Have we seen a rebirth of the independent music dealer? Was the MI dealer dying in the first place, or have they effectively reinvented themselves?
There are four sure things in life. 1. Life. 2. Death. 3. Taxes. 4. All of AC/DC’s songs will always sound the same. And recently, you could add a fifth. The economy will be awful.
But despite the fact that your customers’ wallets are tighter than Shakira’s pants, there is reason for optimism, at least for now. During the NAMM show, we enlisted the help of four independent retailers in the iMSO coalition to explain.
Frank Hayhurst of Zone Music, Harry Gillum of Showtime Music, Gordy Wilcher of Owensboro Music, and Chris Lovell of Strings and Things: we’re putting you on the spot. Have we seen a rebirth of independent retailers?
“What I’m seeing is that the evolution and rebirth of independent dealers that was asked for by our industry is now happening,” said Hayhurst. “What was once potential is now real. And this is not the information we’re seeing as independents. It’s the information we’re receiving from manufacturers. Repeatedly, we’re hearing from manufacturers: ‘We need you guys and we need you to step up to the plate. Your part of the industry must be strong.’ Perhaps, one of the reasons manufacturers are saying this is because when you bet on a bunch of different diversified retail channels and they don’t come through for you the way you project, then suddenly you realize the original core of the industry is very significant.
“But also,” continued Hayhurst, “independents are showing a new proactive approach they never had in the past. Usually we have freight problems or [complain] about this or that. We used to complain about the Internet and other parts of the industry. Now we’re bringing a plan and agenda. [Manufacturers] are reacting extremely positively. I’m more encouraged after this NAMM Show than I’ve ever been in 30 years in music retail.”
Those are strong words indeed. But what has made manufacturers as a group more independent friendly? “We have suggested to them that we are the solution and we can grow the industry because we meet with our community on a daily basis and have one-on-one contact,” said Hayhurst. “Other distribution channels are more remote. Take the Internet for example. People are going online to purchase, but the retailers there are skimming a region and have no commitment to the community. I’ll give you an example as far as big-box stores go. For every $100 spent at a big-box store, $18 stays in the community. The rest goes back to corporate headquarters. For every $100 spent at an independent music store, $48 stays in the community and the rest goes to paying vendor bills, etc. The difference is so profound in a community that manufacturers are seeing it. We’re even seeing it. We’re even recognizing what we bring to the community. Our strength is our ability to bring in customers to MI. Nobody else is doing that. We have to expand the industry somehow. Maybe independents are the way to do that.”
“We hear from manufacturers that we have to step up to the plate and move product,” said Wilcher. “We understand that. That’s business. But how do we do that? We do that by expanding the number of music makers. For example, the iMSO did a survey of about 40 of our members. I asked them for data of how many lessons they teach. We found out that those 40 stores teach about 5,000 music lessons a week. So who’s bringing new players into the market?”
According to Lovell, the rebirth of independent retailers can not only be attributed to their efforts to expand the market however. The economy has caused major changes. Chain retailers are in the barrel so to speak. Independent retailers have already been in that barrel and recovered from it. Chains can’t take serious losses—such as 25 percent—and survive.”
“I don’t think the independent retailer ever died,” continued Lovell. “I just think the spotlight has been shifted to us. There is uncertainty with other distribution channels now. It’s all driven by the economy. It isn’t necessarily that indie dealers are uniting. It’s that the ground is shifting below them. The government took over the banking system. This is scary to corporate America. But it isn’t so scary to us. We can survive things they can’t survive because they are so massive.”
“We began to conduct a vendor survey [at NAMM],” said Gillum.
“One of the questions was: ‘What percentage of your business do independent retailers do for you as compared to box stores and the Internet?’ We spoke to a major manufacturer. Although he was reluctant to give an answer, he gave a hand motion that it was close, but independents sold more products. And it’s changing. If you take the Alaskan pipeline that connects to the big box stores and is only 30 inches in diameter, that pipeline quickly fills up. The pipeline overflows. We believe from many of our interviews that some of the big-box stores’ pipelines have been shut off. The pipeline might be much smaller, but it’s flowing to many more arteries.”
A Different NAMM Show
The independent dealers we talked to noticed a different NAMM Show last month. “I see a ‘pug’ air,” said Gillum. “I [didn’t] see the excitement in the vendor booths. I didn’t see the excitement of new products pulling you in. The meetings I had during the show [carried the theme] of ‘What can we do to do better?’”
Although times are nowhere near perfect, this all means times might be good for independent dealers, at least for the short term.
“In the economic position we are in worldwide, we expect to see production facilities close overseas,” said Gillum. “The United States accounts for approximately 26 percent of all music instrument sales worldwide. China, for example, only accounts for 3.8 percent of total music instrument sales in the world. Yet China is the largest exporter of music instruments. If big-box retailers tighten their spending, some retailer stores could close, and manufacturing businesses will change.”
Gillum cautioned that just because times for independent dealers are seemingly better right now, indie dealers should certainly not be overconfident. “The window could be very short for the independent dealer,” he said. “In 2010 and 2011, as we see product growth again, the spotlight can be turned off. But this is the chance for independent dealers to take advantage of that spotlight while it’s there.”
Food and Water Trump All
Independent dealers must sell products to keep food on the table. They can suffer through a bad year. There is probably more at stake. Chain retailers perhaps have a different perspective. If they are public companies, the stock price is worry No. 1.
“Some manufacturers have only seen the pros of dealing with chain retailers,” said Lovell. “They haven’t seen the cons. Now manufacturers are getting a good look at the risks associated with [chains].”
“What if one retail chain store went out of business?” said Gillum. “How would manufacturers who dealt with them [for say] the last five years deal with that? It would be devastating. We have not lost any chains yet. I’m certainly not saying that will happen. But I think [manufacturers] are looking to see how many eggs they have in one basket. I think they want to put more eggs in more baskets.”
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