Drum And Percussion Manufacturers Weather Economic Storms
By Michelle Loeb
If you take a slow economic recovery, mix it with a European debt crisis and then add a pinch of presidential election uncertainty, what do you have? It’s a recipe for instability that’s affecting all markets, including MI. The Music & Sound Retailer spoke to three recognized authorities, representing the diversity of the drum and percussion segment, to find out how this slice of the market is faring and what manufacturers are doing to help music retailers make it through these tough times.
Although, for this story, we spoke to only three companies, their observations and trend analysis lend insight into the entire segment. Our respondents are Mike Robinson, Director of Marketing, KHS America; Peter Stairs, Vice President of Sales, Sabian; and Mitch McMichen, Founder of TreeWorks Chimes and President of Meinl USA.
At KHS America, Mapex has seen steady sales at the entry-level and upper-mid price points, the latter of which seems to have replaced the former high-end market for many retailers. Mike Robinson commented that “consumers who formerly shopped in a price range of over $2,000 are now shopping in the $1,500 to $1,800 point and are being more frugal,” adding that KHS retailers have also seen a slight demographic shift as the economy continues to struggle toward recovery.
“A large percentage of the market used to be occupied by customers in their mid- to late-20s, but recent graduates aren’t finding work easily. They’re no longer supported by mom and dad and don’t have the discretionary income necessary to afford a new drum set. The 35-and-older demographic is still showing sales, as many in this bracket are still gainfully employed and still have some discretionary income,” said Robinson. “They’re still more frugal than they were five to six years ago, and they’re shopping in a lower price bracket that still offers professional quality, but they are less averse to paying by credit or parting with their cash as compared to those in their early 20s. Entry-level kit sales are still holding up as the customer is not the player but, rather, mom and dad.”
To help tap into the lack of available credit among those in their 20s, KHS launched a financing program for retailers that began over the summer. Through a partnership with First Mutual Financial, customers are able to get flexible terms up to 60 months and a 12.99 percent simple-interest rate with a minimum $1,000 purchase. “There is no cost or commitment for retailers to take part in the program, and they can set up financing programs directly with the consumer right at the counter,” said Robinson. “People are looking for help. They don’t want to pay the astronomical APRs and service fees of major credit cards, but they still want that new drum set. The desire is there, but they need creative ways of achieving the dream.”
Another way customers have gotten creative is to spice up their existing drum kits with exciting new accessories, holding them over while they wait to put down the money on that new kit that caught their eye. At Sabian, this has translated into an increase in high-end sales and profits that are “nicely ahead of our targets for this year,” said Peter Stairs. Looking at the company’s current sales trends, Stairs noted, “This could be because the low end of the market is possibly more sensitive to market conditions, or it could also indicate a trend to buying up. Most likely, it’s a combination of both to some degree, but where we are is that our lower-end products are a bit soft, and our high end is strong. That’s not a bad place to be.”
Mitch McMichen posited that, although economic troubles have affected everyone, they might not have hit the core of the drum market quite as hard. “In 2008, when everything went really bad, it mostly affected people with a lot of investments,” he said. “Most drummers don’t really have much of a stock portfolio. So, for them, not much changed. They heard that things were bad and it gave them pause, but they are just regular people, so they could go on with their lives.”
McMichen has seen an uptick in sales in both of his accessory brands. In fact, both of his companies are in the middle of their best years ever. McMichen points to the lower prices on Meinl percussion and TreeWorks items as one of the keys to success.
“For TreeWorks, our items are typically under $200 and, for Meinl, there are many products for $99 or less. That’s a price point where you don’t have to ask permission from your spouse to make a purchase. It can fit into your budget easily,” said McMichen.
Into The Store
Having ascertained the price points that move the most drum kits, cymbals and accessories, the challenge retailers and manufacturers both face is how to get customers into the store and then out the door with a product in hand.
“Many dealers we know who have both brick-and-mortar and online operations are reporting that there have been noticeable shifts to their online business,” said Stairs. “I think that a lot of it has to do with the consumer’s desire for an easy, seamless purchase. They are getting more used to sitting at a computer to research and buy products across an increasing amount of consumer product categories.”
With online retailers often offering lower prices, free shipping and no tax, it’s no surprise that customers would rather log on than go to the store. But McMichen has an alternate theory explaining the pervasiveness of this trend.
“Musicians love going to the store and getting their hands on stuff. It’s an expense they enjoy incurring, and things like the price of gas are a small price to pay,” he said. “What seals the deal for online consumers isn’t price; it’s the anonymity, the time saved and the selection. So, the best way to combat online retailers is to have a killer selection.”
Although this approach might seem counterintuitive at a time when, as Stairs noted, “distributors and dealers are watching inventory levels and dollars very closely,” Meinl’s dedicated sales staff works diligently to help its retailers maintain what McMichen calls the Long Tail approach to merchandising.
“There are some blockbuster products and then, from there, the products drop off but never get down to zero,” said McMichen. “The many products that we offer that aren’t blockbusters, when you put them together, they add up to a lot. But, in order to reap that benefit, you have to have them in stock.” His sales reps not only guide retailers through the process of creating a product mix, but also install the point-of-purchase displays necessary to maximize floor space and keep these products in the customer’s eye.
“It’s a huge undertaking. If you let it lapse, your great selection becomes just a normal selection and then you lose the magic,” said McMichen. “Buying is just the first step. It’s important to maintain that great selection and continue to restock, even if you feel nervous. We tell them that upfront.”
KHS tapped into the power of the Internet and is using it to draw customers into its brick-and-mortar dealers through a new custom drum program called MyDentity. The site allows users to design their own drum set and then connects them to a participating retailer to make their purchase. Once purchased, the kit is built and shipped within only 30 days.
“We’ve concentrated heavily on MyDentity because it serves the $1,000 to $1,200 price range, where no custom-drum options currently exist. It’s also in response to general trends within the larger consumer market outside of the music products industry,” said Robinson, who pointed to the car industry as an example. “With products like the Scion and the Mini Cooper, customers have a big range of fixed options that give them a customized feel when combined, even if the product isn’t necessarily personalized. There are a large number of permutations, and they can create something that’s completely unique to them and fits with their personality.”
He continued, “Consumers have come to expect a custom experience and they want individuality. It’s a widespread phenomenon that has been going on for 10 or 15 years, but hasn’t been widely acknowledged or acted upon by major manufacturers within the music products industry.”
The MyDentity program has not just tapped into the consumer’s need for individuality; it’s also a conduit for the retailer to express its own distinctiveness, which came as somewhat of a surprise to those at KHS.
“We expected the majority of activity to be at the consumer level, but we’ve found several retailers are using the design software to make custom drums to put on the retail floor and sell to customers,” he explained. “They tell us the program gives them control to design drums that are appropriate for their local market. No one knows their customer better than they do. They are the best judges of local tastes.”