now, as revealed in this month’s dealer e-survey [page 50] and in speaking with a half-dozen dealers on the topic here, there is clearly a movement to take on a develop new guitar lines. For many, it’s mostly a business decision as some of major guitar suppliers have stepped up their buy-in requirements and terms. Abetting the trend to “look around” is the reality that Minimum Advertised Price (MAP) has become the new retail, and in the process done a number on dealer margins for six-strings.

“I would say a 33% margin is pretty much the average these manufacturers are asking us to make on their instruments,” says Steve Hanson, owner of SM Hanson Music in Salina, Kan. “With [a retailer's] fixed cost of insurance, utilities, wages, and with operating costs going up and margins going down, I don’t see how independent stores can survive working on those margins.”

A “take-it-or-leave-it” stance by vendors may be understood from a business perspective, especially as some of the larger makers have increasing costs and large marketing budgets themselves. But dealers are repeatedly commenting it’s refreshing to do business with up-and-comers who take a decidedly more retail-friendly point of view.

“These guys are hungry to do business,” says Terry Lewis of Michigan-based Firehouse Music. He also remarks that Firehouse sees the value in offering more choices to its customers. Many independents like offering quality guitars that aren’t seen in every other store, particularly the big boxes, both within and outside of the music products industry.

A Matter of Survival
“We will not survive in this industry working with 20% to 33% margins that manufacturers expect us to work with,” declares Hanson. The small- town Kansas store has been active in the community of 46,000 since 1972, but today, he notes, “There are quite a few brands we don’t carry anymore. Manufacturers are putting so much pressure on retailers and trying to tell us what to do.”

His response was to turn to brands who can give him better margins, including Hagstrom. Greg Bennett is a line he’s had for a while, but more recently Hanson Music has further expanded its selection of that brand’s guitar models. “Those two brands [Greg Bennett and Hagstrom] are the first we show when someone walks into the store because with them we can stay in business,” he states flatly. Hanson also reports he is going to start doing some private-label guitar products by this summer as well.

The Kansas dealer says people still come in and ask for a Fender or Gibson, but he make sure he shows them other brands that are similar in style and features. He says his customer has typically just heard the more famous companies make good guitars, so he and his sales staff merely educate him or her about other good guitars out there. It doesn’t always work, but overall his store is better off financially, he asserts.

Salina is a farming community suffering from a prolonged drought in addition to the challenges of country’s overall soft economy. Last December saw sales down 35% from 2006. None of this, or the fact that he’s been a loyal successful dealer for more than three decades, seems to matter to some suppliers. Upon telling one that he simply couldn’t meet the new buy-in demands required for a product he’s successfully sold for years, the rep shrugged and said, “I guess we won’t have any representation out there then.”

“This is stupid!” Hanson says. “There’s no other dealer carrying this particular manufacturer’s instruments for hundreds of miles, and now they want to throw that away because I don’t want a $6,500 custom guitar. I asked him, I have five of your $4,500 guitars, but you want to cancel with us as a dealer anyway? There’s something wrong with this. And we were one of the first dealers in the state to carry this particular line! They don’t appreciate that we help build that brand from the ground up. I have a perfect credit rating and I don’t plan on jeopardizing that.”

Terry Lewis of Firehouse Guitars wanted more choices, more options. The five-store Michigan chain has long merchandised ed Gibson and Fender but has recently added Michael Kelly, Schecter, Blueridge, and ESP’s LTD models.

The ease of doing business with some of these lesser-known makers has factored in his decision too – he just recently stopped carrying Gibson because of the large buy-in the company required, which Lewis describes as “ridiculous.” Customers still come in for the über big names, but he’s finding that just by showing them alternatives, he’s getting the sale. “Those people who look at a Michael Kelly go, ‘Wow, that looks great – what is it?’ And those are great $400 and $500 guitars.”

The lines he chooses to carry and promote must meet requirements for quality, price point, and come into his shop set-up and ready to go. That these instruments aren’t seen in Guitar Centers is of great value to him, he adds. But Lewis also identifies a line drawn in the sand – or rather, in the age demographic chart:

“Kids drive this market, and they love the ESP’s LTDs, for example. Those are definitely bringing in new customers. I don’t see any brand loyalty with these kids, especially those 20-something and younger. If they are over 30 though, it’s nearly impossible to have them consider other choices.”

Like That? Try This
At Buffalo Brothers Guitars in Carlsbad, Calif., Adrian Demain just took on Benedetto guitars to mix in with his Gibson, Guilds, Martins, and Taylors. Known for higher-end jazz arch tops, the Benedetto is reaching out to new dealers – and many are reaching back. “Bob Benedetto literally wrote the book on building arch top guitars, and has a great reputation in the guitar building community,” Demain says. “They approached us about carrying their instruments, and it seemed like a great addition.”

Previously, Buffalo Brothers held off on carrying Benedetto because they were exclusively at very high-end price points, but as of late “they are offering guitars the working playing can afford, and yet they still are great-quality instruments,” he comments. As to how that’s working for them, Demain says they got two in on a Thursday, sold one Friday morning, and the second one was sold by Monday.

For a longer time, Buffalo Brothers has carried Don Grosh guitars, which Demain says contribute to the overall draw to his store: “We have a good selection of instruments, and having high-caliber instruments like Don Grosh and Benedetto guitars definitely adds to our overall appeal. Plus, there are not a lot of dealers around carrying those lines.” Santa Cruz is another name found at Buffalo Brothers that’s a high-quality guitar not found in every other store.

Demain adds that while the big three acoustics – Taylor, Martin, and Larrivee – are the store’s bread-and-butter, it’s great to be able to offer customers “a more refined instrument alongside a model that is highly recognizable. I will occasionally tell a customer ‘if you like that guitar, you should try this one.’ For example, if someone is looking at a Fender Custom Shop guitar, I’ll also show him or her a Don Grosh. It’s not a matter of which guitar is better, but a matter of being able to appeal to different tastes.

“It’s like a good pair of shoes – all of them don’t work for me. And the same guitar won’t sound the same in someone else’s hands.”

But don’t be misled that the big guys are making it impossible to get their iconic axes in a smaller store. Lifesong, in Quarryville, Pa., opened just two years ago and boasts Yamaha, Taylor, and Fender lines. The distinctive store has a coffee shop, a reading area, and Christian books, art, and recordings. But it is also a full-fledged MI store with pro audio, guitars, drums, keyboards, and recording equipment.

“It was a challenge with a lot of those lines,” recalls Derek Deibler of Lifesong. “I guess a lot of them get calls from mom-and-pop shops and it’s hard to get them to take you seriously, and then you have to get through the buy-in and stocking requirements. Of course I understand – you don’t want to have people selling Fenders out of their garage.”

To mix things up a bit, Lifesong is also stocking Daisy Rock guitars. “I saw Daisy Rock’s owner [Tish Ciravolo] at one of the breakfast panels at NAMM in 2007, and we were intrigued with what she had to say, and went to the booth,” Deibler remembers. “It was a leap of faith, but I was sold after hearing her talk. We didn’t have anything specifically for girls and thought it was a neat concept. At Christmas time they were excellent – we couldn’t get them in as fast as they were going out the door.”

Another line found at Lifesong is Kaman’s Jasmine, which the dealership has had from the beginning. Despite the Kaman Music’s size, it was easy for the start-up store to begin a good relationship, Deibler says. The conditions to take on Jasmine were easy, too: it was, “Here are a couple of guitars, try them.” The entry-level acoustics priced as low as $99 have since gone on to be one of the store’s best sellers.

Of course, some guitar makers are “absolutely” easier to deal with than others and that influences what is on Lifesong’s floor, he says. The manufacturer demanding a $80,000 buy-in with 18 new instruments coming in every month doesn’t work for many of these smaller stores in smaller markets. Flexibility, says, Deibler, “makes all the difference.”

Yet the big brands are still key to their success.

“I’m going to say that most of our customers are brand-driven,” he relates. “But I’ll cross-sell if I feel strongly enough about the product. If I feel something else is available that will get them more for their money, I’ll suggest looking at it. But if somebody wants a Taylor, they want a Taylor.

“Personally, I believe there are products every bit as nice as the big brands …but as someone told me, this is fashion industry, and it really is.”

Variety is the Spice of Sales
David Jenkins, sales manager of True Tone Guitars in Santa Monica, Calif., wants to appeal to the discriminating, yet open-minded taste of his customers.

On the True Tone floor are a good selection of Eastwood and Reverend guitars, for example. “We’ve always been fans of Reverend and have done really well with them,” he relates. “We’ve been with Eastwood since the end of 2006, and they are doing well too. They make a lot of cool stuff.” With both of these makers “you can get a great guitar for $600, $800 that sounds good and doesn’t look like a copy of another guitar,” Jenkins points out. “At that price point there are a lot more choices than their used to be, that’s for sure.

“We have a real affinity for the guitarist, and like to have the more off-beat instruments.”

There certainly is a lot of variety for anybody walking into True Tone. Gibson, Gretsch, Fender, Martin, G&L, and Guild are mixed in with Reverend and Eastwood in addition to Blueridge, RainSong, Jay Turser, and other brands.

Jenkins agrees with Firehouse Music’s Lewis that the new generation of players isn’t necessarily as brand-loyal as their elders. Also how these young customers get their music — and see what instruments are being played — has changed. “There’s a lot more music on the Web, and a lot more people getting into playing because of what they see on their computer,” he observes. And what they see there tends to be more individual players playing a wider variety of guitars.

“We’re a professional guitar shop, and high percentage of our customers are professionals, but there are a lot of kids just saving their money wanting one of our guitars, too. That’s where Eastwood and Reverend come in. But not just them – Mexican-made Fenders are fantastic guitars under $1,000, and Gibson too is making more budget versions of some of their popular guitars. Epiphones are a great value, as well.”

Still, the key is variety.

“We’re not the type of place where you just see one or two of something, and then we tell you can order something you don’t see.”

As for different manufacturers requiring different dealer agreements and terms, Jenkins takes a philosophical stance. “Every manufacturer is trying to do the best job they can, make the best product and market it as best they can. We have a good relationship with all our manufacturers, and we need each other.”

At Bellevue American Music in Bellevue, Wash., guitarists see all the familiar guitars with Fender, Gibson, Guild, PRS, Ibanez, Martin, Taylor, and Peavey…or will they?

“Even with the brands people are familiar with, you won’t see many of the models we have elsewhere,” says Reese Marin, president of the store whose roots date back to 1984. “People regularly walk in and go, ‘My gosh – I’ve never seen this kind of selection anywhere, not even on the Internet.’” At Bellevue American,- the player finds a wealth of custom orders, one-of-a-kind guitars, and limited editions. If Martin comes out with a series of which there are only 50 built in the entire world, you can bet at least one ends up at Bellevue American Music, Marin states.

“Vendors, sales managers, and clinicians who come here for business end up staying and playing our guitars because we make it a point to stock things that most people just hear about, not see,” Marin adds. “The Roland guys recently came here for a clinic and workshop, then sat here for hours playing the guitars!”

Having five big-box stores in the Seattle area dictates the need to differentiate, Marin believes, and that means having uncommon models from well-known makers being on their walls as well as guitar brands not seen in every other store.

Duesenberg was added in January 2007, and Marin says they have been very successful with them. “The people who work here are players and performers with experience on stage, and our bar is set very high,” he says. “We see products come and go, but we have an eye for quality,” so taking on a new line is not something that’s done lightly.

Composite Acoustics is another line Marin is glad to have. “We’ve been with them since day one,” he says. “The quality of the product is great. When they first brought their guitar to us, we played it, evaluated it, understood the concept, and got along famously with the people. They are an amazing company, and we sell a lot of their guitars.”

He adds that the relationship he has with all his vendors is terrific and key to their success. But, bottom line, Marin seems like a kid in a candy store …

“We’re just spoiled musicians — we buy guitars as though we want to own them, those we’d be proud to own as a player.”