We like to believe that, if there’s one thing that sets The Retailer apart from the crowd, it’s our passionate advocacy on behalf of—and our abiding connection with—the independent, mom-and-pop musical instrument retail stores that now (and forever) are our industry’s beating heart. That connectedness with indie, brick-and-mortar shops is what birthed the Independent Retailer Roundtable 10 years ago, and it’s what has kept the feature alive for a solid decade. In it, we bring together a small group of the most respected indie dealers in the market today, and we give them a megaphone to publicly discuss what they otherwise only talk about privately. No names have been changed to protect the innocent…no impolitic comments have been filtered out…and nothing’s been sanitized to avoid ruffling feathers. This is the story, straight from the folks who know.
In this, the first part of a two-part feature, our panelists delve into their relative optimism (or pessimism) about the industry, the strength (and weakness) of particular categories, the trend toward selling boutique brands, and the challenges of competing against both Internet retailers and other brick-and-mortar outfits. Next month, our participants discuss dealer/vendor relations, the hindrance (or help) that the government represents, and the biggest, most important change they’ve made in their store over the last year.
This year’s esteemed participants are Gordy Wilcher (Owensboro Music; Owensboro KY), Donovan Bankhead (Springfield Music; multiple locations), Larry Miller (Metronome Music; Mansfield OH) and Mike Moser (Columbus Music; Columbus NE).
The Music & Sound Retailer: To start, what are some of your general thoughts about the state of brick-and-mortar music products retail? Are you feeling more optimistic or more pessimistic, and why?
Larry Miller
Larry Miller: One of my biggest problems with brick-and-mortar is that manufacturers are cutting margins. The idea of existing on a margin of 22 percent to 25 percent—even though it might include free freight—is ridiculous. The only way you can justify lowering margins is by increasing turns.
Donovan Bankhead: To kind of jump on that point, you combine the fact that we’re getting lower margins than we’ve ever gotten historically with the fact that our customers are being siphoned off by various Internet competitors…it’s kind of like the margin that’s being offered today
only works in a strictly Internet-based type of environment. Internet operations don’t have all the staffing needs, retail space, high rent costs and everything else that we do. So, things are challenging. You have to partner with vendors that can give you some pricing that works. And, most importantly, I think you have to find other services that you can provide—rentals, lessons, repairs, etc.—that make up that lost margin. And I know that, for us, that’s how we’ve dealt with ever-shrinking margins.
But, all that being said, I’m actually very optimistic about the future. I think we’ve got a lot of good things in place to help the next couple of years be very successful for us. We’re excited about what we’re doing with school music and our rental program. We’ve got an all-new e-commerce site that will be launching soon; we’ve put a lot of effort into it, and we’re excited about it. We continue to grow our services in lessons and repairs. So, although we’re very optimistic about it, it’s certainly a lot harder to make money now than it was maybe 10 or 20 years ago.
Gordy Wilcher
Gordy Wilcher: One of the challenges for me, particularly in a small-market area—our city population is 58,000 people, and my region is about 100,000 to 150,000—is trying to learn to be all things to all customers. It seems the perception among customers is, if they come in or call, they assume that we have every product from every manufacturer. I’m not sure if that’s because the online giants do, or because the other big e-commerce sites have that. How do we stay viable if the perception seems to be that we should have every product from every manufacturer? I don’t know if any of the other stores among iMSO members have noticed something like that.
Pertaining to services, our repair department has exploded. We’re learning how to adjust pricing to make that more profitable all the time. The short-term rental and repair business, along with our installation business, has really helped drive us and helped us stay above water. At least we’re ahead of the curve as compared to last year, and that’s encouraging. So, I’m very cautiously optimistic moving forward.
The other issue is staffing. You must try to keep the right staff…and get them to work on time, keep them off their cell phones and limit friends visiting. Learning to handle the loafers is a new challenge with younger staffers.
Donovan Bankhead
Bankhead: One thing to think about is that you must do a good job with your customers, because they want to deal with you, even if they aren’t sure you carry something. They want to deal with you—their local brick-and-mortar—so bad that they’ll drive into the store and ask you for something that they can’t see. That’s how much they prefer you, their local store, to the Internet outfits. So, kudos to you.
Wilcher: Thank you, Donovan. I appreciate that. Of course, we’ve been here for 43 years. We’ve worked hard to be an important part of the community. We participate in as many community events as possible. If nothing else, we show up just to have a presence there. We are really, really striving to be better and better at customer service. I was fortunate to serve on the NAMM Board of Directors with industry powerhouses like Chuck Surack at Sweetwater and so many mentors, all of whom are customer service-driven. I think that’s the key.
Donovan’s correct. You have to be the destination. After all these years, there are more hats to wear, and there’s less time to wear them. I often used to kid that my former partner didn’t do much! I stand corrected.
Mike Moser
Mike Moser: From reading the trade magazines, it appears that the music industry is doing about 70 percent of the business it did in 2008, and about 30 percent of that business is going to mail order or Internet retailers. So, if you multiply those two numbers together, the 70 percent who are still buying music products and the remaining 70 percent not buying them online, that means the brick-and-mortar guys are battling for 49 percent of the business that we were doing in 2008. I assume that includes the really big brick-and-mortar chains. That illustrates the challenge. But, I will say that business is up this year over last year.
As Gordy said, we, at one time, did a lot of repairs for little or no charge, thinking we were supporting our sales force with our free service. But we’re finding more repairs coming in that are used or bought online somewhere, and we have to charge enough to make sure that those repairs are profitable. We explain to the customer that it takes a certain amount of time to fix things.
The Retailer: What product categories are particularly strong for you right now? Which product categories are contracting? How are those trends affecting your business and what you choose to stock?
Wilcher: In my market—western Kentucky and southern Indiana—acoustic sales have just obliterated electric sales. I hear that’s a trend all over, but I’m not sure. I think everybody is a little different. But, to embrace that, we greatly increased our acoustic and Americana instrument collections. We’re stocking a wall full of banjos, mandolins, fiddles and violins. In the past, we just had them there. We were known as a rock ‘n’ roll shop. Today, when you visit our store, you’ll see a huge selection of acoustic instruments, and they’re driving sales for us. To supplement that, we offer open jams, hosted by our bluegrass instructor. Our electric guitar sales and amplifier sales are scary…practically nonexistent. We do have a few young heavy-metal guys who are still buying and playing guitars occasionally, but it’s very slow.
The short-term rental and repair
business, along with our installation
business, has really helped drive
us and helped us stay above water.– Gordy Wilcher
Cables are probably one of the most profitable items that we stock. We buy our cables from several vendors. One, in particular, is very, very profitable and it’s proven the most serviceable, as well. Increasing string sales is a bright spot. A surprising category with huge sales increases is wireless microphones. The acoustic instruments, repairs, installations and lessons are definitely keeping us afloat, though!
Miller: Gordy, we seem to be almost identical as far as environment and population. But, one of the things I wanted to mention: in trying to keep our profits up, we found used instruments are by far the most profitable. We buy as many as we can. Now, we have to watch very carefully, because there is a big drug problem in the area and, so, we do have a waiting period. They can’t come in and just sell something. But, since we have our own repair department, we do a really good job on used products.
Wilcher: Larry, I agree with that. I wish I had more opportunity to buy used products. Recently, we were lucky to buy some vintage pieces that walked in, and we made healthy, healthy profits reselling those pieces…and they sold quickly! I need to do the work and discover the best strategy to increase the opportunity to buy pre-owned, quality inventory. Seems like a never-ending parade of offshore products comes through the doors, with owners expecting to recover the investment!
Bankhead: For us, we have seen electric guitars come back to some degree. We’re still selling more acoustics than electrics, but we’re selling electric guitars again. I’ve been hearing more electric guitar in popular music, which is always a good sign. The thing, I think, that’s been most interesting is that electric amp sales have been very difficult—I think a lot of people are seeing that—but, holy cow, I sell a ton of boutique effects pedals. I’m doing more business now in boutique effects pedals, in dollars, than I ever was in amplifiers. So, to me, that’s OK. They take up a lot less room, and they’re cheaper to buy. [Laughs.] That’s kind of nice!
I sell a ton of boutique effects pedals. I’m
doing more business now in boutique effects
pedals, in dollars, than I ever was in amplifiers.– Donovan Bankhead
Other than that, it seems to me that the growth in the acoustic area has kind of slowed down. I don’t see it shrinking or anything, but it seems to have stabilized. And, certainly, like everybody, we’ve focused really hard on accessories and stuff like that ever since the recession.
Moser: We aren’t selling a lot of pedals, so I would be curious to know what is selling in the pedal business. As far as used is concerned, we do buy used where we can. There’s a pawn shop in our town that buys and sells musical instruments and, sometimes, their used sale prices are higher than what we sell them for new. So, that helps us a little bit. And I buy things off Craigslist sometimes when I see something that really looks good.
The Retailer: What are the pluses and minuses of centering your store on boutique brands…brands that are the equivalent of craft beers as compared to industry giants that are equivalent to Budweiser?
Bankhead: I think that analogy is a good one. Applying it to effects pedals, that definitely lines up with what we’re seeing. We sell very few of the “big” stalwart brands of pedals. We sell a lot more from the smaller, craft, boutique pedal manufacturers. And I think part of that is because those pedal manufacturers have done a superior job with their marketing. They’re able to put together pedals that are unique. They don’t need to sell a billion pedals to make it worth designing. If they sell 100, that’s worth it for them. And I think a boutique pedal is an affordable luxury for a lot of guitar players. Even a high-end pedal that’s $250 to $500 is something they can afford, as compared to a boutique guitar that’s $2,000, $3,000, $4,000 and up.
Moser: How do you pick those boutique brands, Donovan?
Bankhead: We basically did a couple of things. We got online and searched some of the gear forums, like The Gear Page and a few others. We looked to see what guys were talking about there. We also got on our Facebook page and asked our customers what pedals they were interested in. I thought that was very important because, when we’re bringing in what our customers want, they then respond by buying it. And that’s ultimately the goal! [Laughs.] So, that’d be my suggestion. And the other thing, too, is that I have four different stores. So, I’ll have one brand that just sells like hotcakes in one store, and then another store can’t give it away…and vice versa. So, you’ve got to find what works in your market. That’s how we did it, though.
Miller: Donovan, would you say it’s word-of-mouth that causes one store to do a lot more than another on a particular item?
Bankhead: Yeah, I think it is word-of-mouth. You can also earn word-of-mouth by providing a great shopping experience in a good-looking store that’s fun to shop in. And then, of course, creatively using social media is a great way to get top-of-mind awareness. And that’s something that we’ve worked very hard on in the past couple of years…trying to build that. Then, you try to find ways to capture people’s attention through social media.
The Retailer: Is it plausible, from your point of view, for a retailer to say, “I’m not going to stock Gibson. I’m not going to stock Fender. I’m only going to stock boutique brands”? Or is that not a plausible business model?
Miller: As a Fender dealer, we still work with them, although they’ve become focused on stocking a deeper selection of products…much more so than they used to. But I believe we’re like the rest of you guys with the boutique brands. If you call Seagull a boutique guitar, their acoustics are very good-selling guitars for us.
My competitors have done more to help me
survive than anything else has. In
the morning, you wake up and wonder
what they’re doing.– Larry Miller
We also sell pianos and band instruments. As an example, we stock both of those categories from Yamaha. They build very good products that are priced fairly. Plus, they don’t make unusual demands on stocking. We try to be loyal to our suppliers as much as possible, until they make such demands that we just can’t do it anymore. Trying to keep up with the changing market of boutique brands is like twirling eight plates on a stick! They come and go.
Bankhead: It’s a tough question for me to answer. I do have a number of those larger brands in my stores. I do sometimes wonder if they’re worth it, because they are very demanding. And, a lot of times, their sell-through isn’t as great as what they think it is. So, I think it’s an interesting topic. And, certainly, my success with boutique guitar pedals and various acoustic lines has got me considering alternatives, for sure.
The Retailer: What do you view as the biggest competition right now, in terms of your market share and your bottom line? How are you girding your business to handle that competition?
Miller: Amazon is, by far, our biggest competitor. As an example, a customer walks in and asks for a product they want, and we might not carry it. If we offer to order it for them, they’ll reply, “Hey, I can order it from the Internet and not pay sales tax.” What we’re trying to do is make it a fun experience. We talk to the younger people, especially. We let them play anything they want, within reason. We do events, like all the other guys do. For example, we offer piano classes of six to eight, which are very popular. We want the customer to feel like it’s an experience to come into the store. It’s not just another situation where you lay down your money and the customer says “thank you” and “goodbye.”
Bankhead: I completely agree with what Larry said about Amazon, and how it’s now more challenging to get special orders. But, in terms of the rest of the competitors—others online and, certainly, our local competitors—I’ve just kind of come full circle on that over the last several years. I’ve come to embrace our competitors, and I try to have as awesome a relationship with them as I can. We’re competitors…we’re out there on the field, trying to do our best to win, but, when it’s over, we can pat each other on the back. We’re very positive and supportive of each other. What I’ve found is, by reaching out and being positive, the vast majority of my competitors have responded really well. And the couple that haven’t? Their attitude has actually helped to earn me more business. So, it’s kind of a win/win for me either way. Not only has it helped connect me to other people in our industry in my cities, but it’s also a much healthier way to operate my business and think about people, as opposed to thinking of them more negatively.
The brick-and-mortar
guys are battling for 49
percent of the business
that we were doing in 2008.– Mike Moser
Wilcher: Donovan is absolutely right. We’ve always held that philosophy: yes, they’re competitors, but we’re all in this game together. We’re all here to help each other. I have two other stores in my small town, and I have always maintained a good relationship with them. If there’s a product a customer wants that I don’t have, I always make the effort to call one or both of those stores. If they have the product, I’ll send the customer to them. What I’ve found is not only does that create a healthy relationship with your neighbor, but it also fosters loyalty and trust with the customer. I think the customer will probably keep you top-of-mind because you made the effort to do that. Very often, I’ve had customers who have said, “Well, thanks for calling those people. I’ll be sure to come back.” Most of the time, they remember you for doing that, and they’ll probably come back to your store. I think it’s important: not only for the relationship and the industry, but also for your customers to know that you’re going to provide that service.
Miller: My competitors have done more to help me survive than anything else has. In the morning, you wake up and wonder what they’re doing. It’s not because you’re jealous of them; it’s because you want to see if they have some good ideas. I have a competitor about 30 miles down the road—Larry’s Music Center—that keeps me alert. We have had people who, when they start a store in town, have said, “I’m going to put Metronome out of business.” I don’t try to put them out, though. I want them to succeed. They’re the ones who motivate us. They’re the ones who make us try to do better.