Mass Merchants and Guitars: Market Builder or Category Killer?
The lengthening shadow of mass merchandisers the proverbial big boxes of the retail world is casting a pall over the once isolated world of music products retailing. The Targets, Wal-Marts, and Best Buys have intensified and broadened the MI involvement over the last two years, particularly in the category of entry-level instruments and accessories and most notably in guitars and guitar-related merchandise.
While non-music merchandisers selling music gear is nothing new and, if fact, dates back to the 19th century and the heyday of Montgomery Ward and Sears Roebuck, the latest twist is the involvement of many of the industrys most stellar names, including Gibson, Fender, Peavey, and others, into a sales channel that was once the province of such department store brands as Harmony and Silvertone as well as myriad no-name brands.
Coming off a lackluster (or worse) fourth quarter in 2006, many music dealers believe the incursion of the big boxes is playing a major role in a worsening situation and question the wisdom of name-brand vendors working with the Wal-Marts of the world. They argue the traditional dealers value-added arsenal of products, lessons, expertise, repair, and service has been sacrificed in favor of a quick buck, in the process failing to cultivate lifelong music makers that are the lifeblood of the business.
Suppliers defend their cultivation of the mass merchant channel, noting that a preponderance of consumers who would never enter a music store are being exposed to music via the big box. They believe these neophyte players who advance in their avocation and interest will seek out the specialist music retailer for step-up instruments, other products, accessories and music as well as such services as repairs and lessons.
Several factors throw a monkey wrench into any hope of determining which side is right and wrong in this matter. First, while dealers strongly feel big boxes have crimped their entry-level guitar sales, it also has been suggested off the record by some vendors that the big boxes themselves had a less-than-outstanding finish to 2006 in terms of sell-through. So perhaps the season was merely a down cycle for guitars wherever they were offered. Second, industry suppliers to mass merchandisers are often not forthcoming in their comments on this aspect of their business. One CEO declined to participate in this feature, suggesting that agreeing to an interview was the equivalent of giving you the rope to hang me. Third, while mass merchandisers are publicly held companies and thus have to put out their numbers every quarter, they are not bound to comment on the performance of specific categories within their merchandise mix. And, universally, they do not comment.
Despite these roadblocks, in the following feature we attempt to sort out opinions and at least define the playing field in the current struggle. We hear from Fender, a staunch proponent of the mass-merchant channel, DAddario, an accessories manufacturer currently steering clear of the big boxes, and a quintet of dealers from around the country who for the most part take a dim view of what they see as a disturbing trend. In addition, Chicagoland dealer John Giovannoni offers an impassioned and often amusing take on the situation, and Nelson Varon, a veteran of the keyboard business in the 1970s and 80s, recalls a time when another segment of the industry went down the mass-merchant road.
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Fender: The Power of Known Brands
Andy Rossi is vice president of sales, marketing & product development at Fender Musical Instruments Corp.
Andy, who are Fenders principal customers among the mass merchandise chains?
Andy Rossi: Target, Sams Club, Costco, Hastings, Best Buy, and BJs Wholesale.
What is your take on the sales performance of mass merchandisers in latter part of 2006?
AR: The majority of mass merchants we do business with conduct the majority of their business in the later half and largely in the fourth quarter of the year. As such, we calendarize and forecast our business flow with mass merchants to reflect this trend. This insures adequate on-time supply to all channels we deal with. In 2006, our forecasted sales goal plan with mass merchants was met and, in some cases, exceeded. Information we received back from mass merchants indicated sell-through rates of musical instruments were in line with overall sales performance in this channel.
There were rumors at the NAMM Show that MI and guitar sales in particular slowed down considerably for mass merchants in the fourth quarter last year
AR: Sales of lesser known or unknown brands did not perform well. However, mass merchants highlighting brands that are well known to consumers reported adequate sales in line with overall sales performance in this channel for Q4. Mass merchants are not unfamiliar with the power of known brands, as they often deal in products from Apple, Sony, Panasonic and so on. They are also aware and or have learned that known brands are what moves and provide the best value to consumers and are the best bet for this channel. In our case, the majority of what we sell to the mass merchant channel falls under the Starcaster by Fender brand and is doing very well throughout this channel and provides some obvious separation from the brands and products we sell to our core M.I. channel, which remains our primary focus and the channel we provide the highest levels of support for.
What kind of growth have you experienced through this channel?
AR: Well into double-digit-percent growth year after year for some years now, and this after an absolute explosion of growth from this channel in the first two years of conducting business with them.
What percentage of your companys volume is through the mass merchant channel?
AR: I cannot answer in specifics as the information is confidential, but I can say on the record that our business volume [here] is a very, very small percentage portion of our global sales as our primary focus has been and always will be the primary M.I. channel that provides the significant majority of our business. Its the business we came from and know best and the business that will be with us for the long term.
Is selling MI through mass merchants a seasonal business? Is it a cyclical business?
AR: Its largely seasonal with the majority of business spiking in the obvious time frame of Q4 and holiday sales. We do see an increase however in the mass merchants who are recognizing that yearlong support of certain products makes sense. So while there is an increase of the business we see in Q1-3, the majority of it comes in Q4. Sales within M.I. also increase as we all know in Q4, but the swing between quarters is much less drastic then we see from mass merchants. In all cases, our sales trends within M.I. as well as mass merchants are planned and forecast very well and supply and support is calenderized to remain in line with sales flow from both channels so that one does not adversely affect the other.
Do you have initiatives to direct entry-level consumers toward step-up purchases in music stores?
AR: Absolutely. We were the first company to offer buyers at the mass merchants a coupon for a free lesson or set of strings if they visited their local full-line Fender dealer. We created a Web site that helped direct consumers to the participating dealers and we footed the bill and reimbursed all participating dealers for the lesson or strings. The program has run its course and we are currently working directly with our dealers to create a mutually beneficial program that will direct buyers in the mass merchant channel to the local full-line dealer for any support they may need including lessons, service, or step-up purchases.
Any closing thoughts on this topic?
AR: Fender firmly believes there is a large consumer base that is not familiar with the MI dealer network which if exposed to familiar brands and quality products such as ours, there will be an increase of some small increment in the amount of new players. We also firmly believe that this first-time player who will become a
lifelong guitar consumer will be unable to support his new hobby with mass merchants alone after the initial buy. This means that a program to direct these first-time buyers over to the core M.I. dealer base is essential and that the M.I. industry must embrace and support this evolving opportunity to the fullest.
First Act: A Lions Share of the Mainstream Market
Boston-based First Act is noted for introducing band and orchestral products into mainstream retailing, but the company has also been active in marketing combo-type instruments through this channel. Both categories continue to do well, according to First Act vice president of marketing Jeff Walker.
We do business with most of the mass merchandisers and clubs, including Wal-Mart, Target, Sears/K-Mart, Costco, Sams Club, BJs Wholesale, and others, he reports. Sales for First Act in the fourth quarter last year were steady business as usual. We have seen steady growth in this channel year over year. It is our mission to continue to make playing music more accessible and affordable to mainstream America. As a result, we own the lions share of the market when it comes to selling instruments through mass retail.
Walker adds that First Act does not see its mass merchandiser business as a merely a seasonal, holiday business. We are constantly positioning music as a year round category, he comments. Although band instruments are viewed as seasonal, we strongly believe theres a growing consumer demand to stock instruments throughout the year.
As for guitars, Walker sees a growing market with opportunities for step-up sales beyond the mass market. He concludes, By getting thousands of new players involved in music on an annual basis, First Act is contributing and committed to growing the market. Naturally, a percentage of these players will graduate to other guitars.
DAddarios David Via: Not Convinced
David Via is vice president of sales at DAddario & Co.
While we have been approached by the mass merchandiser market, we have elected not to sell our goods into these channels. You may find DAddario and Planet Waves products in some retailers, but my speculation is that our products have been resold there by a third-party distributor, as we do not sell direct to any mass merchandisers. We do continue to monitor the situation.
As an accessory company, we believe we have to be where the consumer shops. We have to be accessible. In this sense, the consumer dictates where we are. Theyve said they want to shop online, for example, and weve responded to that with direct links and fulfillment networks being established with our dealer community. I dont believe musical products offer enough market concentration to stick long-term at mass merchandisers, but if at some point consumers want to buy strings at bait-and-tackle shops, wed probably have to give it some consideration. Im not too concerned as I see the proper outlet remaining with dedicated music retailers.
Despite the great strides the industry has made lately to raise the profile of music making, I still see a large gap between music consumption the iPod and home theater sound systems come to mind and music participation. My feeling is that a lot of music products purchased in mass merchandisers are bought more as toys than as a commitment to learning a skill required to be a music participant. Those people who are serious about learning to play are continuing to shop with serious retailers, and that is still the music retailer.
Via also notes that some music products that have succeeded in mass merchant environments have been, to some extent, special cases. Electronic keyboards did well in those stores but, to be honest, the instrument was making most of the music, not the player. Similarly, the rise in percussion sales through those types of stores had a lot to do with the fact that you can get some instant gratification there. Drum circles are great things, but you cant have a guitar circle without at least knowing a few chords. So I see the successes of some instruments in that channel as still being a case of consumption over actual musical participation.
Via also points out one potential downside beyond any lost sales for the music dealer. Mass merchandisers may be putting more price pressures into the market.
MI Retailers Feel the Pinch
Stop us if youve heard this one
A guy walks into a Bed, Bath & Beyond and sees a pile of discounted, damaged goods and factory seconds. Everything in the pile has a tag explaining the nature of the damage, and among the dented toasters and the fondue set with the scratched handle, theres a guitar in a box. The note on the instrument reads broken string.
It was literally being discounted because it had a broken string, sighs Ted Eschliman of Nebraskas Dietze Music. I had heard of things like this happening, guitars going back to those places because of a broken string, but I thought it was the stuff of urban legends!
MI retailers from Guitar Center to Mom & Pop reported a soft (or worse) 2006 fourth quarter and many of them are seeing well-known brands sold by mass merchants as a culprit.
How many Lentines have to go under before something is done? asks Wisconsins Mick Faulhaber of Ward-Brodt Music, Madison, Wis., referring to the five-unit Akron, Ohiobased dealership that shuttered after the holidays. We lost Billy Everitt and Brook Mays Woodwind and Brasswind. These are hard-working, bright, committed retailers who were dedicated to creating music makers. These are people who offered service and stocked deep and wide. Todays playing field is definitely not level.
Ted Eschliman, Co-Owner, Dietze Music
Lincoln & Omaha, Neb.
Ted Eschliman takes a long pause when asked about his fourth quarter before finally laughing and saying, I would spin it this way we started off like bang in 2006. The first and second quarters were great, a time when everyone else wasnt having the same kind of success. Then summer and fall were lackluster. Were used to a two-percent to six-percent increase every year, but it wasnt happening. Then we were thinking we would make it up at Christmas and that didnt happen. We had like four good selling days and then nothing. I guess were still scratching our heads.
Pushed, he points to the usual suspects: online competition free from sales tax and the release of the new Playstations and Wiis. He says he hears even Guitar Center is having a hard time.
Bottom line on the bottom line, though, is that beginning guitars are especially weak. Yes, Target, Best Buy, Wal-Mart, and their brethren are selling those beginning instruments by Fender, Gibson, Washburn, and others but Eschliman notes stores like Dietzes are not seeing those instruments in their repair shops or as trade-ins on step-up guitars.
This is a big epiphany for us, he says. [Co-owner] Tim Pratt calls this music store attitude. Just because we have our front door open, people will walk in. Were only fooling ourselves if we think thats true. There are plenty of other places to get these things. Its like motor oil. I havent bought motor oil in an automotive store in years. I buy it at the mass merchants. I buy it at the grocery store. There are things that can be satisfied from outlets other than specialty stores and the mass merchants have figured that out. We have a new battle.
He notes that the first challenge is when someone buys a guitar from a mass merchant for his or her daughter there is no support. Little Jennifer may figure it out, or may not. If its the latter, Jennifer likely doesnt have the wherewithal to understand the guitar may just need new strings, tuning, or a $40 set-up treatment. They are saying, Im bad, Im not worthy, I cant play, and the instrument is going in the closet.
Eschliman feels when brand names go with mass merchants, it tends to tarnish the brands luster. They arent creating new musicians; they are creating an image of brand inadequacy, he states. And if they are putting products out there that wont stand the test of time, its counterproductive to the brands image.
But he doesnt see it working long-term. Quality instruments are not products that fit the business model of the mass merchant because musical instruments require market nurturing. I would twist this in a way to apply to the Guitar Center model which is price, price, price. Its doomed to failure as well. Theres no way to keep a customer base that way. Therell just be a lot of 60 percent-off guitars in closets.
Don Griffin, President West L.A. Music
Los Angeles, Calif.
Don Griffin was one of the few we spoke with who has noticed little effect from the mass-merchant inroads into guitars and other MI products. His business is more focused on broadcast, post-production, and the professional, touring musician, and he reports his fourth quarter was fantastic. As a consumer he was in those big box stores, he noticed their musical instrument section looks like a pig sty, and make even our messiest music stores look clean.
Obviously dealers are going to lose some business to the mass merchants, especially during the holidays, but non-music retailers getting into the business is nothing new. Going all the way back to Sears, mass retailers have tried this periodically. It always seems like a good idea, but they never seem to be able to execute it well enough to make it stick.
Griffin has been around long enough to notice that music retailers have a tendency to panic in the face of newfound competition. Ive seen them do it a million times, he notes. But its a matter of just figuring out your competitive advantage. Some do need to end up rethinking how they are doing business. He doesnt see a musician choosing to go to Best Buy to make a serious purchase. If a music store can provide equal or better service then a mass merchant, then this form of competition is something the retailer can overcome. And providing that better service isnt the least bit challenging in his view.
Ive been [at mass merchants] at Christmas, arms loaded with things, and then set it all down and left because the line is too long, he says. Ive gone to buy a digital camera and not gotten any help and ended up buying at an independent store where they would wait on me. Dont get me wrong; I do buy products there occasionally. I did buy a vacuum cleaner there, but only after studying all of them for about 45 minutes before figuring out which one I wanted. Had a qualified salesperson been there, it probably would have only taken five minutes.
He adds that hed be very surprised to see them dealing in MI on any serious level in a few years. Then again, he points out, They have a lot of space allocated to CDs how long will that be viable? Maybe thats what they are trying to do. The return on our business is pretty healthy if you can figure out how to run it properly. But to succeed, they will have to bring in people who understand the business.
After the Holidays: Muted Merchandising for MI
For all the consternation big boxes are creating among music products dealers, their approach to merchandising musical instruments, equipment, and accessories is hardly overwhelming. While the number of music-related SKUs on the selling floor has increased considerably in recent years, the display of musical goods is mostly limited to bare-bones shelving featuring boxed products, unadorned signage, and an overall look more reminiscent of a warehouse than a cutting-edge retail presentation. In addition, the music sections often feature previously opened packages (i.e. returned merchandise), upside-down cartons, and empty spaces.
These various merchandising shortcomings are all amply illustrated in these views of Best Buy and Target locations in the suburbs of Boston, Mass. and St. Louis, Mo., as they appeared in late February and early March this year.
George Hines, President, Georges Music
Pennsylvania & Florida
George Hines recalls a time a year or two ago when he was hopeful about the prospect of mass merchants selling more, better-known beginning instruments. Considering the vast majority of the American public that never darkens the door of an MI store, tapping into the larger public to create more players was certainly an idea that he could sign off on.
But it hasnt worked out that way, Hines believes. There seemed to be a breakdown in how this was being implemented, and some of us underestimated the amount of customers who would not, after purchasing something at a Target or Best Buy, come into the normal musical instrument channels. Had manufacturers and retailers figured out how to turn all those people who bought those things into continuing players, it would be great. But unfortunately there was a failure.
Hines, a pro-business, aint-afraid-of-free-market-capitalism kind of guy, doesnt necessarily blame the manufacturers. There are a lot of sales to be had (how many, and at how much profit, is questionable, however). And looking at Best Buy, at least on paper, it makes sense to experiment with musical instrument sales. They are looking at these huge footprints in their store dedicated to CDs and DVDs, products that he and many industry analysts say will not exist at all in five to 10 years as the trend toward downloading becomes even more pervasive. So there is a big empty space on the sales floor as the pre-recorded music segment disappears. Musical instruments why not?
But its a dead end, at least how its all going down now, says Hines.
My concern is the breakdown were having in figuring out how to get those players into the musician-for-life mainstream. So this trading of dollars for the short term without an eye to the long term is, well. right now its not looking too good. Its just not looking good. All you have to do is look at long-term overall guitar sales. Those numbers are not improving. Were mortgaging our future together, and its not a mere case of retailers being upset that Guitar Center/Sam Ash-like competition is on the block. Hines knows that the manufacturers are having to jump through hoops to do business with the mass merchants on their terms, and while overall numbers are saliva-inducing, he believes profit-per-instrument is less than with traditional MI stores. There is less profit all around for everyone, and its bad for vendors.
Fear and anger on the part of the retailer is to be expected, but he insists we need to skip that portion of the program. If its going to happen, lets turn this into a good thing for the industry. A year ago we could have had an opportunity. Its not there now and Im not pleased. Right now were not talking to each other because were so afraid of this change. But we have to turn it into a positive. We need to figure out how to make these people customers for life.
Mick Faulhaber, President, Ward-Brodt Music Mall
We expected to be down in the fourth quarter when you have major brands in places like Bed, Bath & Beyond, says Mick Faulhaber of Ward-Brodt. Each time those places, and even Guitar Center, sell a guitar its out of our pocket. And those customers are lost. They dont have a chance to become lifetime music makers. When we sell during the holidays, were pitching lessons. Who is going to teach you at those places? Who is going to get you relevant news?
This past fourth quarter, in light of the competition, including a new Guitar Center, Wardt-Brodt cut back guitar pack purchases 30 percent. During a normal Christmas season they would have sold out of them, or the few they would have left over would be gone by New Years. By the beginning of March, they still had more than 20.
Are mass-merchant sales seeding the market and reaching a new demographic?
They dont know what they are talking about, Faulhaber fumes. I think a couple [of vendors] have already realized that. Any real guitar player will own multiple instruments. They will keep their first one for sentimental value. Then they will buy up, usually the same brand.
Whats happening, in Faulhabers words, is the Grandma Fudd, the Aunt Mary, are walking through the big-box store and they are seeing a guitar pack there. They think, oh gosh, Jimmy is thinking about guitar, lets get that for his birthday. What happens? Does the parent/relative say, Oh, he might need to get lessons, but where? No. Then a string breaks, and they take it back to the store for credit.
Ive had to scale down my operation to be profitable. Im a free-enterprise guy. Its not my business to tell anybody who to sell to, but this is a big boiling mess. Worse, its lowered the value of the brand name. He gives a what-if: What if Bose high-end headphones suddenly started showing up in Target with a $99 version of a product that normally sells at $300. Maybe they come with a clever or not-so-clever name as in Dose, made by Bose. This high-profile brand now has a product that looks a little different, but to the buying public its been taken down a few pegs and lost some value. The same thing has happened to some of our high-profile brands, he concludes.
History Repeating Itself?
Nelson Varon is the former founder and president of Long Island-based Nelson Varon Organ Studios, a multi-outlet keyboard dealership that was one of the key players in the organ market in the 1970s and 80s.
His comments were spurred by Short-Term Gains, Don Johnsons editorial in the Feb. 2007 issue of MMR.
I was particularly struck by your very cogent observation that, The first-time customer…(which make up virtually the entire customer base being targeted by the mass merchandiser)…is a raw rookie, but thanks to the music stores involvement and care, he or she is now part of a community of music makers with a good shot at making music a lifetime habit. You go on to say that, This nourishment is something the big-box cannot provide. Some of their customers will find their way to a real, live music store, but I suspect many, many more will find themselves isolated and unsupported in their musical quest In other words, the product was sold, the sale was booked, but the music maker was not created.
One does not have to look too far back in our history as an industry to dispel any wondering about the long-term negative effect mass marketing of musical instruments has. This negative effect will become an absolute certainty, resulting in an ever-diminishing number of future customers for musical instruments, as interest is lost forever due to the lack of any availability of the resources for new players to learn to play and to service their musical instruments.
I remember all too well one afternoon in 1979, when the regional sales manager from Casio Keyboards, visited me (as a high-volume home-organ dealer) to convince me to place an order for their new $499 portable keyboards. I asked for an exclusive representation in the retail market area in which I had several locations. He explained they would not give any dealer an exclusive, but instead would indiscriminately distribute this keyboard product to virtually every mass marketing outlet that wanted it, regardless of whether or not they happened to be in the musical instrument business. The promise of this revolutionary low-priced, mass-merchandised portable keyboard, as enthusiastically described to me by the Casio rep, was that it would rapidly make every portable keyboard buyer part of a huge burgeoning future market for home organs and pianos. These new keyboard owners would eventually seek out the organ and piano store to step up to a more expensive instrument.
I did not buy, and told him I thought his product, and the mass marketing retail distribution he described, would be the beginning of the end of the organ industry.
Needless to say, this mass-marketed product took the entry-level organ and piano customer out of the organ and piano specialty stores all over the country. Stores like mine, which were dedicated to providing these new players with lesson programs, concert promotions, sheet music, and service so that our first-time customer would revisit our stores to step-up to ever- larger instruments as their playing and enjoyment developed and improved, began going out of business, quickly followed by the meteoric demise of the entire home organ industry. As these new portables sold in the millions, organ sales plummeted to the point that organs have now (in all but those markets catering to retirement populations) become the latest, almost extinct dinosaur of our industry.
A possible alternative to the direct selling to mass merchants might be a distribution format similar to that which piano retailers have worked out with Costco stores nationwide, in which manufacturers make their instruments available to mass merchants through music dealers operating a leased department within their big box stores. This would allow the specialty music dealer to benefit not only from the entry-level sale, but would allow that new customer to have access to all the benefits of the music store thereby creating a music maker and thereby creating the basis for a developing future market which would result in really expanding our industry in a way in which every one benefits.
Alan Levin, Owner, Brian Meader, Guitar Sales, Chuck Levins Washington Music Center,
For Alan Levins business, the fourth quarter was pretty good. Hes not sure if the entry guitar market was as strong as ever, but he insists he moved a lot of them despite the six Guitar Centers in his 40-mile radius, which hes much more concerned about than some Mom who may or may not pick up one of those Starcasters at a big box. And he does see people bring in instruments from the Costcos for repair.
And if you believe that he responds to the idea that these outlets are creating music makers where there wouldnt be otherwise. I really think people who are serious about buying an instrument for their kid are going to go into a music store. I dont buy a washer and dryer at the same place I buy car. And I dont think guitars are a spur-of-the-moment purchase.
Guitar salesman Brian Meader offers this perspective: If you were at Baskin-Robbins, and they had a table saw, you wouldnt expect the gals behind the counter dipping your Rocky Road to explain the nuances and features of the machine. They would know how to stick a price tag on it, sure, but not be able to do much more beyond that.
If youre buying a guitar at Bed, Bath & Beyond, lets face it, that is not their specialty, Meader says. But I understand why manufacturers do it because Americans are kind of conditioned to buy everything in one spot groceries, shoes, tools. But if youre buying a guitar from a place that cant tune it, and the guitar is in God-awful condition, if the parents first impression of a guitar does not bode well well, should we buy a guitar or a Playstation instead? Instruments are now part of the discretionary income, and the mass merchants view it all as quick-and-dirty sales for them.
He says he knows that companies like Fender have attempted to give out coupons that entice buyers to seek out the local music store for free strings or a music lesson, but hes not seen one redeemed and is convinced that the reality is 90 percent of these guitars are going under the bed.
I think there will always be guitars in mass merchants. There always has been, going back to Sears and Roebuck in the late 1800s. But I think the problem now is more of the major brands are there. You see Yamaha, Peavey, and Fender in there as opposed to Harmony. Thats where the uproar is.
But at the end of the day, Levin is not focusing on that issue and doesnt think other dealers should either. The biggest concern is Guitar Center. They are many manufacturers biggest customer and changes are being made to their products to suit them alone. They are looking at a product and asking themselves, Will this sell in Guitar Center or not? And if it wont, they dont make it. There are instances where manufacturers discontinue making something and when asked about it, they say it was because it wasnt selling, when in fact it was selling extremely well in a store like Levins.
Theres a dumbing-down of the product line. Thats the big danger.
Fred Bramante, CEO, Daddys Junky Music
One of the Northeasts biggest retailers has suffered two disappointing Christmases in a row, including being down 7.6% this most recent holiday season. Christmas is so much of our year, Fred Bramante of Daddys Junky Music says. Its key to our entire year, every year. So if you start taking that away from us, it becomes a serious problem.
He points the finger solely at the big boxes: not only the Targets and Best Buys, but even the likes of Linens n Things and Bed, Bath & Beyond. He quotes Tom Beckmen, former Roland Corp. U.S. president, who told him many years ago: We have too much supply chasing too little demand.
Hes seen it before. About 20-plus years ago, when Casio and Yamaha came to us and said they were going to start putting keyboards into the mass merchants, many music dealers were not happy. But we were told that they would create many more keyboard players than ever before, and in the end, it was going to be very beneficial to us.
It never happened, never materialized. [See Is History Repeating Itself,] The problem is those stores have no interest in nurturing the beginning musician to stay with the instrument. The music retailer has a completely vested interest, so that the beginner takes lessons and steps up to better models.
The mass merchant channel is a short-term dollar, Bramante comments. How many good, old stores, solid retailers like Brook Mays, are going to have to go away before they realize they are damaging the traditional and reliable product outlets?
This relationship with the mass merchants is not a natural relationship. Its a case that if its decided that the category isnt as strong as they had hoped, they could drop it as fast as they picked it up.
Bramante has expressed dissatisfaction to brand-name manufacturers, but it has done little good and he sees little sign that it will stop. Meanwhile, they are allowing these stores to take the most profitable month from those who are dedicated to selling their products 12 months a year. Yes, hes familiar with the Sears analogy, but he says this is different. Its never been like this. What they are doing is problematic and potentially very damaging to the music retailer.
When those kids come into our store in December and get a beginning guitar package similar or the same as what they can in those stores, they get so much more from us, he concludes. We get them on our mailing list. We send them information. We get them lessons. Were constantly seeding them with tips and support that will encourage them to stay engaged. None of that is happening with the mass merchants.
Down the Primrose Path …
By John Giovannoni
So the customer says:
No, really! Its the EXACT same guitar! Totally came with that same little amp!
You know – its just one of those cheap little pieces of junk I got at [fill in the blank].
I doubt [he/she] is gonna stick with it, so I didnt want to get a nice, expensive thing at a music store.
Whaddaya mean it cant be fixed? That flute cost me $150!
Its good enough to start with.
But I thought that was a good brand!? Its the same thing Eric Clapton plays!
And the rep says:
- Well, you over-bought.
- Hey, its not just us EVERYBODY does it!
- Well, were selling it, and I have to present it to you, but were not putting our name on it, and I dont recommend you buy any. Its really for. [Costco/Target/Sams/Internet].
- We do it [sell in non-music channels] because we have to, to stay competitive.
- This will open new channels. You know, 95% of the buying public wont come in here.
- Youll sell more lessons.
- You guys have to sell on what they dont have. [Implied: knowledge, passion, etc.]
- If you get in on our Accessory Plan, you can really make up those margins!
- Nope, everybody buys at the same price. But if you buy more than 20% over what you bought last year, youll get a 5% rebate.
[Note: yeah, I LOVE this one. See 1. above.]
And then the vendor says:
- [There is a] multitude of products that compete for discretionary income for hobbies and entertainment. [Note: Yes. And every one of them has an ad campaign to rival the war on terror. AND, they dont just preach to the choir.
Lewis, Terry. Where Are We Headed? MMR, Feb. 2007: 37-38.
- There have been 70 million iPods sold to date since the inception of the product we are losing, as an industry, the macro market share battle to a much broader portfolio of products. [Note: How much does Apple spend on marketing them to every biped in North America?]
Lewis, Terry. Where Are We Headed? MMR, Feb. 2007: 37-38.
- The influx of low-cost, poor- quality instruments from offshore [Note: love this one, too. See number three above.]
Stoner, John. Where Are We Headed? MMR, Feb. 2007: 37-38.
- A relatively small number of musical products are sold through these channels that are capable of exposing them to millions of people, 97% of whom will never enter a music store. This creates new demand, brand exposure and interest. We believe, and we have statistical evidence to support the view, that this creates more demand than it takes from established channels.
Lewis, Terry. Where Are We Headed? MMR ,Feb. 2007: 37-38.
And the dealer says
Ok, lets be fair. I quoted two guys from two really well-known businesses who have a lot of bosses to answer to. However, these examples are the tip of the iceberg. Quotes like that show the mind-set of a corporation. Miss the forest for the trees for too long, and suddenly youre in the desert, guys. And lets also be very honest: there is at least one MAJOR guitar name that one will not find in Linens n Things. Ibanez may run sweetheart deals for Guitar Center, but at least that is a music store. I didnt see any RG series guitars at Costco this year. Anyone know how Hoshino is doing? My hunch is that theyre doing pretty well. I also did not see anything Korg/Marshall/Vox at my local Target. Hmmm Could it be that not everyone feels the need to water down their brand?
Im pragmatic. I typically dont complain about what I cannot change; its a waste of time and energy to do so. So, I work within the parameters that Im given, and assume that the team Im on is all pulling together. But there really is no team. The dealers blame the reps and the jobbers; the reps and the jobbers blame the vendors; the vendors blame each other and the consumer. Every vendor uses every one of the phrases I listed — in one form or another; every rep has uttered at least three of the rep lines from above. Yet in the front lines, we — the independent dealers — listen to the customer lines. And none of the vendors can get it through their thick skulls that the short-term cash flow position theyre taking is going to bring severe change to this industry.
Fender, Gibson, Yamaha, Conn-Selmer. These are world-class, HUGE companies. These companies arguably run the vendor end of our industry. I know — there are plenty of other vendors out there, but these are really the only companies that the average non-musical consumer can recognize. These companies are brands in every sense of the word. They have really reached iconoclastic status. And these companies are leading us down the primrose path to destruction.
Sure, selling in non-traditional channels has been going on for a hundred years. One could argue that this is not really a non-tradition. The difference is that I used to drool over names like Silvertone or Mountain Company in the Sears or Monkey Ward catalogs. Its been said over and over, but if you wanted Fender, you went to a Fender dealer. Prestige, kids. Now we take a Les Paul-shaped chunk of wood, slap Baldwin by Gibson on it, and sell it at Bed, Bath and Beyond. Gee, Ill get towels, a foot scrubber, and a guitar for junior.
I have news for every vendor: no consumer who would buy a guitar at Costco/Sams Club/Target/fill-in-the-blank can tell the difference between Fender and Yamaha. A Strat is a Strat to somebody who is buying toilet paper, so please dont try to tell us that selling in mass-markets gives you better brand recognition. And why would any of you sell equipment not worthy of your own name? Imagine if I had one teacher that I had teach in the back alley because he/she is a convicted sex offender: Well, you can sign up for lessons, but I dont recommend it, and it really isnt my issue if something bad happens. Ill make it really cheap for you, though. These lessons are really for people that dont want to learn anything.
An over-the-top example, to be sure. But it gets my point across.
Im not a sports fan, but I watched the Super Bowl, mostly to see Prince do the halftime show, and to see the commercials. Is it just my cable provider, or did I not see any $2 million ads from Fender or Yamaha or Gibson, or hell, even Samick? You folks want to raise awareness? BUY AIRTIME. You mean to tell me that Yamaha — Yamaha!? — cant afford a Super Bowl spot? How about a Grammy spot? How about a Fender ad during the CMA awards? Maybe a Gibson ad during some NASCAR event (they seem to share the same demographic, and that is not an insult.) Every person in America has heard of Bud Light, whether they drink beer or not. Even First Act — the company we all love to hate — has enough savvy to get its guitars placed with Volkswagen in a major ad campaign. Say what you want, that takes some huge stones.
The truth is that you dont give a hoot about brand recognition. A Starcaster has nothing to do with brand recognition — it has to do with easy money. So stop lying to us. If you are a vendor selling an item in [fill-in-the-blank] that looks identical to something you sell to my store, it doesnt matter if the packaging is different or the part number is different. The consumer recognizes that item as the same thing as I have, for 20, 30, 50 bucks less. Or, maybe its the same price — but, what the hell, were here getting 80 rolls of toilet paper and a 50-pound sack of raisins anyway, lets just get it. And the Fender Squire pack with the toy amp is not the same as the Yamaha Gigmaker I sell, but the soccer mom/dad does not know that. Furthermore, he/she does not care.
So dont tell me about selling what they dont have — I do that every day. Dont tell me about your rebates, or specials, or freight incentives. Dont tell me about the many different avenues youre taking to get the word out. Dont tell me about how the mom-and-pop establishments arent doing the job. Dont give me b.s. lines about ad co-ops. Dont tell me about your MAP policy, and then tell me how it really cant be policed or enforced. Dont tell me about A dealers, Platinum dealers, Gold dealers, Master dealers, Buying clubs, special terms, or the rest of your crap. Stow it all in the same place where you come up with identical items with different model numbers that have no MAP. If you need directions, Ill be happy to help you out.
Yesterday, I spoke with a very nice man from an off-brand, a quirky company that makes quirky, cool guitars. The first question out of his mouth was, How close are you to such-and-such dealer? Almost an hours drive, I tell him. Okay, he says, Thats far enough. Here are our dealer prices, and they sell for this much. No Internet, and you cant sell into someone elses territory. Fair enough, I think. Any paperwork you can e-mail to me?, I ask. Nope. We just have a gentlemans agreement, and if you break it, I dont sell to you anymore.
If he was a woman, Id have kissed him. I dunno, maybe I will anyway.
John Giovannoni is the owner of The Music Room, a dealership locate in Palatine, Ill.