For its brand identity, The Music & Sound Retailer tries to be the champion of brick-and-mortar, mom-and-pop, independent music stores. Perhaps no annual feature better presses that case than the Independent Retailer Roundtable, which is now in its 11th year. At a time when the competitive landscape can be particularly daunting and when music store owners must face down new challenges—manufacturers selling direct, MAP policies being skirted, online stores avoiding sales tax, etc.—it’s essential that we listen to the sage words of the best, most successful dealers among us.
Our panel this year is aces across the board, composed of Music & Sound Award winners and NAMM Top 100 Dealer Award winners alike. Joining us are Jim DeStafney of Blues Angel Music (Pensacola FL); Menzie Pittman of Contemporary Music Center (Chantilly VA); Leslie Faltin of Instrumental Music Center (Tucson AZ); and Rand Cook of The Candyman Strings & Things (Santa Fe NM).
Discuss some of the overall, storewide sales trends you’ve seen over the past several months.
Jim DeStafney: Our sales trends are up and, during the last three months, they have been significantly up. It’s interesting why they’re up, though. They’re not up because we changed anything; they’re up because two local competitors have fallen. One was an MI store; one was a piano store that was the last piano store in Pensacola FL, which is a pretty big area. So, it’s kind of a double-edged sword. We’re happy that our numbers are up and that we’re seeing additional sales that might have gone to the others. However, stores are falling. This tells me something about our industry or, at least, it raises a question: Are independent retail stores—mom-and-pop stores specifically—increasingly being squeezed by falling retail margins and increasing Internet competition? I think they are, and that’s a serious call to action for independent retailers to up their game.
Menzie Pittman: The trend I see right now in music, which is causing a lot of other trends to take place, is this: You have no obvious heroes…the Van Halens, the Neil Pearts, the Jimi Hendrixes. They’re not in the discussion anymore. So, if sales are up in your store, then, as Jim said, maybe other competitors have fallen and you’ve been able to take advantage of that. So, therefore, he’s seeing a rise in sales. That’s not an industry trend, though; that’s a trend that’s specific to him.
What I see a lot of right now are local trends, and they don’t necessarily seem to be in harmony with national trends. So, if you’re in a college town and there’s a new coffee shop, where people want to come in, sing and play guitar, then guitar sales might go up. I think events like that have a big impact on the independent dealers right now.
What we see, in our reality, is that we’re doing a lot to create new musicians. And new musicians need gear, so that is an area that remains strong. But it doesn’t stay strong because of a “national trend”; it stays strong, as Jim said, because of events that are local.
Leslie Faltin: Sales were strong this summer. It was really surprising. We’re a school music dealer, so we usually have a big drop off right around May. Everybody returns their instruments and things are typically pretty slow for the whole summer. This year, though, we didn’t see that. We saw a continuation of sales, excitement and traffic the whole summer long, which was really great. Strong categories all around…everything from saxophones to trumpets to lots of acoustic guitars, because they reach so many markets. People feel that acoustic guitars are accessible. They feel that, as a first instrument, it’s a great thing to try because, you know, everyone plays acoustic guitar! You know, it’s like, “Mumford & Sons is famous, so I’ll play that!”
We don’t sell a lot of pedals in our particular market…in our particular store. But, we have strong trends in acoustics and in band instruments. And we really didn’t have any significant changes in our market in terms of competitors closing or changing. So, I don’t know what to attribute it to, other than just, perhaps, consumer confidence is continuing to increase.
Pittman: There’s an interesting trend in one of my regions. Here’s an observation from a high school guitar teacher who taught 162 people his first year. He’s been teaching 19 or 20 years. The guy is a magnificent player. His band came in to do some videotaping in our listening room downstairs a couple of weeks ago, and one of our conversations revolved around trends in guitar interest. He asked me about our student trends, and he said that his class load has declined from 162 students to 22. So, that’s interesting. On the other side of that, I have a friend who is a Grammy-nominated educator and who started guitar programs in schools. He also asked me about guitar interest. This is someone who educates the educators. He told me that his class load was in the range of 25 two years ago and, now, they have a tough time breaking a dozen attendees. So, I find both of those conversations concerning.
And here’s another trend, but this one is the opposite. A band camp takes place up the road from us in Fairfax County VA, and it has for the past 25 years. This year, they had about 500 kids enroll. The real growth for the camp was in strings. In that particular community, there’s a large amount of support for strings, as well as learning to play musical instruments, which is very much encouraged. There’s more business competition in that community, as well. The camp’s a very good financial bargain, and they keep the prices very low. The capacity for the camp is maybe 600, and they were just about there. So, that’s a really good sign for strings programs.
Some of those trends “argue” with each other. So, it depends on which sector you service as to whether you see things on the rise or on the decline.
DeStafney: Leslie said that pedals weren’t a big factor for her. For us, pedals are probably the hottest gear line in the entire store. The more pedal lines we bring on, the more we sell. It’s staggering. I remember having a discussion about effects pedals with my wife about six or seven years ago, and we both said, “Pedals are done. They are being replaced with smartphone apps. They’ll never come back.” Boy, nothing could be further from the truth. We’re seeing so many musicians getting into pedals…and they’re expensive pedals. It’s nothing for young kids to come in and spend $300 or $400 on a pedal. My generation would never have spent anything like that on pedals. But these kids are coming in and building $2,000 or $3,000 pedalboards.
Then, there’s all the associated paraphernalia that goes along with them: the pedalboards themselves, the power supplies, the cables…. You name it, and they’re buying it. The house of worship musicians are really into high-quality, high-fidelity pedals. So, pedals are something we’ve embraced. We just built a new checkout counter, and the whole thing was centered on displaying pedals. And we’re bringing on more lines literally every week. So that, probably, is what’s been hottest for us.
The other thing that, I think, is worthy of mention is the ukulele craze has not faltered one bit, at least in our area. If anything, it’s picking up a little more. So, we continue to stock well over 100 ukuleles. We probably sell 10 to 20 a week. It’s amazing how many ukuleles are being consumed today. I haven’t seen any drop off in ukulele sales whatsoever.
Faltin: One thing that my husband, Michael, and some of our staff did recently was host a “pedal party.” There’s a guy online who sells the pedal parts and components. Then, you solder it together yourself, decorate your box, put your little knob on it, give it a naughty name, make it grungy…. Everybody had a great time. A lot of people had never soldered before, and that sort of thing. I wondered if any retailers have done that, in terms of an organized event. Like, “Hey, bring your kid to the pedal party! Let’s solder some stuff together.”
DeStafney: Well, we haven’t done that with pedals, but, getting back to ukuleles, we’ve had a half-dozen “build your own ukulele” events. They bring in about 20 people on average. We make it a two-day event: Saturday and Sunday. I think we were charging $100, and that included all the materials to build it. Two staff members and I were there to help people build them. It takes two days because of the glue dry-up time. It’s hugely popular, though. They’re just wonderful. I encourage all indie stores to host these types of hands-on events. Your customers will love them!
There’s also a company that sells a do-it-yourself amplifier kit. I saw them at Summer NAMM. I ordered some of those, and we’ll do the same thing with those. They’re low voltage, so nobody’s going to get “shocked.” [Laughs.] But, yeah, those types of events where customers come in, they’re in a big group, they’re having fun and they’re making noise…those are wonderful.
Faltin: You can’t find that on Amazon!
Rand Cook: To go back to an earlier point, in the state of New Mexico, we are down 14 music stores for the last year. It’s from 40-something down to 30-something. I looked at that and I was a little bit shocked. Now, we’re feeling like we’re in fairly flat territory right now, for a variety of reasons. There are businesses we’re involved in that are really outside the sort of brick-and-mortar, four-wall music store. You know, installation-type stuff that has affected us greatly, and it has a lot to do with the government not having a whole lot of money to spend and budgets being super tight. That’s particularly true in the state of New Mexico.
But, I did want to throw in that we’ve seen real erosion in the acoustic market. I attribute that to the fact that we had a banner year in acoustics last year. I must have sold everybody in Santa Fe NM an acoustic guitar, because they’re simply not buying them this year. But what’s doing extremely well—and this might relate to piano dealers falling by the wayside—is our digital piano business. It’s up about 40 percent this year. So, you can never really know where it’s going to come from. But, I think all of us are smart enough to know that you just have to be prepared. When you see that trend coming, you have to be able to respond to it quickly, capitalize on it and take advantage of it as much as you can.
Faltin: You just recently picked up Roland digital pianos. Is that right, Rand?
Cook: Yeah, we picked up the Roland digital pianos…the home piano line. That’s been fantastic! I mean, we’re the only dealer in the state, which means anybody who’s seeking the product in the state is going to be directed to us, not to anybody in Albuquerque, Las Cruces or anyplace else. So, that’s been a nice benefit.
We’ve already anticipated the next question a bit, but what marketing promotions, in-store events and other initiatives are you involved with? What have been some of your most successful efforts in that regard?
DeStafney: I’m going to go back to ukuleles, because I’m so high on them, and they just amaze me with their longevity. The thing that has really helped us in selling ukuleles is something we started probably four years ago. We started with just a morning class. The first time we had four people. They came in for four weeks, they took their ukulele lessons and off they went. We probably had six ukuleles in the store at the time. That event morphed into a weekly, free ukulele class. We have it every Saturday morning at 9:30am. It’s free. And you don’t need an instrument, because we invite people to come in and take one of our ukes off the racks. Sit down…bring your family…bring your kids. We’ve been doing this for four years, and it’s staggering. Every event, people stand in line with their ukuleles to buy them, before, during and after the event.
A lot of them come back, and a lot of families come in: fathers and daughters and mothers and sons. It’s just heartwarming to see these families coming in and making music together. And it’s neat to think that maybe you’re planting that seed to bring that family closer together and to get that kid into music. And it’s all with a ukulele…a little $40 instrument. But our parking lot is literally full on Saturday mornings. When the free ukulele lesson is over, we have the weekly jam for the Pensacola Ukulele Players Society. That’s a local club that we started a number of years ago. They have a Web site now, and it’s about a 45-member group. They all know each other, and they come in, buy ukuleles and buy books. We have promotions for them every couple of weeks…sales and discounts. They’ve become store family.
So, yes, indeed, our ukulele-driven Saturday mornings are incredibly powerful. Many of our “ukers” eventually cross over to guitars. Or maybe they see the pianos, and then mom wants the piano. It’s staggering…the impact of that little event. I’ve got one young, 26-year-old teacher who conducts our group lesson. He’s also the proctor and leader of the Ukulele Players Society. So, it’s marvelous. And that society gets out into the community: nursing homes, churches, homeless shelters, etc. The minor-league ballpark invited them to come out and do the national anthem on ukuleles. It’s a wonderful thing that costs you so little. We put 50 chairs out on Saturday morning and then we pick ’em up. But, man, it’s so well worth the effort.
Cook: We do a ukulele club, as well. We don’t do it during the summertime because, as Menzie knows all too well, we’re wrapped up with our summer camps for kids, which are going on right now. Two little, nine-year-old twin girls are killing “Rockin’ In The Free World” as we speak. [Laughs.] It’s a lot of fun to watch. But we’ve actually had a very similar experience with the uke club. Basically, Saturday afternoon is a packed house here.
One thing that we did was an event we called the “Beer and Gear Swap.” The first time we did it was back in June. It was great…very, very successful. We simply provided a platform in our parking lot for people to set up booths and sell their used equipment. We didn’t take any money other than collecting fees for renting tables and things like that. And, of course, we had our own booth. It was a really good opportunity to go through and scrape out all the collected garbage from the store and blow it out the door. And we had a local brewery come in and set up a little beer garden with the fencing. It was great! It was great fun. I would definitely recommend any of you guys consider something like that.
Pittman: I’m hearing a theme here. And it’s interesting because one of the things I respect about all of you guys is the fact that you don’t wait for the industry to set the tone. You’re busy setting any tone you feel would work in your region. Jim, are you close to water?
DeStafney: Oh gosh, yes.
Pittman: So, what I think I hear when you talk about that is that you’re capturing the region well. You guys talk about the uke clubs, and I really appreciate how excited you are about that. We get some energy there, but I think there are improvements that we, as a dealer, can make with some of Jim’s strategies and those of everybody else.
We have a bluegrass club that meets every other week on Thursday evenings. We have around 20 folks who show up for that, and they’ve immediately begun to kind of have their own little clan. Through the club, we introduce our retail lines, helping them to click over into understanding that we can supply them gear. I don’t mean to offend any bluegrass people here, but we noticed they are the frugal kind of thinkers. [Laughs.]
Faltin: It’s like I say, “Hippie drummers don’t have any money.”
Pittman: The kids will spend money on pedals, but a guy who comes in and just enjoys jamming three or four chords and sings “M.T.A.” by the Kingston Trio is not necessarily going to drop a lot of cash. He will come back, though. I make it a point to share with the bluegrass club attendees my favorite story…the time Greg Deering came to visit @4410—the room they meet in—because the story brings additional credibility to the retail aspect of CMC. So, we’re having pretty good growth there with adults. In today’s market, it takes a lot of effort…it takes a lot of putting your shoulders into it. And that’s the common theme I’m hearing from all of you. If your shoulders are in it, you can make some things take place. Whereas, in the days of the Beatles—and Jim would attest to this, being a Beatles freak—gear walked out the door. If they recorded a tune and used a Rickenbacker, out the door it went. Because they used VOX amps, out the door they went. But that whole climate is no longer there, unless the store has the vision to really create it.
That’s why we changed our model, and it’s why we approach things the way that we do. We’re kind of home-growing our own “scene” to fill what used to be walk-in traffic. It used to be that people would walk in and say, “Oh, I’ll take this. My kid plays this. He needs some of those.” I think there’s a different philosophy now, and those who adapt will be able to succeed. You guys are talking about a number of stores closing. I think that’s directly proportional to owners not having the capability to have a vision for change, and their failing to avoid “polyester thinking.”
Faltin: If retailers sit around and wait for their vendors to come up with the perfect promotion that’s going to work for their market and resonate with them, they’re going to still be waiting for it. I’m a big advocate of grabbing the bull by the horns and creating your own thing. It sounds like all of you have the same thought process as I do. IMC does this Rummage Sale event, and it came about as a result of Alan Friedman saying, “Anything that has a birthday in your store should be sold at any cost.” Just get it out of the store! By clearing it out, marking it just above cost, and having an event to generate cash and get things out, it actually gives you money and space so you can buy new things that will resonate with your market.
As an example, we had this stupid mixing board that would burn whatever you did to a CD. It was so 1995. I think we ended up selling that thing for $100 just to move it out. That sort of thinking can give you the freedom to make buying decisions without fear. It also gives you a nice, clean feeling in your store. And you’re not sitting there waiting for your vendors to tell you what to do.
One thing that we did in the last couple of years is having a road show. I’m not a Taylor dealer, but I saw these flyers that said, “We’re having a special Taylor road show!” I thought to myself, “Well, I want a road show…but I’m not a Taylor dealer.” So, we came up with a P. Mauriat road show. I contacted my P. Mauriat guy and said I wanted to have an event. He said, “Great!” So, he sent me a whole bunch of product and we had an event. This past March, we had a flute road show. I called up all my vendors and asked, “Hey, do you have any cool flutes you’d like to send us?” They said, “Oh yeah!” We had, like, 40 flutes, and we ended up having a wine and cheese party with flute players. It was really successful!
So, it’s great to see independent retailers creating their own destiny…creating their own marketing. Because, a lot of times, vendors will send something out that’s half-baked or that wouldn’t work for your market.
Tell me about the state of relations between vendors and dealers right now.
DeStafney: I think that, in some cases, the relationship is not as good as it could be. What I’m seeing—particularly from the bigger manufacturers and, in some cases, those we’ve dealt with for many years—is that they don’t seem to be putting the effort into their relationships with smaller dealers like us. They don’t treat mom-and-pop dealers the way they did 10 years ago. In some cases, we hardly—if ever—even see a company rep. That can cause both the manufacturer and the retailer to lose sales.
At the last NAMM Show, one of my reps from a major manufacturer asked me why I wasn’t ordering nearly as much merchandise from him as I had been five years ago. I told him the reason why was because he never visits our store, doesn’t provide me with new product info, never e-mails any information and never makes any buying recommendations. Consequently, I’m buying from other companies that partner better with us. Just as we retailers have to fight for and earn the business of our retail customers, the manufacturers need to do the same thing…even for us “little guys.”
At the same time, we have some wonderful manufacturers that truly do partner with us, keep us updated on all their products, provide marketing materials, facilitate in-store events, refer customers to us and happily help us with customer-service issues. That type of direct engagement makes all the difference in the world, and it results in more sales of their products. They’re the type of companies I want to do business with!
Pittman: This, of all the third-rail topics, is the one where it’s like, “Oh, gosh. Everybody reads the trades, so I’d better tread lightly.” I’ve seen really interesting trends, though. Everybody loves when financial things flow…we all love that. So, when money comes in from our customers, of course we love them and we love their support. But remember: We’re the customer to the rep. I used a term earlier, which I’ve used for years, and I’m going to refer back to it because it ties into this: “polyester thinking.” So, back in the ’70s, there was a drum company—I’ll be kind and leave out names—that had a great product, but that really got stuck in polyester thinking. The product took a nosedive because the company refused to accept new ideas and changes in market trends and relationship needs. I think you don’t really have to look too much further than Slingerland or Rodgers to see that you can get out of step with the industry, even if you’re a good manufacturer with a great product.
The rep relationship is one where they want you to buy. So, at first, they’ll greet you and say, “Hey, how are you doing?” They talk to you a lot in the beginning, but, then, they’re motivated by how much gear you consistently buy. And I guess you really can’t blame them for that. They are just as affected by sales as we are. For us, it’s about striving to establish the best relationship possible, and we’ve found that, if you reach out to them, then it’s a better relationship. If you don’t, they kind of poke in and say, “Hey, we expect this.” You can’t really blame them for that, either. We don’t have total control of the customer, though. It’s not like we can shake down the customer, the dollar bills fall out of their pockets and we can give them to the vendor.
So, I’ve noticed that the relationship with some vendors can get a little more “metallic” and a little tougher to deal with. They have these expectations on re-ups and things that seemed out of step with building productive relationships, not to mention with industry trends. And, by the way, there’s one particular vendor that’s very large, and they’re the easiest vendor to deal with that we have. It’s peculiar to me, but it proves that size doesn’t always dictate the behavior. I did, however, get a letter this week saying that they are selling some products online.
In some cases, we got to a point where we said, “We’re going to change strategy. You’ve been a great partner, and we’ve tried to be a great partner. Thank you very much.” But what’s interesting is this: In the last six months, I’ve had four reps who we aren’t currently using reach out, just trying to warm up the conversation again. It’s like, “Hey, I know we’re not doing business right now, but how are you?” And I find that very telling. So, all of a sudden, I think people are beginning to say, “We don’t know where the industry is going. We’d better make sure we have some good relationships.”
I also see that more vendors are starting to sell direct. That’s a concerning thing. That’s been a big topic in the industry. It certainly doesn’t necessarily encourage somebody to want to be the local seller for that product. So, there are some challenges. But, I think the manufacturers are having the same exact challenges you were just talking about, Rand, with closing stores. I think they see that trend just as clearly as anybody else. So, they’re thinking, “Oh, we haven’t done business in a while. Let’s go back and keep that relationship open…restart the discussion.” I find that interesting because, for us, that’s a different trend in the last 12 months.
Cook: Yeah…it’s pretty fascinating, having seen how things have evolved during my 26 or 27 years in the business. Menzie, I know the large company you’re talking about; we also have a great relationship with that company. It’s astounding to me how nimble they are, given their enormousness.
What it really comes down to at the end of the day is what you put on your shelf: its desirability level, the quality of the build, the price you sell it for. All those things triangulate, and the customers become attracted to that. One thing I’ve found—and this has really struck me in the last year or two—is that you can pick up an instrument and you can determine the intentions of its manufacturer. Why are they making this instrument? Is it purely for money? Are they bean counters? Or, is it because they have a genuine care for the end user…a genuine desire to build the best thing they can build and put it in someone’s hands? You can sort of “feel” the vibe of that instrument.
I find the latter type of instrument so much easier to sell. I have three full-time service people who work on guitars. With some of the stuff we get, the necks are roller coasters. Some of the other stuff we get—at the same price point—the necks are perfect, with just the right amount of relief on it. I just find it so much easier to sell those products, because you can feel the intentions of the company that made them.
Faltin: I tend to do business with people I like. If a vendor is causing me grief or demanding something that’s unreasonable or unsustainable, we just walk away. [Laughs.] In my opinion, in this day and age, there are no irreplaceable vendors. We are primarily a band and orchestra store, and there are lots of companies that make similar products, which would sell just as well in our market.
I know there are some sacred vendors whom nobody wants to say bad stuff about. But, if they’re not working for me, or if they’re putting unsustainable or unrealistic expectations on me, then we’re not interested. They’re not going to help me make payroll, when push comes to shove, and I’m down in cash. They’re just looking out for themselves. So, we are definitely willing—perhaps more than some of you guys—to just say, “Never mind. I don’t need your product on my wall if it’s going to cause me this many issues.”
Cook: We’ve walked away from several vendors in the last couple of years, for that very reason. We just didn’t feel as though their intentions were in the right place for our store. And it’s not like we’ve missed a beat in any of that. The fear of lost sales never materialized.
Faltin: And now it’s interesting to hear, like with Menzie, that some of these spurned vendors are coming back, like, “Hey! How are things?” It’s like a bad boyfriend who just won’t go away. But, you know, maybe he’s changed. Maybe he’s learned his lesson. I don’t know. It’s an interesting phenomenon. But there are a number of unsustainable business practices that used to be fine years and years ago, but that just aren’t anymore. It’s good that people are willing to stand up to vendors and call shenanigans, if need be.
We ended the first part of the conversation by talking about the challenges associated with dealer/vendor relations nowadays. Let’s pick up on that topic again.
Pittman: To be fair, I want to say that there are great reps, who are dear friends and who make sure that they do anything they can for you.
DeStafney: It’s interesting. A lot of my best reps are guys who’ve worked for 12 companies in the last few years. [Laughs.] They’re great friends, and they’re awesome with every company they work for. You know, I’d like to see some of the big companies keep the good guys…keep those people on staff and dealing with us.
I’d also like to get your opinions, though, on the trend of vendors selling direct, if it even is a trend. Of course, it was such huge news when Fender announced that they would be selling direct. That stirred the pot quite a bit, and I think a lot of people, from what I heard, left Fender. Fender trimmed their dealer numbers down a little bit. And I’m curious what you guys are experiencing with other manufacturers that might be selling direct. I just heard that Yamaha will be selling some accessories direct. Is that a “testing the waters” move on their part?
I’ve got a lot of small vendors—a lot of the pedal companies—selling direct. The good news is this: They are very, very strong enforcers and proponents of MAP. They’ve closed all the MAP loopholes that seem to exist with the bigger companies. But I’m just curious what you guys think. Fender announced at this last dealer meeting, a few months ago, that they might be selling on eBay…selling b-stock and overstock instruments that dealers can’t absorb. And that concerns me. It concerns me because we’re adding another direct-sales wicket to the game now.
Pittman: I have a question for you, Jim. Actually, it goes for everybody. Do you guys feel that, in the music products industry, the manufacturers think, “If we do this, it will hurt this part of the distribution chain”? Do you think they think about that? Or, do you think it’s more from a corporate mindset, as in, “Do this and remove that”? What I’m seeing is, with a lot of vice president positions and things like that, where we used to have six, we now have one or two. And there are a million people in the entry-level positions now. There are no colonels anymore. I find that interesting. So, do you all see that as the trend? And, do you really think they are our partner, or is it just a business relationship?
DeStafney: I’m skeptical and cynical, I guess. When a CEO says, “Yes, we’re doing this just to help you guys,” I’m not sure that’s always the case. As you alluded to earlier, those companies are under the gun, just like we are. They’ve got payroll, like we do. They’ve got expenses, like we do. They’ve got overstocks; they’ve got money issues; and they’ve got to balance their books. So, I understand that. And I hope they really do think we’re their partners out here, where the rubber meets the road. But, sometimes, it doesn’t feel that way.
Pittman: I’ve had people in leadership positions talk to me about how much they are concerned about the direction things are going in. But, I think that goes for corporations all across the world. I don’t think it’s unique to the music business. I think there are really nice positions at the top and there used to be a pretty obvious chain of steps, filling them up. But middle management is really being thinned out right now. They’re trying to run things less on human efficiency and more on technology. I really don’t think that works very well. I’m talking about that whole voicemail thing, where you push “9” for this, and then you have to push 11 buttons for 20 minutes before finally getting to an operator. I see the corporations moving in that direction, and it’s interesting to me. I mean, if I had a large corporation, maybe I’d embrace those behaviors. But they seem to run counter to the logic of the music business…even just business in general.
Faltin: In the last couple of years, looking at what’s gone on with KMC Music, what Fender has spun off, with the changes at Alfred Music and Hal Leonard…. I mean, all of those decisions are not done to benefit the dealers; they’re done to benefit the bottom line, the shareholders and whoever it is who’s lining their pockets. So, in all honesty, I foresee more and more vendors trying the Apple model, which is to sell themselves. But, you have to execute it really well. That’s where companies like Fender sometimes fall short: the actual execution.
That’s where we can fill the gap and say, “Hey, let’s work together and have a store within a store! Let’s be creative about creating a space to display your stuff.” I’m actually seeing a push even from some of my vendors—Yamaha, in particular—to try to create some in-store signage and in-store display units to better highlight their stuff. It would be circumventing the whole need for an “Apple Store” model if you have a “Yamaha Store” within your own store.
So, we’ll see what the future holds. We’re seeing more and more purchases for all the financial reasons, not for the dealer reasons.
DeStafney: One thing I will say about Fender is they really bend over backwards to help us promote their product, in terms of store signage and displays. They spend a lot of money, and it does really help us sell their product.
I don’t want to bash Fender. I grew up on Fender in the ’50s in southern California, listening to the Beach Boys and Ventures and Dick Dale. I drank the Fender Kool-Aid, and I still do today! I still believe in the Fender mythology. [Laughs.] And I love the product.
I will tell you, I had my first customer come in and sell us an American Standard Stratocaster that he had bought direct from Fender. Of course, he apologized. “I’m sorry, Jim,” he said. “You didn’t have this color. I should have had you order it.” And, so, he sold it to me as a used guitar. That’s the bad news…that Fender made a sale that I didn’t get. The good news is, I bought it used, and I’ll make more money selling it used than I would have made selling it new. [Laughs.] But that’s another topic all together…profit margins. And, so, I guess I should say to Fender, “Thank you for selling him that guitar.”
Pittman: That also brings up an interesting discussion, because, when you go to the customer directly, you’re taking out a whole tier of expertise. I also see this in music education, where people make statements like, “I’m on YouTube. I subscribe to this particular thing or that. It’s a directed tutorial.” But there’s no interaction. There’s nothing like, “Hey, you want to keep your posture this way. Watch where you put your finger. You probably want to lift your heel when you play that type of pattern.” You know…things like that. So, you’re getting the same thing: OK, you’ll buy it direct. But do you even know what it is? Well, no, but the description seems to fit. And that’s the same thing as YouTube for music students…the same idea: “This is quicker, it’s more convenient and we don’t need that education.” And, although that thinking is erroneous, it’s a current trend that I’m seeing.
But you’ll notice, Jim, that the guy came back and sold it to you. I have people who have learned things incorrectly who are very stuck; then, they come and have me bail them out. The sad part is, had I had the year before with them, they wouldn’t even be in that position. I wouldn’t have to go back and fix all the crooked teeth. I could just get it straight from day one, and they could be well down on the road. And it’s on the dealers to make sure people understand what we offer. It’s also a little bit on the manufacturers, who should want the right partners. And it’s a little bit on the consumer to understand. Of course, it’s our job to make them understand.
If a consumer is unaware of what they actually need in order to accomplish the result they’re looking for, then somebody’s got to get in there and fight for that education. That touches a lot on the subject of big box. It’s an interesting concept, because that understanding of how to truly help doesn’t happen in the boxes. They don’t even comprehend it.
DeStafney: If a company wants me to believe they’re going to sell direct and, in doing so, they’re going to benefit me directly and partner with me, then, when they make that sale, they should share that customer with me. Send me that guy’s contact information, and let me contact him. Let me say, “Thank you for buying a Fender product from my partner, Fender. We’re here to serve you. If you haven’t been to our store, come by. We have a great service center. We can manage warranty issues. We can sell you accessories.” That’s partnership.
What are your thoughts about competing with Amazon, Guitar Center and other businesses?
Faltin: In The Retailer’s recent op-ed, the Guitar Center executive basically said, “We’re creating musicians, and you should thank us.” My response was, “You’re saying, ‘We’re taking business from you because we love you.’”
One of the problems with Music & Arts and Guitar Center—that whole conglomerate—is that, at least in our area, we have not seen them create new markets. They tend to move in right next door to a store that is successful. In my opinion, they’re targeting them to put them out of business. It’s moving business around, but it’s not creating new markets. So, the op-ed about what [the author] thinks GC is doing was cute. I don’t see it…but…it’s one spin on things. [Laughs.]
Cook: Of course, the concept of Amazon and the concept of Guitar Center are two extraordinarily different things. We have a GC down in Albuquerque NM, which is 60 miles away. That actually benefits us, because they’re terrible. People go in there, and they realize why they come to us instead. I hate to dog them that way, but that’s what it is. Their existence is, on some level, good for our business, because our market is set up in a certain fashion. Of course, particularly when it comes to people who don’t really know any better, we do lose a considerable amount. But then, with that next-level customer—the step-up customer who’s been playing guitar for a couple of years and who’s now ready to really get into it—that person gravitates more toward our type of store, because of our level of expertise.
Pittman: I see some interesting things with that. I don’t know if you guys remember when Best Buy got into the music industry, but that was an interesting moment. At the time, I happened to have a friend who was a VP for Best Buy. On day one, the cockiness reflected one level of confidence; two years later, it was a different story, reflecting an eroding confidence level.
We’ve got a Guitar Center nine miles from us. What I see in all of this is that franchises—be they educational or product-based—generally have deep pockets, because they’re bankrolled by an investment firm, they’re publicly traded or they’re privately held by some bank. So, their pockets are deep. The other thing they have is really strong marketing campaigns. And when you have 200 guitars on the wall and 58 drum sets on the floor, the “wow” factor is there. Anyone who says that’s not hard to compete with is naïve, because I know personally that it’s very hard to compete with.
Think about a used car lot. There’s a Jeep dealer in my area, and he’s got around 20 of them out there. And I promise you that he keeps them in really good shape. But, if you go to CarMax, they’ve got 6,000 cars on the lot. There’s a huge impact on the buyer, who goes, “Oooh! Wow!” And Amazon and any of the box stores have that. And then, you get some large companies that have it, but they’re really good. Not all boxes are the same.
So, our clientele will pop in and out of them, and then come back to us. We’ve seen the effect on the floor. “Oh, they had this in stock, and I wanted it, so I just got it. You guys didn’t have it on the floor.” It’s really hard to compete with their wallet. It’s in a category that we just aren’t. So, you hope that, through relationships and service, you get people patient enough to work with you. Sometimes you can, and sometimes you can’t. There are a whole lot of kids who hang in those boxes, and they’re addicted to the “wow factor.” Logic doesn’t enter the conversation until they’ve already gotten burned.
People go on Amazon because they think they can get a great deal. People go to a box because they think they have more things. We educate our customers on the fact that, if you’re looking for specialized knowledge, you might find they don’t have it. When it comes to the mechanics—and, when I say “mechanics,” I’m talking about the musicians in our store—you have to constantly keep that capital in front of people. I like to be able to say, “Hey, this guy is one of the best guitarists on the East Coast. So, he knows more than that 17-year-old kid who’s working behind the counter at the box store. Trust me. I promise you.” So, when you get into that kind of stuff, you just have to use different ammunition. Their ammunition is volume; our ammunition is expertise.
It’s not even pricing all the time. Everybody has to be competitive on price. It’s the “wow factor” of somebody exclaiming, “Look at how many guitars they have in here!” Customers buy from that intoxication. They don’t always think it through, like, “Well, maybe the teacher knows more about it.” And teachers are sometimes loyal to brands, even over the place where they work.
DeStafney: Menzie, I think your comments are awesome. They’re spot on. I agree with you totally. I know the experience in my store is so much better. I know my employees are so much better. I know that the service is so much better. I know my store is cleaner and more comfortable. I know we can react on a dime and make a decision now, whereas it might take days to get a similar decision out of Guitar Center. But, you’re right: The power that they have with the deep pockets and the huge advertising that they do…there’s a whole generation of kids who equate “Guitar Center” with “music store.” They really do. We do the best we can. We create an amazing experience. We do things GC doesn’t do, and we do things they do, only we do them better. They’re great competitors. And I think, if you do really well, you might split sales with them in a region. If you split sales, you have won.
What are your feelings about MAP? Are you a MAP store? Are you grateful for MAP, or do you think it hurts you?
Faltin: We won’t carry a product if we’re not going to make money on it in our store. So, if we have a vendor that is selling direct or that is selling at a ridiculously low price to somebody who’s an online retailer, and then I get pressured to match that price, I’m not going to carry that product anymore. It’s just as easy as that. There are very rarely no alternatives to that product, be it a clip-on tuner, a bag of picks or a box of reeds, in the marketplace. There are always alternatives that are attractive, which we can steer our customers to.
So, for me, MAP is really great because it levels the playing field. It ensures that we, in general, are in line with online prices. People will come in and say, “OK. You’re in the ballpark of online prices.” When you go to buy a product and it’s hundreds and hundreds of dollars cheaper online than in a store, that’s hard to rationalize as a consumer. But, if you’re close, they’ll typically go for it. So, MAP has been a good thing. And, if vendors aren’t protecting MAP, or if it’s disproportionately cheaper online, we have a hard time justifying carrying that product in the first place.
DeStafney: I’ve heard a lot of people opposed to MAP. They think it hurts them and hurts their profitability. I think, without MAP, it’d be the wild, wild west out here. We’d see stuff selling for dollars over cost. And I know you guys see the same thing. How many of you have customers come in, with their phones out, and they’re checking pricing? They’re going to Amazon to see what the pricing is. They’re going to Sweetwater to see what they’re selling it for.
I’m a believer in MAP, and one of the things we look at when we look at a manufacturer or a new product is what the MAP policy is, as well as how strictly it’s enforced. We go online and look to see what others are selling it for. That’s when you’ll find out just how stringently they support it.
At the NAMM Top 100 Dealer Awards at Summer NAMM, I was so blown away by the young people who have stores and what they’re doing with their stores…how they’re marketing and how they’re merchandising. It just blows me away. These kids are awesome. I’ll go back to the pedal companies: They understand MAP, and they don’t want people to violate it. So, they’re covering every possible iteration and thing you can do to circumvent MAP. They’re closing those loopholes. They’re enforcing it, and I’m glad to see that they are.
Now, the bad news is, the margins are getting less and less. We’re seeing a trend of people saying, “Yeah, 30 points. Isn’t that great?” And I say, “30 points? No, that’s not great.” Forty, I’m happy with. Thirty, not so happy. Thirty-five, I can accept. But there are a lot of companies—big companies, too, now—throwing 30 points at you as a starting point. And, now, you’re also dealing with sales tax issues…people who don’t want to pay sales tax. They want you to match prices online. And, so, that 30 points quickly becomes 18. And that’s just something you’ve got to deal with.
Margins are important. I’ll walk away from cool products at the NAMM Show when a guy says, “Yeah, 25 points.” And I’m seeing it from some big people. I say, “No. I can’t sell your stuff. I won’t make any money on it.” It takes 26 points just to keep my doors open.
Pittman: Jim, I agree with you 100 percent in the fact that I think MAP has some good things about it. Enforcement of it, I think, is the discussion. If this were an industry of integrity, MAP would never be violated. It wouldn’t be an issue. That’s what it’s supposed to be: 35 miles per hour is the speed limit, and that’s what you drive. But that’s not how it works. So, it’s tough. In Washington DC, there are a billion choices. We have chain boxes and we have independent retailers that are $80 million businesses. We have all of that to go against. And when MAP isn’t consistent, that makes it even harder, because it’s a small margin to begin with. It used to be that you could keep 40 points. Life was pretty good.
The other thing is the cost of real estate to lease or buy. It’s gone up, not down. So, if the cost of maintaining your business is going up and the percent of profits in business is going down, then you end up having to do more creative things. One of the things I’ve said to folks when they ask me how it’s going is, “If you don’t mind working 15-percent harder for 10-percent less, it’s great!” But then, you look around and you realize that’s actually a pretty good spot to be, you know? You’re working, at least. I’ve got a Sports Authority going out of business two blocks down the road from where I live. Aeropostale is closing stores, too.
The whole retail story—be it the music industry or just retail in general—is like catching a falling knife. To try to catch it, you’ve got to be very tricky, you’ve got to be very astute and you’ve got to be pretty quick. You also have to be creative. Jim, you’re talking about these private pedal companies…you know, these smaller things. What we see in the youth is that, at the very least, they’re freshly creative. They’re saying, “You could also do this. You could also do that.” Anyone who’s locked into the “This is the way we’ve always done it” kind of thinking…man…if I were them, I’d be hiding under my bed with my knees knocking. You can’t look at any of it that way anymore. Tomorrow morning, it’s all going to be different.
I mean, apps didn’t even exist 10 years ago. No one had a smartphone, either. That changed everything. Sure, people could go home, check on the computer, come back, and challenge or accept your price, but they very rarely did it on the floor. But, in Fairfax County VA outside of Washington DC, they’ll not only do it to you, but they’ll also walk over and show you what they’re doing on their phone. To say the least, it’s very different…it’s the wild, wild west.