These are uncertain economic times.
There are two schools of thought as regards where the economy is heading. The first points to a recession, which, according to Bank of America, there is a 25-percent chance of. If this were to come to pass, musical instrument retailers could find it tough sledding, assuming the old adage continues to hold true that consumers cut back on discretionary purchases during bad economic times.
The second scenario, however, according to which the economy’s recent rough patch is attributable to low West Texas Intermediate (WTI) oil prices, would be much more welcome to MI dealers. Those watching the stock market for the first three months of 2016 saw this school of thought hold some water, as major stock market averages often rose and fell in direct correlation to WTI prices.
Although gas prices are predicted to remain low for the immediate future, it would be hard for them to remain as low as they have been because of a variety of factors, including the possibility of OPEC cutting back production, a refinery failure or political unrest.
In short, there are a lot of questions surrounding the economy for the remainder of 2016. This uncertainty could directly affect the number of customers who walk through MI retailers’ doors. How will this affect the guitar industry? Was 2015 a boom year, or a bust?
Aligning with our annual Guitar Issue in April, The Retailer enlisted the help of two retailers with extensive knowledge of the guitar segment: Stephen Olsen, General Manager of Pensacola FL-based Blues Angel Music, and Christie Carter, Owner of Nashville TN-based Carter Vintage Guitars. To provide the backbone of our guitar industry update, we turned to stalwart industry researcher MI SalesTrak, which provided exclusive research, along with commentary from President Jim Hirschberg.
Biggest Takeaways
When reviewing the MI SalesTrak data, the biggest news was certainly that, in an otherwise strong 2015 for guitar sales, things derailed during the holiday season. MI was clearly not immune to general economic weakness.
According to Hirschberg, “2015 looked like an up year for the guitar market until a holiday season that was slower than anticipated put the brakes on growth. Guitars finished the year with dollar sales down just 0.9 percent versus 2014.”
Although a year-over-year decline of 0.9 percent hardly seems like a massive drop off, the number is telling when compared to 2014, which saw the guitar industry enjoy a robust 3.1-percent increase in sales versus 2013.
Overall, sales at Blues Angel Music in 2015 were in line with MI SalesTrak data, with Olsen stating sales were flat to slightly down. However, he offered an optimistic read of last year’s results. “The guitar retail business is tough,” he stated. “All of us brick-and-mortar independents who battle in the retail trenches daily, providing our communities with jobs, taxes and community service, need to pat ourselves on the back. If 2015 was a flat year for you and you are making a living, then you did very well, indeed.”
The flat sales year for Blues Angel Music was not attributable to the holiday season, Olsen added. “The Black Friday to December 31 holiday season was our best in the 18-year history of Blues Angel Music,” he said. “We experienced an overall increase in total guitar sales, attributable to increased Internet sales via Reverb and eBay. Much of that sales activity centered on used guitars and basses: a very important segment of our business.” He continued, “Local seasonal guitar sales were consistent with 2014’s numbers. We’re really working hard to increase our local market share. With the ever-increasing number of online guitar sales, that effort sometimes feels like we’re swimming against an unbeatable current.”
Christie Carter’s first year in business at Carter Vintage Guitars—known as “Nashville’s Friendliest Guitar Store”—was 2014. Last year, sales increased a whopping 55 percent. The Nashville-based store, which also sells other fretted instruments and amps, did see some change in holiday sales, but it was nothing about which Carter expressed serious concern.
“Our sales in December were slightly lower than our monthly average for the year,” she said, “but there was no significant slowdown in guitar sales.”
The Breakdown
Let’s break down guitar sales even further. Most telling is that electric guitars fought back against acoustic guitars in 2015. As the printed pie chart reveals, electric guitars accounted for 45.4 percent of all guitar sales (in terms of dollars) in 2015, a slight increase as compared to 45.2 percent of all sales in the prior year. Acoustic sales dropped to 21 percent of all guitar sales in 2015, as compared to 22.5 percent in 2014. That decline is significant, as it halts a multi-year trend of acoustic guitar growth. The beneficiary was acoustic-electric sales, which rose a solid 1.3 percentage points, reaching 33.6 percent of all sales in 2015.
Despite negative growth for acoustic guitar sales, however, Hirschberg stressed that this segment of the guitar industry is certainly not in freefall.
“Electric guitars and acoustic-electric guitars gained slightly in market share, whereas acoustics without pickup declined by just 1.5 percentage points versus 2014,” he remarked. “Overall, more than half of dollars spent on guitars last year were spent on acoustics, whether with or without pickup.”
Bursting Out
In 2014, sunburst-finished electric guitars were most popular in eight of the 12 months; however, black overtook sunburst in the last two months to finish number one for the year, according to MI SalesTrak. In 2015, by contrast, sunburst regained the number-one slot, as seen in the printed chart.
For the most recent month of data available (December 2015), sunburst-finished guitars accounted for 27.6 percent of unit sales of electric guitars, followed closely by black, which came in at slightly more than one in every four electric guitar sales. Rounding out the top five were red, which accounted for 13 percent of unit sales, white (6.4 percent) and blue (6.1 percent).
“The ’burst is back!’” Hirschberg exclaimed. “Sunburst edged out black as the most popular finish for electric guitars through most of last year.”
As for trends in acoustic guitar color sales, natural finish extended its dominance. In 2014, approximately 75 percent of all acoustic unit sales had a natural finish. In 2015, that figure increased to nearly four of every five guitars (79.5 percent of unit sales).
With this being an Olympics year, it’s fair to say that sunburst-finished acoustic guitars took the “silver medal.” That said, the race wasn’t even close: that finish accounted for only 10.8 percent of all units sold. Black-finished acoustic guitars took the “bronze,” with 5.4 percent of unit sales. No other finish even approached two percent this year.
“Natural has traditionally been the most popular finish for acoustic guitars,” Hirschberg confirmed, “and it became even more dominant in 2015.”
Sunburst-finished electric models have always outsold black models, Blues Angel Music’s Olsen said. In fact, he added, sunburst electric models outsold their black counterparts three to one during the holiday season.
Top Sellers
As for what guitars are moving the needle the most, Olsen immediately brought up three names: Eastman, Taylor and Fender.
“Last year, we were the number-one Eastman Guitar dealer in the country,” he said. “Obviously, we sell a lot of them. They make an amazing array of guitars, and they’re fantastic people who strongly support their dealers.” He continued, “As I’m [doing this interview], two snowbirds here from Minnesota are each buying a Taylor guitar in my store. I am continually amazed at the selling power of Taylor guitars.” He added that Fender guitar sales are also consistently strong.
Carter pointed to Gibson and Martin as manufacturers whose products customers keep purchasing. “The Gibson ES-335 has been a strong seller,” she said. “Martin guitars from the ’40s, ’50s and ’60s also continue to do well, and the mandolin market is still burning strong.”
Future Looks Bright
In light of a teetering economy, is flat the new up for guitar sales? Nobody knows the answer to that question. However, uncertainty does not prevent MI retailers from being optimistic about the remainder of this year.
“The economy has been uncertain since 2009,” Carter remarked, “and it’s caused a certain degree of caution among guitar buyers. But, they continue to buy guitars.” She continued, “Barring another economic disaster, we’re optimistic about 2016.”
“Overall, I’m very optimistic for growth in our store,” Olsen concurred. “We’ve been aggressively and innovatively marketing our brand locally, and we’re much more efficiently and comprehensively utilizing social media to keep our name highly visible.”
Olsen continued, “As regards guitar sales specifically, flat might be the new up, but I’m optimistic that we can and will see a five- to 10-percent increase in overall guitar sales this year. We’re continuing to increase local market share aggressively. We’re also increasing the size and efficiency of our guitar repair shop. This will bring more potential for sales.”