Last November, we interviewed a group of retailers at a restaurant to find out what was going well, what wasn't, and what could use improvement. We're back now to give you a second helping of our independent roundtable discussion. Are things going better for independent dealers? What are their biggest pet peeves? We hosted a small group of four retailers, Peter Hix of Hix Bros. Music in Aurora, Ill.; Chris Lovell of Strings & Things, Memphis, Tenn.; Bill Stevens, administrator for the NORCAL Music Coalition in Oakland, Calif.; and Chad Knowles from The Music Room in Rome, Ga., to provide their thoughts.
The Music & Sound Retailer: What's your biggest challenge at your store right now?
Chad Knowles: The main thing that is concerning me is some manufacturers don't want to deal with independent music stores. I can't get the same products that the big boxes can. And I can't sell products at the same price that big boxes can. So I'm losing customers every day. I can discount, but I still can't compete with the big boxes. We are trying to utilize some of the NAMM programs like Weekend Warriors, and we've looked into working with Little Kids Rock. But price plays a major role in a buyer's decision. It seems like service doesn't matter anymore. Customers want a cheaper price only.
Peter Hix: My problem is probably the same as everybody else. I describe it as though I'm standing on my tip-toes and my head is just above water. I'm about to drown. The only thing helping me is I've done this for a long time, so I'm trained. The biggest problem is a lot of things are not as profitable as they could be because the products we have are devalued. Manufacturers have lowered the costs, so the gross dollars aren't as good. But we also don't have the opportunities to make any dollars off of it because we have devalued our own goods. Not our services, but our goods. I use the Bentley as an example. I think the cheapest Bentley is $169,000. Is it worth that price? Sure it is, because that's what people will pay for it. Bentley doesn't have a $50,000 car. It hasn't gone to China. It's not that we are not selling items. We are. The problem is we are not making as much as we should. The second thing that concerns me is the fourth quarter was always the quarter when we kicked some [butt]. We sold enough of the entry-level stuff. People came to the guitar stores to buy guitars. And with that quarter, we came off well. All of our employees received bonuses. We don't even get an opportunity to do that anymore because the general public sees guitars everywhere, so they don't even come in the store. We don't have the opportunity to get out of debt during the last quarter or really establish something.
M&SR: But can you then sell the boutique independent-friendly brands instead?
Bill Stevens: It's a problem when you are one of the ones who built up the name of that big manufacturer. You all of a sudden get involved in a situation where a company you and your dad spent 20, 30, or 40 years building up is one you can no longer make a profit on. You're faced with the problem of having to switch brands. That's a very hard decision to face.
M&SR: Are you worried about the future of the independent dealer?
Chris Lovell: I'm less worried. Do you know why? Because the manufacturers are in the swamp with us. The whole thing is a wreck. Now that the reps and manufacturers are in the quicksand with us, we'll all die together or someone will do something. That's the good news. Manufacturers are now unsure about the future like we've been for the past half-decade.
Stevens: There's an old Chinese "curse" that says "May you live in interesting times." There's doubt and insecurity about what the Guitar Center sale means for growth. Will there be growth? Where's it going to come from? There's doubt involving the [possible] FTC investigation. Doubt involving the Leegin Supreme Court decision that allows manufacturers to set a minimum selling price. That has major implications for our industry. So there's a lot more "up in the air" then there has been in a long time. The margin difference is so dramatic for independent dealers that they can't make money in the same business their fathers and grandfathers have been in.
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