Re: Guitar Center is Doomed
nada...?
The dealers lost control of their world decades ago...
JR
nada...?
The dealers lost control of their world decades ago...
JR
Guitar Center is Doomed
- Thread starter Jim Zumbo
- Start date
Mark DeArman
Junior
Re: Guitar Center is Doomed
Obviously, none. GC Pro did not drive mid/pro level development.
Obviously, none. GC Pro did not drive mid/pro level development.
Re: Guitar Center is Doomed
Which reminds me... what DID GC Pro actually accomplish? My rep repeatedly never got back to me so I dropped him from my list of dealers to talk to.
Which reminds me... what DID GC Pro actually accomplish? My rep repeatedly never got back to me so I dropped him from my list of dealers to talk to.
Re: Guitar Center is Doomed
Somebody still has to give guitar lessons and refurbish clarinets. My local mom&pop store is still there, though they finally decided to drop Fender.
Somebody still has to give guitar lessons and refurbish clarinets. My local mom&pop store is still there, though they finally decided to drop Fender.
Re: Guitar Center is Doomed
John and you misunderstand my question, and in retrospect it's not well written...
Will the collapse of the big box retailer give MORE opportunity for dealers of non-commodity items? Commoditized items - things with knows attributes and qualities - are fully destined to on line sales.
It will also be interesting to see if end users will buy $2k - $3k loudspeakers without hearing them, or a mixer or amps without touching them at least.
John and you misunderstand my question, and in retrospect it's not well written...
Will the collapse of the big box retailer give MORE opportunity for dealers of non-commodity items? Commoditized items - things with knows attributes and qualities - are fully destined to on line sales.
It will also be interesting to see if end users will buy $2k - $3k loudspeakers without hearing them, or a mixer or amps without touching them at least.
Re: Guitar Center is Doomed
I am not sure which question I am misunderstanding.
My response to "brick vs click" is that there is a larger sea change going on.
Regarding more professional products, value product distribution channels has been the tail wagging the professional distribution tail for decades. Further erosion of value product revenue from conventional distribution channels may thin out pro stocking dealers even more.
Life will go on, and manufacturers will adapt to the new playing field or not. Small individual manufacturers will have more of a challenge than conglomerates.
JR
I am not sure which question I am misunderstanding.
My response to "brick vs click" is that there is a larger sea change going on.
Regarding more professional products, value product distribution channels has been the tail wagging the professional distribution tail for decades. Further erosion of value product revenue from conventional distribution channels may thin out pro stocking dealers even more.
Life will go on, and manufacturers will adapt to the new playing field or not. Small individual manufacturers will have more of a challenge than conglomerates.
JR
Re: Guitar Center is Doomed
I think all manufacturers will just go direct at some point, doing business on ebay and amazon. They could drive prices, cut expenses, eliminate sales rep firms, etc. Big ticket items could be facilitated and supported by local/regional reps. All of the service issues would be handled by momma.
Maybe there might be more commerce at NAMM, AES, InfoComm. Peavey, Harman, Carvin, Behringer could have some strategically placed shops if they like.
I don't like it. I don't think it will last. It is kind of hard to try out instruments on-line.
I think all manufacturers will just go direct at some point, doing business on ebay and amazon. They could drive prices, cut expenses, eliminate sales rep firms, etc. Big ticket items could be facilitated and supported by local/regional reps. All of the service issues would be handled by momma.
Maybe there might be more commerce at NAMM, AES, InfoComm. Peavey, Harman, Carvin, Behringer could have some strategically placed shops if they like.
I don't like it. I don't think it will last. It is kind of hard to try out instruments on-line.
Re: Guitar Center is Doomed
Unlikely, simply because the support infrastructure required to handle many small orders is vastly different (and larger) than the support infrastructure required to handle fewer large orders
Unlikely, simply because the support infrastructure required to handle many small orders is vastly different (and larger) than the support infrastructure required to handle fewer large orders
RYAN LOUDMUSIC JENKINS
Sophomore
Re: Guitar Center is Doomed
Bain Capital is 100% at fault! They buy companies with good cash flow and credit. Make that company sell bonds and buy on very extended terms. They then charge huge management fees to the company. Basically taking all the cash out of the company that was raised by taking on the huge debt load. It's a terrible business model. According to some quick reading that I did, 22% of Bain Capital's companies files for bankruptcy after this business model was applied to them. Bain does not lose money on these deals! Mitt does not lose money on these deals! The employees lose, the customers lose, the suppliers lose, the local communities lose, the tax payers lose! Unfortunately it's still legal!
Bain Capital is 100% at fault! They buy companies with good cash flow and credit. Make that company sell bonds and buy on very extended terms. They then charge huge management fees to the company. Basically taking all the cash out of the company that was raised by taking on the huge debt load. It's a terrible business model. According to some quick reading that I did, 22% of Bain Capital's companies files for bankruptcy after this business model was applied to them. Bain does not lose money on these deals! Mitt does not lose money on these deals! The employees lose, the customers lose, the suppliers lose, the local communities lose, the tax payers lose! Unfortunately it's still legal!
Re: Guitar Center is Doomed
Yes. Bain is a big part of the problem here. Practically every penny that GC makes goes to pay back loans and management fees to BAIN. It is a disastrous business model.
But don't forget that Retail pays a big part in GC's downfall too. This month alone Radio Shack, Staples, JC Penney’s and Sbarro all announced bankruptcies or store closings. Let’s not forget Circuit City or Best Buy. Even Macy’s said it would shut 5 stores.
The cards are stacked against GC. Bain, Retail, Suppliers refusing credit because of instability, High Debt.
Retail is simply over and it’s on to the next thing and people will adjust. What’s next? Maybe 3D printing.:lol:
Yes. Bain is a big part of the problem here. Practically every penny that GC makes goes to pay back loans and management fees to BAIN. It is a disastrous business model.
But don't forget that Retail pays a big part in GC's downfall too. This month alone Radio Shack, Staples, JC Penney’s and Sbarro all announced bankruptcies or store closings. Let’s not forget Circuit City or Best Buy. Even Macy’s said it would shut 5 stores.
The cards are stacked against GC. Bain, Retail, Suppliers refusing credit because of instability, High Debt.
Retail is simply over and it’s on to the next thing and people will adjust. What’s next? Maybe 3D printing.:lol:
Re: Guitar Center is Doomed
UPS is the "big box store" of the package shipping world. I predict someone will startup an Uber shipping service.
UPS is the "big box store" of the package shipping world. I predict someone will startup an Uber shipping service.
Re: Guitar Center is Doomed
While that election is still over, Bain bashing was a very popular theme in 2012.... Presumably to tar a candidate by association.
If 22% went thought bankruptcy, what is your point? 78% did not go through bankruptcy and 100% were probably in trouble before Bain purchased them. Further companies can emerge from bankruptcy (after scraping off a bunch of equity/debt. Remember GM, while that is not a clean example). Bain's track record probably reflects the garbage-in, garbage-out nature of their business. If you want to identify a true villain it is the artificially low interest rate environment, for too many years still, promoted by central bankers to inflate assets and bank balance sheets. That low interest rate makes it too easy and attractive for mature company owners to cash out, leaving behind a debt laden shell. The burden of carrying high debt loads will get even worse when we eventually get out of this unnaturally low interest rate regime
I submit it is a little more complicated than just blame the wealthy, or blame big business, for everything, and we will be dealing with the unintended consequences from the last several years of monetary policy, long after I am gone.
Of course opinions vary... It seems Mitt's distrust of Russia was proved correct by recent events. More time passing may reveal more that he was correct about.
JR
While that election is still over, Bain bashing was a very popular theme in 2012.... Presumably to tar a candidate by association.
If 22% went thought bankruptcy, what is your point? 78% did not go through bankruptcy and 100% were probably in trouble before Bain purchased them. Further companies can emerge from bankruptcy (after scraping off a bunch of equity/debt. Remember GM, while that is not a clean example). Bain's track record probably reflects the garbage-in, garbage-out nature of their business. If you want to identify a true villain it is the artificially low interest rate environment, for too many years still, promoted by central bankers to inflate assets and bank balance sheets. That low interest rate makes it too easy and attractive for mature company owners to cash out, leaving behind a debt laden shell. The burden of carrying high debt loads will get even worse when we eventually get out of this unnaturally low interest rate regime
I submit it is a little more complicated than just blame the wealthy, or blame big business, for everything, and we will be dealing with the unintended consequences from the last several years of monetary policy, long after I am gone.
Of course opinions vary... It seems Mitt's distrust of Russia was proved correct by recent events. More time passing may reveal more that he was correct about.
JR
Re: Guitar Center is Doomed
Do you realize how difficult that is to build the infrastructure from scratch? It seems like this is an market opportunity that could help bail the post office out of their perpetual decline, if they use it. The only other serious competition IMO is FEDEX. It is interesting to compare those two companies. FEDEX uses mainly independent contractors, while UPS has made peace with the unions (mostly). UPS actually has a contract pending with the union and still in negotiation, so that could be a negative news event, but over the years UPS management has always managed to extract productivity increases that paid for the wage increases, so a win-win. I am more philosophically aligned with FEDEX, but the results seem to favor UPS for now.
I have not seen any public support for my thesis, but the price of UPS is up several percent since I bought it, so I suspect some people are betting along with me.
JR
PS: IMO delivery drones are a joke, but self driving trucks, and perhaps package/mail delivery robots that roll not fly, not unlike what are already used inside some automated offices could happen. It's all a matter of economics.
Do you realize how difficult that is to build the infrastructure from scratch? It seems like this is an market opportunity that could help bail the post office out of their perpetual decline, if they use it. The only other serious competition IMO is FEDEX. It is interesting to compare those two companies. FEDEX uses mainly independent contractors, while UPS has made peace with the unions (mostly). UPS actually has a contract pending with the union and still in negotiation, so that could be a negative news event, but over the years UPS management has always managed to extract productivity increases that paid for the wage increases, so a win-win. I am more philosophically aligned with FEDEX, but the results seem to favor UPS for now.
I have not seen any public support for my thesis, but the price of UPS is up several percent since I bought it, so I suspect some people are betting along with me.
JR
PS: IMO delivery drones are a joke, but self driving trucks, and perhaps package/mail delivery robots that roll not fly, not unlike what are already used inside some automated offices could happen. It's all a matter of economics.
Re: Guitar Center is Doomed
I think you may be overlooking that many manufacturers provide products to multiple markets, some of which may not as readily support that model. Of course some of the manufacturers, from what I've seen primarily those coming from the MI market and trying to expand into other markets, don't seem to recognize that either.
Re: Guitar Center is Doomed
The true villain here is GC itself. This story isn’t new or extraordinary. The industry is changing. How will you respond? Amazon is stealing your business with a much cheaper model. How will you compete? How will you reinvent yourself in a changing business environment? Can you attract new customers and keep the old? GC failed this test.
The Bain model of leveraged financing is older than the recent sub-prime lending model and low interest loans that lead to the economic crisis in 08. When you get into bed with Bain you know what you are getting. It’s high risk. GC took this risk because they had few options. They failed.
The true villain here is GC itself. This story isn’t new or extraordinary. The industry is changing. How will you respond? Amazon is stealing your business with a much cheaper model. How will you compete? How will you reinvent yourself in a changing business environment? Can you attract new customers and keep the old? GC failed this test.
The Bain model of leveraged financing is older than the recent sub-prime lending model and low interest loans that lead to the economic crisis in 08. When you get into bed with Bain you know what you are getting. It’s high risk. GC took this risk because they had few options. They failed.
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Re: Guitar Center is Doomed
Regarding manufacturers selling direct, it may be instructive to study what Tesla is going through trying to sell their automobiles direct to end users. In numerous states car dealers have influenced legislators to pass franchise laws presumably to protect existing dealers from the evil car manufacturers. You may recall the legal stink when Chrysler was emerging from bankruptcy (their second bankruptcy) and tried to fire dealers to get their distribution channel profitable at the expected (lower) sales volume. These same franchise laws are now being used in several states (TX, NJ, etc) to thwart Tesla's business model. I suspect the dealers would drop their opposition for a slice of the pie (requiring higher prices to pay them too).
I am not supportive of legislated advantages for any business or interest group. Dealers want their's, and Tesla is already getting their's with government subsidized prices. arghhh
Ironic that government wants to raise gas taxes because people are using less gas. :-(.
FWIW I do not expect music store owners to be as organized or politically connected as car dealers.
JR
Regarding manufacturers selling direct, it may be instructive to study what Tesla is going through trying to sell their automobiles direct to end users. In numerous states car dealers have influenced legislators to pass franchise laws presumably to protect existing dealers from the evil car manufacturers. You may recall the legal stink when Chrysler was emerging from bankruptcy (their second bankruptcy) and tried to fire dealers to get their distribution channel profitable at the expected (lower) sales volume. These same franchise laws are now being used in several states (TX, NJ, etc) to thwart Tesla's business model. I suspect the dealers would drop their opposition for a slice of the pie (requiring higher prices to pay them too).
I am not supportive of legislated advantages for any business or interest group. Dealers want their's, and Tesla is already getting their's with government subsidized prices. arghhh
Ironic that government wants to raise gas taxes because people are using less gas. :-(.
FWIW I do not expect music store owners to be as organized or politically connected as car dealers.
JR
Re: Guitar Center is Doomed
It seems to me that the "buying blind" model will require increasingly accessible customer product reviews. I can testify that I rely on them quite a bit for items that I can't put hands on before buying. Right now Amazon is working this angle pretty well. If manufacturers selling direct is going to work on a large scale then there will have to be some kind of widely used review system. Already we see a number of click and/or brick resellers who are selling on Amazon, presumably for the exposure to a larger audience. But I could see manufacturers 'selling direct' on Amazon for several reasons including reviews. Regardless, there are a host of other hurdles to mount that would be necessary to eliminate the rep & dealer system, including where to employ the people who work in the current system. I'm not sure we want those people running around "on the loose", do we?
It seems to me that the "buying blind" model will require increasingly accessible customer product reviews. I can testify that I rely on them quite a bit for items that I can't put hands on before buying. Right now Amazon is working this angle pretty well. If manufacturers selling direct is going to work on a large scale then there will have to be some kind of widely used review system. Already we see a number of click and/or brick resellers who are selling on Amazon, presumably for the exposure to a larger audience. But I could see manufacturers 'selling direct' on Amazon for several reasons including reviews. Regardless, there are a host of other hurdles to mount that would be necessary to eliminate the rep & dealer system, including where to employ the people who work in the current system. I'm not sure we want those people running around "on the loose", do we?
Re: Guitar Center is Doomed
This is very interesting. However, I don't think that it is relevant for the sound equipment industry. The heavy regulations in the car industry makes it unique. There are just too many examples of manufacturers who sell direct (apple, microsoft, clothing manufactures & etc). I don't think that the issue will be - can they. I think it will be - will they want to. Are they capable of putting the infrastructure in place to pull it off? I don't think so.
This is very interesting. However, I don't think that it is relevant for the sound equipment industry. The heavy regulations in the car industry makes it unique. There are just too many examples of manufacturers who sell direct (apple, microsoft, clothing manufactures & etc). I don't think that the issue will be - can they. I think it will be - will they want to. Are they capable of putting the infrastructure in place to pull it off? I don't think so.
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Re: Guitar Center is Doomed
I already suggested that music dealers do not have the political clout that car dealers have. So perhaps I should have called it educational instead of instructive.
What infrastructure are you talking about for a manufacturer to sell direct ? A website? A credit card machine. Not heavy lifting. The only hard part is transitioning from here to there. There will be many lawsuits and push back from dealers when their livelihood gets ripped away. Again the Chrysler dealers demonstrated that, and they had legislation backing them.
When dealers no longer add any value to the supply chain, that customers are willing to pay for, they will disappear. I have been watching this play out in slow motion for decades.
The customers who say they will never buy an XYZ without holding it first, sound just like the customers who swore they would never buy a product made in China. Ask Mackie how believing that worked out for them.
JR
PS: I wasted way too many brain cells, and spent blood and sweat back when it was job trying to drag dealers kicking and whining into more value-added strategies for their business. Rentals and Install business are segments that don't work well mass market or direct. It's all about adding value that the local customer will pay for, IMO.
I already suggested that music dealers do not have the political clout that car dealers have. So perhaps I should have called it educational instead of instructive.
What infrastructure are you talking about for a manufacturer to sell direct ? A website? A credit card machine. Not heavy lifting. The only hard part is transitioning from here to there. There will be many lawsuits and push back from dealers when their livelihood gets ripped away. Again the Chrysler dealers demonstrated that, and they had legislation backing them.
When dealers no longer add any value to the supply chain, that customers are willing to pay for, they will disappear. I have been watching this play out in slow motion for decades.
The customers who say they will never buy an XYZ without holding it first, sound just like the customers who swore they would never buy a product made in China. Ask Mackie how believing that worked out for them.
JR
PS: I wasted way too many brain cells, and spent blood and sweat back when it was job trying to drag dealers kicking and whining into more value-added strategies for their business. Rentals and Install business are segments that don't work well mass market or direct. It's all about adding value that the local customer will pay for, IMO.
Re: Guitar Center is Doomed
I think that Amazon would disagree with you. I think that the many companies who have tried to model Amazon would disagree with you. How is Musician's Friends doing for GC with their website and credit card machine?
Dealers absoultely add value to the supply chain. They also have the infrastructure to support sales. However, if they don't have exclusive agreements, they would be out of luck in a direct model. I am sure that ATT and other phone companies would love it if they could legislate the Apple store out of business. It just isn't going to happen. It's not going to happen in this case either.
I think that Amazon would disagree with you. I think that the many companies who have tried to model Amazon would disagree with you. How is Musician's Friends doing for GC with their website and credit card machine?
Dealers absoultely add value to the supply chain. They also have the infrastructure to support sales. However, if they don't have exclusive agreements, they would be out of luck in a direct model. I am sure that ATT and other phone companies would love it if they could legislate the Apple store out of business. It just isn't going to happen. It's not going to happen in this case either.
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