PASIC 2010: Beat of the Market
The 2010 Percussive Arts Society International Convention in Indianapolis, Indiana was a reassuring bellwether for many in the percussion market. Of the over-120 exhibitors, there were at least a few who prominently expanded their booths and visible product offerings at The International Drum and Percussion Expo, in comparison to last year, and the total number of displaying companies was up, as well.
However, in spite of a solid showing on the expo floor and another year of increased attendance – with over 5,000 attendees representing six continents and many corners of the U.S. there for the many competitions, performances, clinics, product demonstrations, and percussion-oriented workshops – an air of caution persisted among manufacturers and distributors on the show floor. The general consensus was that most areas of the percussion market have at worst stabilized from the throes of the recession, but success moving forward is contingent upon increased flexibility, creativity, and outreach from manufacturers, retailers, and suppliers alike.
For a closer look at how the percussion market is holding up, both in terms of specific companies and in general, as well as what retailers, suppliers, and manufacturers need too be doing to help boost the economic outlook in this segment of the industry moving forward, MMR caught up with a number of exhibitors on the show floor…
I can only hope that everything is positive and we’re on an uptrend. The percussion market is no different from the auto industry or the clothing industry; we’ve all been hurt by the economy. But as far as Meredith Music is concerned, we’re up in sales for the year. Last year we were down slightly, but I think we were ahead of the industry. Last year was the first time we were down in our 32-year history, and this year, so far, sales are up, so I’m hoping we’re on an upswing.
We are in a specialized niche market and we have a quality product, so that helps us. We have a new publication every month and we’re blessed with some of the finest authors and composers out there. In general, I think the economy is coming around, so hopefully that will help the entire percussion industry.
Percussion Marketing Council
This year, 2010 is the time of sorting out the survivors from the non-survivors. 2009 was unprecedented in the industry at all levels. Those companies that made it through 2009 are happy to be here and now it’s just a matter of thinking positively and building momentum after the storm. The new product innovations will now rekindle customer interest as the market starts to turn itself around, dollars change hands, and the industry reinvests in itself. The real benefit of that will be that the consumer is now going to get more new products, competitively priced, and it was really a survival of the fittest. Even the icons and pillars of our industry took a major hit and shakeout during 2009. Jobs, new product technology, advertising and promotional materials – they all got cut, across the board. In my case, representing the Percussion Marketing Council, we’re encouraged that all of our members have stayed on, and they’ve all survived 2009. And we think that this will help grow our entire industry for the next decade to come. We also hope that what we’ve seen in the past few years never repeats itself!
Moving forward, I see the industry turning to more of a customized approach from the buyer – the consumer – whether that’s a student, a teacher, or a player or artist. The mass merchandising isn’t going to fit this mold of doing business. It’s going to have to be more personalized and customized, with more listening to what the market is asking for and delivering that, whether that’s in technology of instruments, software, music for competition, and so on. What I expect to see is really a more grassroots, customized approach that entails listening to whatever the market is asking for and then delivering it, as opposed to the old notion of one shoe fits all – those days are over.
Fortunately, we’re up from last year, so that’s a good thing. But it’s still very challenging, to say the least. Looking at where to promote and where to advertise, that whole landscape is changing, between social media and how to launch stuff on Twitter and Facebook, and the timing of it all. The dynamics of how to approach the market are changing, and they’re changing every day. We’re trying to adapt to those changes, just like everyone else. Between quicker product development – because people want instant gratification – to becoming more efficient in our inventory and production, there are a lot of factors that have to play into the scheme in order to make it successful. We’re doing the best we can, but it’s a challenge.
You see the stock market right now, and it’s creeping up, but one of the challenges we have is with our Japanese products, which is all of our high end stuff. Our Absolute, Oak, and PHX series are all hand-made in Japan. Right now the Yen and the dollar, well, it’s very unfavorable for the dollar. I saw a recent quote that the dollar was buying 81 Yen, when two-and-a-half years ago, the dollar was buying 120. That drastically changes our competitiveness and other aspects of how we approach our high-end products. It really makes it yet another challenge to get our products out there in the marketplace.
One of the things that we’re trying to do [to help facilitate recovery] is to try to reach out to the consumer more than ever. Obviously our dealers are really important and we’re trying to reach them, but you have to almost go beyond that and get in touch with the consumer via Facebook, Twitter, and our Web site. We need to get to those people because they’re influential. I read a recent report that a significant percentage of consumers are taking advice from friends on social networks before making purchases. And even more than that are doing research online before they buy. It’s an ever-changing marketplace and you have to be versatile.
Woodwind & Brasswind
Basically, marching and concert programs are still going and schools are still buying. We’ve increased our whole focus on that, and consequently we’re way up on school marketing. Gradually, we’re hearing on the phone that people are buying combo items, too. I think we’re looking at the growth here that we’ve been looking for.
To keep the customer satisfied, we need to focus on pricing. We need to keep costs at a basic price, have good advertising, and work with dealers around the country to do anything we can as far as training, coming to the store with specials, and other similar incentives.
There are really two sections to this market: what I’d call the consumer part of the market and then the school side. Last year, 2009, was tough everywhere, but the consumer side of the market has actually come back in 2010. It’s been much stronger for us in terms of drum sets, snare drums, hardware, and other products of those types. What’s been more challenging in 2010 has actually been the school market and that’s because the budgets that were set in 2008 for 2009 were all set pre-recession. So the budget cuts at the school level really took a much stronger hold in 2010. The selling of mallet instruments, tympani, and those types of instruments have been much more challenging in 2010.
Where is it going? Well, we think things are improving. One thing we’ve noticed is that normally, our highest intake order time for school instruments is August/September. October and November were the new high this year, so I think a lot of orders were delayed, school buying was delayed, and it is all coming back in the final part of the year. It’s not quite back to where it was and it probably won’t be for a more years, but we’re starting to see some life out there.
So many things on the school side of the business depend on tax rates, and other things of that nature which we just can’t control. We just have to continue to make the best quality product that we can, and make sure it has a serviceability to it. And that’s one thing that Ludwig and Musser are known for: We can make products that will last three decades in a school, and you can get parts for them, even three decades later. Selling that message to the music educator is important for us.
Another issue is that the music educator is turning over, also. There are constantly new people coming in to this activity at the teaching level, so there is constantly a new market that we have to service and educate. We’ve been doing things like band director summits at Conn Selmer and Ludwig. We’ve been doing dealer summits. We’re trying to do a major educational campaign to impress our products on the market and to the people that make the buying decisions on instruments. We’re trying to educate on percussion instruments in general, and that’s what our Conn Selmer Institute is all about. I do a major presentation there on teaching percussion instruments because 95 percent of band directors are not percussionists. They don’t know, necessarily, which items are the right ones to buy. It is our job to train them and teach them about that.
As for what the percussion market can do better, the issue is really about the media. There’s so much information out there. And the people who are least media savvy are probably the everyday school music dealer. The big box dealers that sell school music products are very media savvy, but it seems like there are still a lot of things that the general school music service dealer needs to get more involved in to outreach to their market through electronic media.
The last few months have actually been exceptionally strong for us, both domestically and on the foreign side. I don’t know that I’m optimistic enough to say that we’re turning a corner yet, but I’ve been pleasantly surprised by how strong the market has been over the last few months.
I wish I had a crystal ball about what we could do to keep things moving forward. I was talking to somebody recently about how several years ago, we could track our sales on a predictable annual basis, knowing which times of year would be busy and which times would be slow, and while the curves from year to year may not lay on top of one another, they’re even from a relative standpoint. That’s not true anymore. Times that have historically been very strong are not doing as well, and times that are historically weak might be doing so well that I say, “Wow, where’d that come from?”
To be honest, we noticed some sales trends slowing down at different points, but we’ve always been pretty successful in sales because we’re price-point friendly to the consumer and margin-friendly to the dealers. The dealers get more points per product than you usually find in the industry, and the consumer gets a cymbal that’s made as well as any of the other high-end cymbals from the big name companies for a third of the cost.
I see a lot of expansion coming in the next few years. Everyone had their downside and the two years of crash. Now everyone is trying to find ways around business to be more competitive without damaging the brand and what they’ve built up in years past for their products. I think people are being more creative.
Manufacturers need to keep in mind what the customers actually want. It’s not a matter of what they feel like producing or what someone in sales and marketing or the R&D team decides is going to sell. You need to take a look at the products that are actually being requested by the stores. Look at price points. Take into account that the job layoffs all over the country have affected the market, how much money people have, and what products they’re looking at. It is up to the manufacturers to take a look at what’s being offered that didn’t work, and then to create new variations that are either more cost effective or add more value to the product for the consumer. What makes it different and better? What makes it easier for the dealer to sell? What makes the consumer want to buy that instead of something else?
It’s not just competition in the music industry – video games and other leisure activities have cut into our sales by taking up a chunk of the Christmas budgets. Finding a way to compete in the market and make yourself relevant in the marketplace is difficult. There are so many other products out there, you have to give the consumer a reason to look at you: What do they get from your products, and what do the dealers get for selling your products?
2010 has been a very interesting year for everybody. The economic recovery has been slower than everybody would have liked, but I think we’re starting see good movement within the market. We’ve had consistent orders for our products. 2010 was the year that Pearl introduced electronic drums back into our product mix, so that’s been exciting for us and a real boost to our sales numbers. We’re anticipating this holiday season that parents are going to be getting back to work and people are again going to be investing in musical instruments for their kids again.
It’s been a tough year for the school market. A lot of school bids have been cut, and it’s incurred some tragic situations there. Hopefully we’ll start to see that recover. School bids are slower to recover, because you work on a bid year, and then it’s not until the following year that you see the effects of some of that recovery.
Manufacturers have all cut back on their manufacturing facilities. About a year ago, what you saw was every manufacturer got caught with their warehouses full. That created tons of price slashing and everyone was just trying to get products out. We were in a situation where we didn’t have to do that as aggressively as a lot of other companies, but what happens when you do that is you train dealers who buy the products and then sell them on to the end user to shop only for deals. By training them to only look for deals, it has a very negative effect on the gross margin level of the manufacturer. Now that everyone’s inventory levels are back in line – and you’re seeing this in the automobile segment and every other area of manufacturing – companies are a lot healthier because they don’t have to liquidate inventory. We have to have confidence in the recovery that’s taking place to make sure that we’re stocking heavily in our warehouses and putting people back to work in our manufacturing facilities.
We do see an uptick right now, but that’s seasonal because we’re heading into the holiday season. We’re slowly coming out of this. I just sat through the PAS board meeting, and everyone’s struggling. But coming forward with new products and giving people a reason to buy new offerings is going to be key. We’re coming up with something called Gen 16, which will be a bigger launch at NAMM, and that will up our toe into the electronic realm with the digital vault, which we’ve already been selling for several months.
I don’t think it’s right to hunker down. That hasn’t been our strategy. We’ve actually reinvested in the business during this hard time. We continue to do things in the factory and we continue to come up with new products and try to expand our business so that once we do come out of this, all the work we’ve put into building the foundation will serve us well.
Grover Pro Percussion/
At the very worst, things have stabilized. It doesn’t seem to be getting any worse. We see a small uptick in professional sales and sales to individual students. Our institutional sales are challenging. Because the institutional sales budget a year or two ahead of time, we’re experiencing now the real serious cutbacks they did to the budgets last year. So that will be a lagging indicator, I believe. It’s nothing to get excited about, but I think there’s a little light shining through the tunnel. Like all companies, we’re operating lean. I think that’s the name of the game today. We’re using a lot of resources for social networking marketing, which is very cost effective. It’s very difficult to find concrete metrics [of its effectiveness], but we have faith in that. We’re watching our expenses and making sure we hit our revenue projections.
I see that there’s a lot of good efforts by the PMC and some of the members there. One of the challenges for our retailers is the inventory of products. I understand that they want to reduce inventory levels. Unfortunately, some of their expectations are for us to produce immediately, and as manufacturers, we can’t always do that. I think there can be better communication between retailers and manufactures as to projecting what they might want, and working strategically together so retailers don’t have to carry heavy inventory and manufacturers might know what to expect in terms of orders.
Consumers have so much information at their fingertips now that they’re very well informed about product specifications. They look for sound files on the Internet, they’re looking for product demonstrations in videos. We’re doing a lot of posting of product demos on our YouTube channel. Consumers are very savvy with the Internet. That puts a lot of pressure on pricing right now. We’re dealing with a very, very educated consumer right now. Ultimately, that is a good thing. I’m not sure if Internet sales is a good thing – I’m not sure how that trend is going to play out. For us, because we’re in the business of high quality products and we don’t sell on price point, it’s always been an education game, as why to why someone should spend five times as much for a tambourine, for example. If they don’t understand what the benefits are, they’re just going to go with a lower-cost product, especially with prices dropping on low cost products due to imported goods. We just stick to quality. If you’re worried about price, we shouldn’t be the ones you’re looking at. So for us, having an educated consumer is a good thing.
I’m really optimistic for 2011. As far as band and orchestral, which is what I do here, we’ve had a pretty positive year and I think we’re leaning into a positive 2011. It’s tough out there, though. Everybody’s trying something and the key is to find out whatever works for you. One of the things that I like to try to do is reach out to the end user. You’ve got to prove relevancy and value.
In a difficult economy, one of the first things that people do is try to knock down prices. The danger in that is that you run the risk of devaluing the brand. It’s a tough question. One way we’re being proactive is by engaging in projects on the Internet, with social media and videos. We’re going to continue doing those things and ramp them up even more.
The effect of that increased access to information is that creates a more sophisticated clientele, and that creates pressure to keep the quality up. It elevates everything. When one company puts out a certain type of information, another company sees it says, “Boy, that’s good, we should do that, too,” and the end user benefits. It’s certainly an interesting time as far as business goes.
If you’re talking about how the percussion world in general is doing, it’s one answer, and if you’re talking about Vic Firth, it’s another. In general, we’ve reached a level where we’re done going down and things will start working in the other direction. However, I think it’ll be slow.
Vic Firth makes bread and butter, salt and pepper, and we haven’t been so adversely affected by these recessions. Our sales have been strong since day one, and we have never had a year where we went down. We’ve only been flat twice in the history of the company, so we are lucky, by virtue of what we sell.
Should manufacturers and retailers be doing anything different now that we’re on the other side of the recession? I can answer that in one word: Everything. In the last five years, there’s been such a dramatic change in financial and market situations and people’s thoughts on how they’re going to spend their money. Manufacturers and retailers shouldn’t try to solve new problems with old solutions. We’ve got to find new directions to go in and continue to be so innovative.
As far as I’m concerned, the best two recent things to happen to music are Guitar Center and the recession. Those events have made people wake up. The good ones get their acts together, and the other ones, unfortunately, go down. It may sound ruthless and heartless, but that’s the reality.
Percussion is coming back a bit. Obviously, a lot of companies have had difficulty since 2008, to say the least. As far as a company like ours, accessories have been okay. We’ve actually had increases in the business over the last two years, which is good. I’m also seeing signs that some of the major drum companies are seeing things get better.
The new playbook is the Web. People are getting more information from Web sites of companies than they are from print advertising. The amount of Kindles that have been bought is going crazy. Everyone’s in love with their phone now. We’re actually working on a Vater app for the iPhone and we just introduced a brand new vater.com Web site. The Web is really the way to show your best foot forward these days.
The percussion market is always driven by the kids. I’ve talked to so many people that say, “Oh, I used to play the drums when I was a kid.” It’s the young kids up to 18 that are really driving the market, as I see it. People need to pay attention to those medias, absolutely. If you look at drum lines and marching bands, it’s way more prevalent than it was 25 years ago. Right across the street here, we have the Bands of America National Championships, there are a ton of high schools, and it’s become like a sport. That’s great to see because a lot of these groups have such great camaraderie, and it’s a great experience that it just helps lift the whole drumming experience. That’s a great thing.
Mike Balter Mallets
What’s changed because of the economy is that the manufacturer now has become the back room. Retailers don’t want to carry inventory, and they tend to order products when they get the orders. What happens with this is that the retailer needs to educate the consumer that if they don’t have something in stock, they can get it in a couple of days. We have a lot of quick ship orders, where a student has a Friday night football game, and we’ll get a call Wednesday that they’ll need something and it needs to arrive less than 48 hours later.
As long as the consumer knows that these products are still available, then the retailer will be good. If the consumer gets the sense that their particular retailer is not stocking items, they might start to think, “Why should I go there? They’re not going to have it, anyway.” Then they’ll call mail order, go online or go somewhere else. Smaller market retailers need to educate their consumers on that so their patrons will have confidence that the local retailers will continue to be able to supply them.