Piano Retailers Face 2009 With Cautious Optimism
Dealers Scramble for Profits — Stress Institutional and Used Sales
For most of us, 2008 was a challenging year—one that included soaring gas prices, a worldwide financial crisis, record home foreclosures, and a presidential election. All of these events have, of course, had an impact on MI vendors, some more than others. MMR recently checked in with piano retailers to see how they fared during the events of the past year, and what they expect in 2009.
In terms of sales, there seems to be no clear trend: roughly half of the dealers we spoke with report that high-end sales are keeping them afloat, while the other half noted that low-end and middle range models have been moving. With 2008 being so unpredictable, some dealers noticed a shift in sales as the economy slumped. As Anne Shepherd of Chick Music in Athens, Ga. notes, “The inexpensive pianos are selling. We did a lot with the higher end player pianos, but after the middle of the year, we saw those sales slumping. We do carry a less expensive player grand and they are moving better than the upper end.” One common thread shared by most dealers was that institutional sales have been a key component and, for most, have become more important than ever. As Alex Kapteyn of Central Michigan Piano in Carson City, put it, “This seems to be saving grace currently. We are focusing more on institutional sales this year than ever before.”
As for 2009 predictions, the overall sentiment from dealers was uncertainty. However, they do remain hopeful, on average. Gil Colainni summarized the coming year by saying, “The industry is precarious. The next six to eight months will really tell a story. It doesn’t look good, but the strong will survive.”
How do you think 2009 will compare to 2008?
Gil Colaianni: Worse. I don’t know how small, local dealers like me are going to be able to buy merchandise with the credit situation being the way it is at local banks.
Dennis Fry: We had a really good 2008 up until October. We actually did better this December than last December because we had a lot of large school sales. Schools have been very strong for us. We are lucky that in our area we have a lot of large schools and colleges like Yale that have been putting a lot of money into music funds.
Anne Shepherd: Well, I am not going to be pessimistic. I’m going to say that it will be better.
Alex Kapteyn: We are cautiously optimistic about 2009.
Bobby Hodges: It looks like 2009 will be a trying year for all in the piano industry.
Market recovery, negative media, and the election year have all taken a toll.
William Crabtree: We had a very strong institutional year in 2008 with a down year for home sales. I think 2009 will still be a good institutional year, but probably not at the 2008 level. Home sales will depend on consumer confidence which will be anyone’s guess.
Craig Whitaker: 2007 was the best year ever with 2008 being the second best. 2009 will be okay, but not as good as the two previous years.
Nick Pell: I think 2008 will go down as just another so-so year for the Conservatory of Music.
How has the economy impacted your business?
Gil Colaianni: It has impacted business considerably. It has been a combination of things. I am not a full-line store, and before the economic crisis, piano sales had been on the decline for all dealers to begin with. I think the biggest surprise and the biggest impact of the economic crisis on business has been the credit market freeze. I don’t have the personal capital to keep my inventory up, and banks are not lending to small businesses.
Dennis Fry: There has been an impact, but we’re making it through. We are not waiting for the business to come in; we’re going out to get people in. We have been doing a lot of promotions with Yamaha.
Alex Kapteyn: Our numbers were actually up in 2008, but only through much creativity in marketing, as well as beginning to manufacture our own soundboards and pinblocks for our piano restorations. This aided in controlling our costs. Networking with other piano stores and techs has also helped us find new market share.
Bobby Hodges: Buying attitudes continue to decay, and it is a real challenge to make the sale in today’s market. We attempt to make the purchase a pleasant experience.
William Crabtree: All facets of retail business are off. I especially notice that customers seem to be retreating to one level. Steinway customers are buying Boston pianos; Boston customers are buying Essex pianos. New low-end buyers are buying used or digital pianos.
Craig Whitaker: We have been seeing more low-end shoppers, for both digital and acoustic, fewer people coming through the doors and fewer buyers
Nick Pell: Our gross sales numbers were very much in-line with 2007. However, we did notice a slightly lesser profit margin.
Have you expanded or have you had to cut back on staff, for example?
Gil Colaianni: I have always kept my staff and expenses at a minimum because we are a fairly simple operation; we are not full-line. But advertising spending has been curtailed drastically.
Dennis Fry: We have stayed the same with no expansion or cutbacks.
Anne Shepherd: Right now we are holding on and have not cut staff yet. We hope it will stay that way.
Alex Kapteyn: We still are maintaining the same staff, but are concerned we may have to cut back if the economy does not improve.
Bobby Hodges: We are a staff of regulars who have been here long term. There have been no changes other than temp help.
William Crabtree: We have cut back on staff and are now at barebones.
Craig Whitaker: Things have remained the same.
Nick Pell: Our staff levels have remained the same. We feel that any reduction in staff would have caused us to suffer a loss in our level of customer service. In this economic climate, it’s imperative to have the best team you can. We all preach to our customers that “you get what you pay for.” The same can be said for your sales staff.
What price points are moving?
Gil Colaianni: If it wasn’t for the high-end sales it would be difficult. Fortunately we carry the Steinway line, and it doesn’t take a lot of the large dollar sales to at least keep our head above water. That’s where our money is coming from—the high-end sales.
Dennis Fry: All of the top-end, used stuff went this past holiday season. People were very conscious of price. But we had some high-end, used pianos for $25,000 that we had for a while, and they sold the quickest. In terms of new, it’s been the moderate end, mostly mid-range uprights. We also sold a lot of digital pianos over the holiday season. It seemed like people felt as though they were getting more for their money with a digital. We had a record year for Clavinova sales.
Anne Shepherd: The inexpensive pianos are selling. We did a lot with the higher end player pianos, but after the middle of the year, we saw those sales slumping. We do carry a less expensive player grand and they are moving better than the upper end. We are selling more grands than uprights.
Alex Kapteyn: High-end grand pianos, and entry level consoles are moving.
Bobby Hodges: Small or petite grands seem to outdistance the other units. I attribute this to middle to upper income.
William Crabtree: The Essex vertical has been especially strong in the $4,000 to $5,000 range and the high-end Roland HP207 SB is a very good mover, while the lesser models are slower movers.
Craig Whitaker: Low-end and rentals.
Nick Pell: It seems that the middle-end products are moving the best for us.
What role have institutional sales played?
Gil Colaianni: That business has broken through to about 20 percent. It is the only thing that has been semi-constant.
Dennis Fry: In December, Yale bought 16 pianos, all high-end Yamaha. Just prior to that, the city of Bridgeport bought 15 professional uprights.
Anne Shepherd: We haven’t done a lot with institutions. We have done business with people who work at the University, but nothing with the school directly.
Alex Kapteyn: This seems to be our saving grace currently. We are focusing more on institutional sales this year than ever before.
Bobby Hodges: Institutional sales hold our business together, with a combination of organs and pianos.
William Crabtree: Very strong in 2008, close to half our total revenues. While 2009 may not rise to this level, we have expectations for another very strong institutional year.
Craig Whitaker: Institutional sales have not been impacted too much by the economy and have remained steady.
Nick Pell: Institutional sales are extremely important to us now. We find that purchasing church mailing lists and offering free on-site trials with no obligations have better than 75 percent closing rates. Once we get our instrument in there, they don’t want to let it go.
How have trade-ins and used sales been?
Gil Colaianni: It’s all I can get. We may be seeing a renewed interest in low-end, low-priced, used pianos. About 25 percent of my floor space is dedicated to nothing but refurbished, used pianos.
Anne Shepherd: We have a tremendous amount of trades and used. We had a lot of used pianos during the Christmas season, most of which have moved.
Alex Kapteyn: About the same as 2007.
Bobby Hodges: We keep a good inventory of used and trade-ins to feed the buyers who cannot afford the new price range, which works well for us.
William Crabtree: We have more inquiries about used pianos, especially people wanting to sell. With the glut of used pianos, we are able to be much more selective and purchase newer and higher quality pianos for less than we did several years ago. We have also found a new service to offer and that is the removal of unwanted pianos for a fee. In years past, people would try to give their old pianos away free if we could re-sell them or use them for parts. Now they are willing to pay us to haul away the pianos. We do quite well offering this service since we have a full-time moving crew.
Craig Whitaker: Piano trade-ins, used piano sales, and rentals have been an increasing revenue stream.
Nick Pell: Used pianos are actually our quickest turning instruments.
How are you getting people in the store?
Gil Colaianni: Prayer. I am just hoping to stay in the loop. I have a lot of competition in this area and a newcomer who has to advertise because no one has ever heard of them.
There’s an array of Steinway promotional activities that we have adhered to for quite some time, some of which cost very little and some of them cost a lot. I can’t invest $50,000 in an all-out promotion. I have continued with direct mail and that’s about all right now. We also do social-type events every month. It’s a good, inexpensive way to get people to come in and visit for music, cocktails, and a musical presentation. Sometimes we see a lot of the same people at these events, but anything to generate camaraderie that spreads to new customers is good. It’s fun too. We are in a very eclectic part of town, with many art galleries. We combine a lot of events with our neighbors and have art displays. I also jump at the opportunity to work with charitable organizations, if they are looking for a place to host an evening out for their donors. We have done several of those and they have really worked out well.
Dennis Fry: We’ve run full-page ads in regional papers and, we really can’t tell if we got any calls from it. We did radio ads and got no calls from it. We’ve been doing quite a bit on-line with our local Yellow Pages, to target people shopping on-line, so they can find us. It’s been really hard to trace the money spend and what has come back from it.
Anne Shepherd: Television has been our best form of advertising. We also do newspaper ads, but have found that television ads are much more effective.
Alex Kapteyn: We are advertising and selling more than ever through our Web site. We have done a couple of big mailers this year, but with disappointing results. Locally, people are not buying nearly as much as 2005-2007. Our area has been hit hard by the declining auto industry.
Bobby Hodges: We keep rotating advertising between local radio and major television markets. We continue to use branding as our main avenue of media, and this has been mainly through television and radio.
William Crabtree: Our Web site is attracting more buyers, so we try to increase the information. We also offer our store space to teachers for recitals and organizations for meetings.We have a contract with a national talk show host to do radio ads. This has had some positive results as far as store awareness.
Craig Whitaker: We have done radio ads, mostly with newspaper support. We have also done liquidation sales on stock from other out-of-business dealers
Nick Pell: We have done some radio advertising and lots of direct mail. I still think that over half of our business comes directly from referrals. That’s why creating customer loyalty is so important to us.
What do think your Web site has done for your business?
Gil Colaianni: I think it’s a very integral part of my business. I don’t know of too many of my customers who have not accessed the Web site or found us through the site. We preach to not be in a hurry and to use resources like the Internet. We encourage people to use the Internet to shop around to make their decision and not just buy the first shiny thing they see out there. We figure if they slow down, get an education, and talk with people, our chances are a lot better that they will come back here and deal with us. We have been here a long time—55 years in the city and 85 years in my family. Our products’ dollar value is second to none.
Dennis Fry: We don’t sell through our Web site; it’s just for fact finding. We are getting customers through the site more than ever. It also comes down to our reputation. We have been here for 50 plus years. A lot of our business is word of mouth.
Anne Shepherd: We have had people come in saying that they saw our Web site. We have teaching studios, and many people have come in for lessons because they saw it on our Web site.
Alex Kapteyn: Without it, we would be struggling a great deal. It accounts for 50 to 60 percent of our overall business.
Bobby Hodges: We have been pleased with the out of area response from our site. It continues to amaze me how many people surf the Web.
William Crabtree: It has made us more visible and has definitely enhanced customer contacts and business.
Craig Whitaker: The Internet has replaced the phone book for shoppers.
Nick Pell: Our Web site is budding right now.
Do you have a customer e-mail list or regular mail list?
Gil Colaianni: Our e-mail list is about 6500. We’ll do that periodically, for promotions, but not on a daily basis. I don’t want to be in peoples’ faces.
Dennis Fry: Both. We do e-mail blast.
Anne Shepherd: We have a mail list and plan on creating an e-mail list.
Alex Kapteyn: Yes, both.
Bobby Hodges: We keep a continually growing church list.
William Crabtree: We are building a list for e-mail. Direct mail pieces have not done well for us in the past.
Craig Whitaker: We do not have an e-mail list, but we do have a mailing list.
Nick Pell: We have both customer and institutional direct mail lists.
What type of promotion has been the most effective?
Gil Colaianni: Little things have done well, and I have lost thousands of dollars on promotions when I shouldn’t have lost anything. It’s a matter of timing I guess. We are not really big in the promotional game. Some retailers promote sales for pianos selling at 80 percent off. That’s ridiculous; I’m not going to get into that fray.
Dennis Fry: We’ve been doing a lot of targeted, direct mail pieces. We buy certain zip codes and target that way. We sell the high-end Disklavier. We target people who we think who are not as effected by the economy
Anne Shepherd: Television ads and our Web site. We also have a lot of loyal customers who do a lot of advertising for us. Word of mouth has been the best type of advertising for us.
Alex Kapteyn: We have done a couple of big mailers this year, but with disappointing results. Locally, people are not buying nearly as much as 2005-2007.
Bobby Hodges: We stick with the branding, and generic types of advertising with our long history of being in business. Discounted prices always get attention.
William Crabtree: I cannot say that anything has been particularly effective. Good referrals still are our best opportunity to sell a higher quality instrument. Working directly with influential folks in the community is still good.
Craig Whitaker: Special financing offered by the manufacturer and liquidation sales have worked the best.
Nick Pell: Free trials for institutions and free lessons for our general walk-in customers have been good. A great lesson culture shows your customer your not just a salesperson, but you are going to see it through right along with them.
Who is your customer base?
Gil Colaianni: Well, for years we would assume that the instigator of a piano purchase would be they lady of the family, interested in beatifying the home and educating the children. That still viable, but the male of the home is just as interested, if not more now.
Dennis Fry: Mostly families with young children, but we cater to all.
Anne Shepherd: We have a wide-range of customers. The University of Georgia is right here in Athens, and we get a lot of customers from there. We have two hospitals and some of the doctors have been our customers. We also do a lot with music teachers.
Alex Kapteyn: Our customers are schools, recording venues, casinos, piano owners, piano teachers, and piano technicians.
Bobby Hodges: We continue to see the middle income couples, in their late thirties, leading the way.
William Crabtree: Families with beginner children and retired or almost retired adults.
Craig Whitaker: Mom and dad with a few kiddies who want to learn to play the piano
Nick Pell: Our base consists mostly of moms and dads.
Do you offer lessons or work with the community in any way to get people interested in music making?
Dennis Fry: We have a studio and offer lessons. Right now we have one teacher. This is an area where we are really looking to grow in 2009. Right now we have 60 students. We work with Make a Wish and other organizations. We also did a lot of promotion, trying to get people excited about pianos, when the Elton John piano was on tour. We have sold two Elton John pianos, which are very expensive. With Make a Wish we have donated pianos to families.
Anne Shepherd: We have put an addition on our building and have dedicated the entire second floor to teaching studios and recital hall. It’s been two years since that was completed, and it’s going very well. We work through the schools to reach out to students and get them in to take lessons. We are a full-line store, which helps. We do school band rentals, and that gets students in the door.
Alex Kapteyn: Yes, we do offer lessons
Bobby Hodges: We have always promoted private lessons and support our local music teachers association. We provide a digital piano each year at Christmas for their students to perform. We also tried a digital in one of our local grocery stores for Christmas music during the month of December. We had a musician play each afternoon from 3 to 8. PM….
William Crabtree: We began an RMM (Recreational Music Making) program in one of our stores, and I have interest from a teacher to begin one in our other store. We also have studios in our store.
Craig Whitaker: We do in-house lessons, but not much work in the community to promote music making.
Nick Pell: We have a great Lowrey Organ program for senior citizens that focuses on fun and wellness.
What is your outlook for the coming year?
Gil Colaianni: The industry is precarious. The next six to eight months will really tell a story. It doesn’t look good, but the strong will survive. Those dealers with personal assets may be able to hold out and ride the storm. There are also some savvy entrepreneurs who know how to scale back and still make money. My feeling is we will probably see some heads roll—there is no way around it. It’s going to be tough. Maybe if we all ride out these peaks and valleys together, it won’t be so bad. I may be working out of my garage in the future, but I will always be in the business.
Dennis Fry: I am trying to maintain a positive outlook. It seems like all of us here are doing twice as much work to make what we did last year. We are actively pursuing whatever we can.
Anne Shepherd: I think things will improve. We have seen bad financial times before. Things will pick up again.
Alex Kapteyn: Uncertain, but doing all we can to succeed.
Bobby Hodges: Guarded but optimistic. We are too blessed to be stressed.
William Crabtree: I believe it will be a tough and challenging year, but I expect we will survive the current economic climate. We will have to re-evaluate how we do business, re-focus on our core operations, and in general, get back to basics.
Craig Whitaker: I will refined my advertising vehicles and cut out phone book ads. My outlook is generally positive. I am not retrenching for 2009, but am not planning any over-zealous promotions or product line changes.
Nick Pell: We are already noticing an upswing in our piano sales for the month of January. We think if we can focus on getting more referrals and building our customer base and loyalty, we can outperform 2008 by a large margin.
|Santi Falcone–Where Is He Now?
Santi Falcone has made the transition from piano dealer, technician and manufacturer to chocolatier. During the ’70′s Falcone operated a chain of seven dealerships in New England which was sold to New England Piano & Organ. In the early 1980s, Falcone introduced, a line of grand pianos under the Falcone brand which was later sold to supermarket entrepreneur Bud Greer and became part of Mason and Hamlin. Eventually Mason and Hamlin was sold to the Burgett Family and the Falcone brand to ASC.
As reported in the Boston Globe, Falcone decided on a change of lifestyle 20 years ago, “I spent two weeks at the library, researching what I wanted to do, and boiled it down to either bottling water or making chocolates…I wanted a business that was relatively recession proof.” He made his first candy (truffles) at home and developed his candy making skills to Dante Confections, a wholesaler and retail operation located in a strip mall in Billerica, Mass. When asked if chocolate has proven to be a recession proof career Falcone replied, “Yes, even when times are bad everyone still buys chocolates.”