We Proudly Present Part Two Of The Independent Retailer Roundtable

PART 1

This year’s Independent Retailer Roundtable conversation was so expansive and wide-ranging that we had to split the story in two, so as not to leave any important topic undiscussed. This time, our esteemed panel—Donovan Bankhead (Springfield Music; multiple locations), Gordy Wilcher (Owensboro Music; Owensboro KY), Mike Moser (Columbus Music; Columbus NE) and Larry Miller (Metronome Music; Mansfield OH)—touches on some of the most controversial topics currently swirling in MI circles. Concerned about dealer/vendor relations and manufacturers pursuing direct sales? Think the government is hindering your business with indie-unfriendly policies? Believe that MAP policy in the music products industry is chaotic and stress inducing? Well, our participants delve into all of the above, while also expounding on the best, most impactful changes they’ve made so far this year in their own stores.

Enjoy the concluding part of a conversation with some of our industry’s very best.

The Retailer: Describe the relationship between dealers and vendors at present. Are you concerned about those embracing a direct-sales model? Do you feel like dealers and vendors are working in partnership?

Donovan Bankhead: I think, definitely, the lack of an online sales-tax initiative is hurting our business. And it’s really shameful that these people who we laughably call leaders in our government have not addressed this yet.

Donovan Bankhead: I would say that relations are strained. Our relationships with the large vendors—the top of the top-tier vendors—have been difficult. They’re not necessarily musicians. They’re not necessarily in it for the love of music or for the craft. They’re basically finance guys who are in it for the business, and they don’t have the same passion and the same goals that we have. Sometimes, some of those guys have drank their own Kool-Aid and read too much of their own press, which makes them rather insufferable to deal with.

What we’ve found, though, is that, outside of those—moving down to vendors that are large, but that aren’t those top-of-the-mark giants—we’re finding a lot of people who are wonderful and who are embracing what the independents are doing. One guy who I think deserves mention, and whom I wish every other vendor would model itself on, is Tom Bedell with Breedlove and Bedell Guitars. That guy has such a passion for making great products, for building a great dealer network, for supporting his dealers and for taking care of his customers. You want to do more business with him. We want to find every way to do as much business as we possibly can, just because we appreciate how much passion he has for what he does.

There are other people in the industry who are like that. Sadly, many of the biggest names are not among those I feel that way about. And, I feel like, if they could adopt that model, it’d be such a tremendous advantage. I mean, if you can take some of those storied brands and names that are the very top of our industry—given how beloved their products are—and get them into this idea of truly loving their dealer network and their end users…embracing that idea and working to help everyone’s success…they could have even better growth. But, for some reason, they don’t want to do that. But, if they could, it would be fantastic.

Gordy Wilcher: Wise words, indeed, Donovan. During the past 43 years, I’ve been a partner with every brand we’re thinking about, especially the iconic brands. Over the years, as negotiations, mergers and more have gone down, I’ve realized that I can no longer support most, if not all, of those lines. Sure, you get bitter for a while, but I’ve got to say, now that I’ve moved away from those, my cash flow is healthier. It seems like we have more money to support some of the other brands and to take on more accessories, not to mention having less stress!

I was attached to Fender, in particular. I’m a Fender player…a bass player. I’ve played them all over the country. It was hard for me when Fender came in and told me that what I was doing just wasn’t good enough. Donovan mentioned Tom Bedell. There are a lot of vendors out there, really, along those lines. You just have to seek them out and start to build a relationship with them. I miss all those iconic brands. I’ve had ’em all, and I’ve lost ’em all. But we’re still here, and we’re still doing OK. So, you’ve just got to change your way of thinking, and then move on.

Mike Moser: To talk a bit more about what Donovan was talking about…manufacturers dictating to us what we’re going to sell and what we’re going to buy…. I think the business has been challenging over the last 10 years or so. And I think some of those companies are just grasping at straws trying to figure out what’s going to be a profitable business model for them. In the end, whatever they sell us, we have to be able to sell to our customers.

One company decided that we were going to sell hats and bar stools and signs…all that sort of thing. Our customers are primarily musicians who play; they aren’t dreaming about playing. They don’t want a Fender sign on their kitchen wall or whatever. They want to play a guitar. We’re a music store, and we sell musical instruments. I think that’s what we do the best. Sometimes, they come up with crazy ideas, and we just kind of have to let ’em go. Maybe they’ll come to their senses, come back around and we’ll do business again in the future. But we can’t go broke trying to follow their crazy sales ideas.

Larry Miller: I agree with you. As a Fender dealer, we’ve seen what’s happened so many times before. We had Baldwin. We were selling the heck out of their digital pianos, so we weren’t doing so much with the Baldwin acoustics. They cancelled us with a very mean letter. They did it with so many dealers that they got everybody mad, just as Fender did when they cancelled all those dealers. And, now, you never see a Baldwin piano. It’s gone. And that’s the danger for some of these companies. They have their own agenda. And, the next thing you know, things have changed so much that they’re not a factor anymore. I think that’s what’s happening with some of these companies.

Moser: We were also a Baldwin dealer for 40 years. They hired a CEO who came in from Proctor & Gamble, or somewhere like that, to run the company. They fired more than 80 percent of their dealers, thinking it was going to make business go up. When you look at the music business by the nuts, bolts and numbers, it sometimes doesn’t add up. You just can’t sell musical instruments the same way you sell soap, shampoo, toilet paper or pizza…whatever it is. The markets don’t have the same elasticity. It’s a much more complicated business. It’s too specialized just to be run by accountants and attorneys.

The Retailer: To what extent is federal, state and local government affecting your business, and in what way? How big of a challenge is the sales-tax issue?

Bankhead: I’ll jump in and take the low-hanging fruit here. [Laughs.] I think, definitely, the lack of an online sales-tax initiative is hurting our business. It hurts our communities. It hurts us badly. And it’s really shameful that these people who we laughably call leaders in our government have not addressed this yet. I remember reaching out to our senators and to our governor maybe seven or eight years ago, as well as several years before that, about this issue. I was told at that point that they just didn’t see it as a major issue. And, now, I think they’re starting to change their mind on some of that. But the fact that they have such a lack of vision to see what’s going to continue to happen with Internet sales and the growth of online selling is really pathetic. The fact that, to this day, we still don’t have something that’s reasonable and fair is, I think, really a travesty.

Moser: I talked to our congressman about the sales-tax issue, and he just told me flat out that he’s got some really big national retailers in his district. They don’t want sales tax charged on their national sales. And, so, I think that those bigger retailers are influencing some of the politicians to look the other way when those taxes aren’t charged when they ought to be.

Miller: Well, the FTC is the biggest problem. Interstate commerce laws are what they hide behind. I don’t think it’s going anywhere. It’s like when our county commissioners raised our sales tax a quarter of a percent, not realizing what it does to the local guys. It’s really a big burden. Seven and 1/4 percent might not sound like a lot, but that’s off your net profit when you have to include it in your sale. The good news is that Amazon is now charging sales tax in Ohio.

The Retailer: Recently, Allen McBroom wrote an exposé about minimum advertised price (MAP) in the music products industry. What are your thoughts about his critique? How do we cope with the issues that MAP creates?

Mike Moser: One company decided that we were going to sell hats and bar stools and signs…. Our customers are primarily musicians who play. They don’t want a Fender sign on their kitchen wall or whatever. They want to play a guitar.

Wilcher: MAP is the new retail. We may have touched on this earlier in our conversation. You go to Nashville for Summer NAMM and you do some serious legwork to find vendors you can add to your business. It was hard for me to think that I could get away from all the so-called “name brands”…the iconic brands. But, in the last couple years, we’ve really done our homework and hunted for the right vendors and the right pricing.

If more independents could manage to work together on things, we could overcome a lot. I think all of us are iMSO (Independent Music Store Owners) guys. In the past, this group has actually gotten enough people together to get some attention. I think it would be helpful if more dealers worked together. The iMSO organization was making a real difference, and we should reinvigorate that work. It would help increase our bottom line. We need to do a little more work on our end. To really make things better, the work has to start with us: the way we approach things, how we work together as dealers, the way we interact with suppliers, etc.

You guys have mentioned making the store a destination, having a clean store and throwing events. We’re doing all of that. We’re remodeling and moving things around as much as we can. But the way you buy is just as important as the way you sell. And, certainly, training your staff—how to do add-ons, how to take things to the next level—is important. Those are the things I’m working on. After 43 years, I’m learning how to be relevant again. Stay predictable and, soon, you become forgettable.

Bankhead: I’ll say that I really agreed with a lot of what Allen wrote. I thought it was an excellent article. He hit all the major points. First of all, the effort of just trying to comply with all these MAP policies when they’re all totally different. They’re all policed differently, if at all…. It’s really challenging. I don’t mean to say that I don’t want MAP. I mean, we really need it. But, on the other hand, it is the maximum selling price. That’s what your customers expect. I think, in some cases, there’s probably some leeway on those things. Certainly, in accessories, I think there is. Certain brands that might not be the highly shopped brands…you might be able to get some pricing here and there. But, ultimately, a $300 guitar is worth $300, and a $500 guitar is worth $500. Customers are going to have in their minds what those things are worth. So, if you’re selling a $300 guitar for $500, it’s going to be hard to stay in business for very long.

Miller: I tell my employees that, when people bring up these things about the Internet and all, we can’t really match some of those prices. We tell our customers, “You’re dealing with our jobs. You want to buy somewhere else to save a couple of bucks, and then you want to come in here for our service? Help me out, man! I can’t fix your guitars if I’m not here!” We try to get them to understand what they’re saying when they say, “Oh, I’ll get that on the Internet.” Sometimes, they’ll be realistic and think, “Well, maybe a couple extra bucks is worth it for all these extras: free service, a friendly atmosphere and the rest.” So, that’s kind of how we try to handle the customers who come in and demand the same price as they’ve found on the Internet.

Moser: I think there’s some value in being able to try something before you buy it. I was just selling a sound system to a kid, and he had all different brands he picked from a number of Internet retailers. He had the whole system picked out. I had some prior bad experiences with some of the brands he was looking at, and I asked him whether he’d actually heard any of that stuff. And he said, “No.” He was just buying it all based on what he saw on these people’s Web sites. I started asking him some questions about what music he was doing, where he played and how he had designed the system. And, honestly, I don’t think he would have been happy with that system, if he had bought it. He wound up buying a different system from us and, I think, in the long run, he’s going to have something he can use and enjoy, rather than just buying what his first impulse was from looking at Internet Retailer #1 or Internet Retailer #2.

So, I think there is a place for brick-and-mortar retailers. But we do have to be more careful about what we buy and what we sell it for. We have to try to make a profit wherever we can.

The Retailer: What is the single best change you’ve instituted in your store in the last six months to one year?

Miller: We decided to do a complete remodeling, with the purpose of not spending a lot of money: some paint, carpet and things like that. But the best thing we did was to put in LED lighting. That’s really made the store have a much more intimate look. And, again, because those are 12-watt lights, as opposed to the 60- or 80-watt lights they replaced, we’re saving a significant amount of money.

Bankhead: We built a new shopping center and moved into it for our store in Joplin last year. We had it professionally designed, both inside and out. I think the final product is something that’s very beautiful, that I’m proud to own and that our customers like shopping in. It’s been very good for business. Now, we’re looking to do a remodel for our store in St. Louis, and we’re looking to move our store in Kansas City. I think that’s an important thing. We did that with Springfield Music back in the late ’90s…built a shopping center and hired pros to design it. And, man, that just changed our business from being a small, little music store to laying the foundation for what we are today.

If you want customers to put their clothes on, get behind the wheel of the car, pay $3.00 or $4.00 for gas, fight traffic and find a place to park in order to walk into your brick-and-mortar store, then you’ve got to earn it. You’ve got to have a store that’s worth it. You’ve got to have salespeople who are worth it. You’ve got to have products that are worth it. And I think, with the retail side of it, that’s something that a lot of independents could really work on…work to make their stores more attractive.

I think the best piece of advice I could give people is this: if you’re going to put the money into redesigning your store or giving it a little facelift, hire a professional. Don’t do it yourself. Most of us really don’t know what we’re doing when it comes to commercial design…retail design. We don’t know how to pick the right colors. It can just become kind of a mess, and then you’re spending good money after bad to try to fix it. The cost of a professional just isn’t that much. And their first draft of ideas will blow you away. I can promise you that.

Gordy Wilcher: If more independents could manage to work together on things, we could overcome a lot. In the past, the iMSO
(Independent Music Store Owners) has actually
gotten enough people together to get some attention. The organization was making a real difference, and we should reinvigorate that work.

Wilcher: I had a partner of nearly 35 years retire. I purchased his shares of the corporation. That was a huge change. But I think the most impactful thing was deciding to make our staff younger. Our core employees at our store worked here for decades. Twenty-five years was probably our junior employee. We were just here forever. My partner was here for 34 years; a manager was here for 30; and so on and so forth. When replacing staff—all of whom retired—I decided on a young staff, including a female multi-instrumentalist who is fluent in Spanish. That made a huge impact. The younger people think we’re more credible now, not just the old, ornery guys behind the counter! [Laughs.]

It’s impacted us in a lot of ways. It allowed me to learn new things. As Donovan mentioned earlier in the conversation, we need to get back into effects pedals. It’s making us aware of the boutique pedals and which ones to stock. It also helped our store traffic get a little younger…a little more vibrant. It’s increased a lot of things. We do a lot of custom guitar work now: pickup installations, setup, modifications, etc. That increase is a result of hiring the right guy! That young gun…that well-known player in our community…well, that’s his strength. He’s well known around the region as “the guy” who does that. So, staffing has to be the biggest change that made the biggest impact, along with more in-tune marketing and use of social media. We use Facebook, Twitter, Instagram and the new one, Periscope. Utilizing social media gave us a much longer market-area reach. In addition, we produce bi-monthly in-store showcases and seminars, as well as having a ukulele club and student recitals.

Moser: Well, I don’t know that, in the last year, we’ve made any big change that has impacted business all that much. We’re a small store in a small market, and we’ve been pretty agile in trying to keep up with what our customers want over the last 60-plus years. Gordy was talking about having a staffer who speaks Spanish. We do have a lot of Hispanic Americans in our community, and they do shop with us. We’ve learned enough Spanish vocabulary to be able to help people with what they’re interested in. So, that’s been a plus. And we’re trying to charge for our repairs and adjustments and those things, so that they reflect our costs. Sales are important, but we have to make money in our service department, too.

Overall, business is up from last year. We’re optimistic for the rest of this year. And we’re just going to keep working along and doing the best we can with the business that we get.

The Retailer: Are there any important topics we’ve forgotten to bring up?

Larry Miller: We were selling the heck out of Baldwin’s digital pianos, so we weren’t doing so much with the Baldwin acoustics. They cancelled us with a very mean letter. They did it with so many dealers that they got everybody mad. And, now, you never see a Baldwin piano. It’s gone.

Wilcher: There might be some things, but we probably wouldn’t want them in print. [Laughs.] I’m going to take the high road and focus on the positive work that I’m doing this year. I want to stay positive, grateful and thankful.

Miller: I’ve been doing this for 52 years and, so, one of the questions I’m often asked is how I’ve been able to do it so long. It’s because I enjoy it. I really love what I do. I look forward to it each day. And I think that’s something we all need to keep in mind: having a good, positive attitude. I know there are a lot of people who get sour on it because, maybe, it’s not what they wanted to get into in the first place. So, frankly, if you enjoy doing what you’re doing, then keep it up. If you don’t, then just get out and do something else that you’d rather do. Because you’re not going to get better, and you’re not going to feel better…. You’re just going to get in the way of the rest of us.

Moser: Thanks for bringing us together to speak about trends in the music business. I enjoy The Retailer, and I read it every month. Keep working to keep us informed about what’s going on. I appreciate you sharing our views.

Miller: I want to close with one thing: this organization, iMSO, is one of the best things a dealer can belong to. The people—just look at the guys who are speaking today—really take a lot of time to answer their fellow store owners’ questions on the iMSO forum…just a lot of help for running your business. If you want to do something helpful, then Google “iMSO”—Independent Music Store Owners—and join. You’ll really benefit.