David Kalt
David Kalt likes to find solutions for things that don’t work. After spending a few years working in recording studios, Kalt, who has a master’s degree in computer science, created ClientBase, the first customer relationship management (CRM) software for travel agents and group tour operators. After selling that company, he created a highly successful online options trading site, optionsXpress, which he took public in 2005 and later sold to Charles Schwab. In all of his successes, Kalt allowed himself one extravagant purchase: his dream guitar. It was a 1963 Fender Strat, which he bought from Chicago Music Exchange (Chicago IL).
Kalt began feeling the pain caused by eBay and similar Web sites firsthand shortly after purchasing Chicago Music Exchange in 2010. Kalt began to buy and sell used instruments online through eBay and, quickly, he found the experience to be less than satisfactory. In his usual fashion, he began to envision a solution to a problem that hardly anyone even knew existed: a vertical market for used musical instruments. (To establish our definitions, a vertical market is a market designed to fit a single industry or need.) In the case at hand, Kalt envisioned an online marketplace designed to facilitate user-to-user sales of musical instruments and equipment. When asked about the name choice, Kalt remarked, “I’ve always loved Reverb, and I thought it would be a catchy name for a business.”
Wondering why someone would want to limit his or her purchasing to one specific vertical market or “ecosystem,” as opposed to using a larger, one-stop marketplace like Amazon or eBay? That’s a good question. There are several answers, the first of which comes in the form of a different question: When’s the last time you went to the mall? The mall is the ultimate one-stop destination…the original be-all shopping experience. And, after decades of wading through crowds and bad shopping experiences, we can all pretty much agree that the mall sucks.
If an independent retail store is the best alternative to the mall, then a vertical-market-focused online marketplace is a reasonable reaction to the tired, cluttered, expensive, all-around-terrible shopping experience that eBay has become. Much as with the mall, if eBay or Amazon were satisfactory, there wouldn’t really be a need for an alternative. They’re not satisfactory, though. And, given that there is a marketplace designed specifically for musical instruments, why not use it?
Kalt describes himself as a “product guy,” saying that he hires people who are product-oriented so they can speak firsthand about products and functionality, as well as solve problems quickly. That approach clearly paid dividends because, just two years after launching, Reverb.com’s growth necessitated going from three to 30 developers. It currently has more than 120 people on staff and, in a typical month, there are several new hires. The tech team now has roughly 40 members, with another 35 focused solely on customer engagement. Some 85 percent of Reverb.com’s staff is composed of musicians, which is a huge number for a technology company.
Again, though, you can’t argue with bottom-line results, and Reverb.com is a fast-growing power player in MI retail. How fast? When I spoke to the company in December, it was on track to hit $245 million in sales in 2016, and it projects $1 billion in sales by 2019. There are more than 115,000 sellers and eight million monthly visitors to the site. International sales grew 150 percent over the last year, and international users grew 700 percent. And here’s another super-interesting number: Roughly three percent of Reverb.com sellers have a brick-and-mortar storefront. Hard numbers aren’t available on how many MI retail stores are using Reverb.com, but I can say this: It’s not enough.
Reverb.com’s executive team shares the creativity and vision of the company’s Founder, David Kalt (at center, holding a guitar).
“I like the fact that some people don’t think of us as a tech company,” Reverb.com’s COO, Dan Melnick, said. “You don’t ‘feel’ the tech while you’re using the site; it’s meant to be seamless.” Of the on-staff developers, eight work on the iOS and Android apps, 15 to 18 work on back-end and front-end code, and a five-person product design team makes sure the site continually has a best-in-class user interface (UI). And, in fact, the UI is one of Reverb.com’s best features. The site’s ease of use and speed have made it inviting and user friendly, benefits that the company prioritizes. Simple things like the load time of each page on the site are given their due at Reverb.com. According to Melnick, “Your bounce rate [the percentage of site visitors who leave after viewing only one page] dramatically increases if the site doesn’t load quickly enough.”
For payments, Reverb.com uses PayPal synchronized through its own Direct Checkout system, as well as credit cards. Most e-commerce sites still require buyers to exit the site and log into PayPal to process their payments. It’s often problematic, and it can degrade the user experience. According to Melnick, “We’re working toward a unified payment platform where the buyer no longer has to leave Reverb.com. When you leave Reverb.com, we’re no longer in control of the experience.” The idea is for Reverb.com to control the end-to-end user experience, or the “the whole widget.” He added, “It’s part of our DNA as a tech company. We measure and experiment and figure out what the best version of something is.”
Reverb.com constantly mines user feedback from its customer service team to improve the technology that drives the user experience. All employees are encouraged to use the site to buy and sell gear, ensuring that they understand the platform and can expose potential issues. Kalt himself is not excepted; he still logs in every day. He explained, “In the early days, being able to feel the pain of what a dealer goes through in terms of negotiating and answering questions, and then working to make listings easy, being able to edit them and promote them….those are all things someone has to champion and fight for. We sat down with developers and made it happen.” At its core, Reverb.com is trying to make buying and selling product easier for dealers, and the shopping experience easier for consumers.
One solution Reverb.com continues to develop, which should make many dealers very happy, centers on point of sale (POS) systems. Currently, Reverb.com supports e-commerce integration with Magento, Shopify, BigCommerce and WooCommerce, and it continues to support do-it-yourself comma separated value (CSV) integration. The company also has an open application programming interface (API), so anyone can write their own integration. (All the APIs that supported e-commerce platforms use are publicly available.) Rain POS, a new system that is targeting MI retail, is working on out-of-the-box integration with Reverb.com.
Along with improvements to the checkout funnel, as well as search efficiency, one innovation coming to the site is personalization. Reverb.com has begun to curate inventory that’s targeted to buyers based on their search history, their past purchases and more. “When a drummer logs in, they don’t want to see a bunch of guitars,” Melnick said. “And jazz drummers are different from metal drummers. Our goal is to get as granular as possible with that.” For dealers, some exciting, personalized innovations specific to that channel are in the pipeline. We expect to hear about them soon.
Reverb.com is incentivized to make sales, meaning that, if you don’t find buyers for your products, the company doesn’t make money. Personalization is just another way to help facilitate that. According to Melnick, “The goal of personalization is not to favor one shop over another shop. The question is, ‘Do you add unique inventory to the platform, and can we find a buyer for it?’” With Reverb.com’s low, 3.5-percent fee, selling through it is much more appealing than third-party marketplaces like eBay and Amazon. And, because it’s a vertical market-focused environment, everyone on the site’s a potential MI buyer. That’s not the case for the online shopping malls.
Reverb.com is very committed to original content. Pete Schu, Managing Director of Content, said, “Even with all the search engine optimization (SEO) tips and tricks, and all the back-end keyword information you can work on, it doesn’t matter if you don’t have compelling original content.” One way the company prioritizes that is by creating content based on what people are, or might be, searching for. For example, think about questions like, “What are the five best small tube amps?” and “What’s the best capo?” Answers to those questions in the form of compelling articles and product videos keep people coming back to Reverb.com, even when they aren’t buying.
Schu added, “Even with our demos, we try to take a different approach, because the field is saturated. So, we do things like our Potent Pairings series, where we show how to get a particular artist’s tone with different pedals that are very affordable.”
Compelling blog posts, as well as interviews with artists and discussions about wider-reaching industry topics, drive traffic to the site. That original content gets buyers excited about gear, helps to foster interest in potential buyers and drives sales. Internal data shows that the more original the content is, the more likely a sales conversion will be. “Our data shows we get a lot of conversions that come one click away from a blog article,” Schu affirmed. “The more original the article, the more traffic it drives and the higher the percentage of users who clicked through and bought something.” That clearly shows why developing original content is so important.
“If consumers today are going to be loyal to a brand, they want more than a utilitarian idea of ‘You make a product. I buy a product,’” Schu declared. “They want their brand to stand for something, whether that’s a value or a lifestyle aesthetic.” Although Reverb.com is a tech company and a marketplace, it behaves very much like a lifestyle brand, relative to content and keeping consumers in the fold. Someone can buy a pedal or an amp anywhere; original content helps consumers get more out of it than just a simple buying experience.
In just a few years since its founding, Reverb.com is now approaching $250 million in annual sales and becoming a ubiquitous brand.
Reverb.com’s data reveals that its users are mostly older than 25, and it skews toward used items. When the company began, site inventory was mostly vintage and used items; now, although new items have overtaken used in terms of number of listings, used items still sell more frequently. Used gear is also more closely associated with Reverb.com’s brand identity. And that’s an interesting fact, because it exposes some pretty specific buying trends among consumers.
Reverb.com’s identity has helped attract buyers for off-the-beaten-path items that might be more appealing to long-term players than to beginners. Many first-time buyers focus solely on marquee-name gear, and they have a bias toward new items that have never been played or touched. Older, more experienced buyers are much less likely to show trepidation when buying used items, and they’re much more likely to be interested in buying new items that are esoteric, rather than common things found everywhere.
One of the best ways to ensure a quality user experience is robust customer support. Chris Miller, Director of Customer Engagement, said visitors are five to six times more likely to buy something on Reverb.com if they engage with the customer support team. According to him, “Customer support runs the gamut from ‘What’s the best studio monitor for under $500?’ to ‘Where is my item?’” The company supports buyers during the purchasing process, helps point them toward items and fields miscellaneous questions. The team also helps sellers who might have questions about international sales or how to improve their sell-through rate.
One side effect of Reverb.com’s success: Traditional brick-and-mortar shops are now less dependent on big-name brands, as the online marketplace has helped to drive customers to new and unique brands, such as Reverend Guitars and EarthQuaker Devices. How has that happened? Miller said “boutique” manufacturers that have gotten a lot of exposure on the site have experienced a “communal lift” because of the hugely increased exposure. Reverb.com is, in a sense, helping to remove the stigma from buying a brand of guitar or amp that, although up and coming, hasn’t been widely seen; in fact, those items have become showpieces that consumers are actively seeking out. Perhaps most importantly, Reverb.com gives brick-and-mortar MI retailers a robust marketplace whose clientele is more likely to take a chance on those items. As such, it can be a great place for your physical storefront to sell, but also source, unique and vintage inventory.
In fact, Reverb.com incentivizes dealers to source inventory on its platform by offering one percent back on your fees, provided that you take your sale proceeds in Reverb Bucks and then spend that money on buying inventory for your store. One percent might not sound like a lot, but it adds up over time. Small innovations like that make Reverb.com even friendlier to brick-and-mortar dealers.
According to Miller, “There’s a ton of used gear that you can’t really get anywhere else that Reverb.com opens the door to. For a lot of brick-and-mortar stores that sell used gear, they have to take what someone brings in off the street. Then, they have to sell that stuff to someone who comes in off the street.” He continued, “Why not try finding something really cool on Reverb.com to put on your wall? There’s sort of a ‘wow factor’ to a lot of the gear you find here.”
That type of flow reversal isn’t something I’ve yet tried in my role at Larry’s Music Center, but it’s an interesting idea and a great way to try to limit exposure to harsh dealer stocking requirements. And it’s a viable way to find unique, interesting used pieces to complement your new inventory. Plus, even if the margin isn’t as high as it would be on locally sourced used items, it might help drive foot traffic into your store if you fill your pedal case with unique items that people haven’t seen before. And boosted traffic usually helps make sales.
According to Kalt, “If you look at the most successful retailers, they have a good used selection. The stores that have the best foot traffic and vibrancy take used very seriously. It gets a lot of repeat visits.” He continued, “We have plenty of people buying used inventory, bringing it into Reverb.com and having success. We want dealers to have that same success by buying used and making money on it, as well as getting more customers.”
Reverb.com is a viable alternative to traditional e-commerce for many brick-and-mortar stores that don’t have the time or the capital to build and maintain their own Web store. The company is also more than willing to speak to dealers one on one and help them optimize their listings. I did just that while on-site at Reverb.com’s headquarters, getting advice on everything from taking better photos, to how to leave feedback, to how to drive more sales. Its ease of use, mobile-platform friendliness and wide adoption among musicians, coupled with low fees, make Reverb.com an easy way for MI retail stores to monetize unused inventory, source used gear, sell pre-owned inventory to new customers and add margin to the bottom line.