Show Posts
1
The Outpost Cafe / Re: Sam Ash on the decline
« on: May 06, 2024, 07:20:59 PM »
Editorial from Music Trades magazine.
The Collapse Of Sam Ash Music
How the internet revolution brought down a one-time industry leader?
In late February came the news that Sam Ash Music would be closing 18 of its 45 locations in order to “consolidate” and “focus resources on better performing stores.” A month later, the Ash family delivered a bombshell, announcing that they were closing all stores and looking for a buyer to salvage their 100-year-old retail chain. The news elicited a torrent of emotion throughout the industry—sympathy for the travails of the Ash family, sadness at the closing an enterprise that launched the careers of innumerable musicians and industry professionals, and shock that a longstanding industry institution could crumble so quickly.
The collapse of a one-time industry leader underscores just how dramatically the internet has reshaped the retail landscape. Suppliers familiar with Sam Ash Music estimate that staffing and lease payments put the break-even point for its 20,000-square-foot locations well north of $6.0 million. With approximately 50% of music products sales now transacted online, generating that level of business at a brick and mortar store has become difficult, bordering on impossible. While Sam Ash operated a popular website, its online sales were obviously not sufficient to prop up the struggling stores.
Online retail enjoys inherent productivity advantages that are nearly impossible for a conventional brick and mortar store to match. Sales-per-employee for the typical online music retailer is over $700,000, versus $220,000 for brick and mortar. On a sales-per-square-foot basis, the disparity is even greater—industry leader Sweetwater generates revenue out of two distribution centers that rivals what Guitar Center produces from over 300 stores. These efficiencies allow for a broader selection—over 50,000 SKUs at Sweetwater versus 7,000 or 8,000 at a well-stocked conventional store.
The brick and mortar retailers able to prevail against the selection, convenience, and price of online rivals are those that deliver specialized service or a unique “in-person” buying experience. Think boutique guitar specialists like Gruhn Guitars of Nashville, or school music operations like Chicago-based Quinlan & Fabish. Providing this high level of person touch becomes harder as the number of locations increase, which explain the decline in the number of multi-outlet operations. In 1991 there were 17 retailers with 10 or more locations. Last year, excluding Guitar Center with its 558 locations (including Music & Arts) and Sam Ash, there were just five.
Sam Ash Music is the latest and most prominent victim of market shifts and changing consumer buying preferences. But, the story of its downfall is hardly unique. To say music retail has always been a risky undertaking is no overstatement. At Music Trades we began ranking the largest music products retailers by revenue in 1991. Of the 100 retailers that appeared on our first sales ranking, 68 are no longer doing business: 53 of the vanquished closed their doors outright, nine were acquired or merged with another retailer, and Guitar Center and its Music & Arts subsidiary acquired another five.
Some of the closures could be chalked up to a changing marketplace. Twenty piano and organ dealers that appeared on the first list, including once formidable operators like Sherman Clay, Organ Exchange, and Colton Piano were victims of a shrinking home keyboard market. Others could be traced to succession problems: second or third generation family management that lacked the skills or interest to keep the business afloat. Others like Reliable Music in North Carolina, Nadines of Los Angeles, or the Daddy’s Junky Music chain succumbed to Guitar Center’s aggressive store roll-out. The most recent casualties were victims of online powerhouses like Sweetwater and Amazon. Together, the two giants generated over $2.5 billion in revenue, roughly the equivalent of roughly 900 “average” storefronts. In total, 153 retailers that appeared on our retail ranking at some point over the past 33 years are no longer in business.
Home grown music stores are hardly the only ones that have stumbled due to managerial missteps or a changing market. A number of high-profile outsiders have also had “bad luck.” Mark Begelman, who had built Office Depot into a multi-billion dollar chain, hoped to have similar success in the music business with his Music and Recording Superstore chain, better known as MARS. In 1996, he opened the first of 46 cavernous 40,000-square-foot locations, betting that sheer scale would provide an irresistible customer draw. Five years and $100 million in venture capital later, MARS entered liquidation.
Microsoft co-founder Paul Allen was among the first to recognize the potential of the internet, and in 1996 provided financing for zZounds.com, one of the industry’s first online retailers. Unfortunately, his vision wasn’t supported by a skilled management team and zZounds faltered within a few years. After closing, its domain name was taken over by American Musician Supply and continues today.
In 2008, Best Buy took a stab at music retail based on market research showing a strong overlap between guitar buyers and the typical Best Buy customer. Over a three year period, 100 well designed specialty “music stores within a store” were opened inside Best Buy locations across the country. At the end of 2011, the project was scrapped. Apparently, the customer overlap wasn’t as strong as initial research suggested and Best Buy’s consumer electronics sales staff was less adept at presenting m.i. gear.
The Ash family is a uniquely American success story. In 1924 Samuel Ashkenazy pawned his wife Rose’s wedding ring and used the $400 proceeds to buy a tiny music store in Brooklyn. In the 1960s, on the strength of the Beatle boom, his sons Jerry and Paul, added locations throughout the New York metro area and established a reputation for marketing and merchandising savvy. In the 1990s, Jerry’s sons Richard, David, and the late Sammy, expanded beyond New York opening locations in fourteen states. Regrettably, the business model that served them so well—big, well-sited stores, stocked with the best brands at low prices—no longer works as well as it once did.
In the early 1920s, Baldwin Piano & Organ Company executive Philip Wyman created one of the first truly national dealer networks, complete with formal sales agreements, inventory and consumer financing programs, and ample promotional support. Sharing his decades of experience in a 1955 Music Trades interview, Wyman declared, “music dealers usually have a 20 year life expectancy.” After two decades, he noted, a majority close because of the owner’s retirement, new competition, a “mistake,” or some combination of all of the above. Phil Wyman wouldn’t recognize much in today’s music industry, however, his actuarial analysis is as true today as it ever was. This isn’t a business for the weak of heart.
For a better understanding of the shifting music products retail channel, get your copy of Music Trades Top 200 report, which ranks the industry’s leading retailers by revenue and productivity.
Brian T. Majeski
Editor?
The Collapse Of Sam Ash Music
How the internet revolution brought down a one-time industry leader?
In late February came the news that Sam Ash Music would be closing 18 of its 45 locations in order to “consolidate” and “focus resources on better performing stores.” A month later, the Ash family delivered a bombshell, announcing that they were closing all stores and looking for a buyer to salvage their 100-year-old retail chain. The news elicited a torrent of emotion throughout the industry—sympathy for the travails of the Ash family, sadness at the closing an enterprise that launched the careers of innumerable musicians and industry professionals, and shock that a longstanding industry institution could crumble so quickly.
The collapse of a one-time industry leader underscores just how dramatically the internet has reshaped the retail landscape. Suppliers familiar with Sam Ash Music estimate that staffing and lease payments put the break-even point for its 20,000-square-foot locations well north of $6.0 million. With approximately 50% of music products sales now transacted online, generating that level of business at a brick and mortar store has become difficult, bordering on impossible. While Sam Ash operated a popular website, its online sales were obviously not sufficient to prop up the struggling stores.
Online retail enjoys inherent productivity advantages that are nearly impossible for a conventional brick and mortar store to match. Sales-per-employee for the typical online music retailer is over $700,000, versus $220,000 for brick and mortar. On a sales-per-square-foot basis, the disparity is even greater—industry leader Sweetwater generates revenue out of two distribution centers that rivals what Guitar Center produces from over 300 stores. These efficiencies allow for a broader selection—over 50,000 SKUs at Sweetwater versus 7,000 or 8,000 at a well-stocked conventional store.
The brick and mortar retailers able to prevail against the selection, convenience, and price of online rivals are those that deliver specialized service or a unique “in-person” buying experience. Think boutique guitar specialists like Gruhn Guitars of Nashville, or school music operations like Chicago-based Quinlan & Fabish. Providing this high level of person touch becomes harder as the number of locations increase, which explain the decline in the number of multi-outlet operations. In 1991 there were 17 retailers with 10 or more locations. Last year, excluding Guitar Center with its 558 locations (including Music & Arts) and Sam Ash, there were just five.
Sam Ash Music is the latest and most prominent victim of market shifts and changing consumer buying preferences. But, the story of its downfall is hardly unique. To say music retail has always been a risky undertaking is no overstatement. At Music Trades we began ranking the largest music products retailers by revenue in 1991. Of the 100 retailers that appeared on our first sales ranking, 68 are no longer doing business: 53 of the vanquished closed their doors outright, nine were acquired or merged with another retailer, and Guitar Center and its Music & Arts subsidiary acquired another five.
Some of the closures could be chalked up to a changing marketplace. Twenty piano and organ dealers that appeared on the first list, including once formidable operators like Sherman Clay, Organ Exchange, and Colton Piano were victims of a shrinking home keyboard market. Others could be traced to succession problems: second or third generation family management that lacked the skills or interest to keep the business afloat. Others like Reliable Music in North Carolina, Nadines of Los Angeles, or the Daddy’s Junky Music chain succumbed to Guitar Center’s aggressive store roll-out. The most recent casualties were victims of online powerhouses like Sweetwater and Amazon. Together, the two giants generated over $2.5 billion in revenue, roughly the equivalent of roughly 900 “average” storefronts. In total, 153 retailers that appeared on our retail ranking at some point over the past 33 years are no longer in business.
Home grown music stores are hardly the only ones that have stumbled due to managerial missteps or a changing market. A number of high-profile outsiders have also had “bad luck.” Mark Begelman, who had built Office Depot into a multi-billion dollar chain, hoped to have similar success in the music business with his Music and Recording Superstore chain, better known as MARS. In 1996, he opened the first of 46 cavernous 40,000-square-foot locations, betting that sheer scale would provide an irresistible customer draw. Five years and $100 million in venture capital later, MARS entered liquidation.
Microsoft co-founder Paul Allen was among the first to recognize the potential of the internet, and in 1996 provided financing for zZounds.com, one of the industry’s first online retailers. Unfortunately, his vision wasn’t supported by a skilled management team and zZounds faltered within a few years. After closing, its domain name was taken over by American Musician Supply and continues today.
In 2008, Best Buy took a stab at music retail based on market research showing a strong overlap between guitar buyers and the typical Best Buy customer. Over a three year period, 100 well designed specialty “music stores within a store” were opened inside Best Buy locations across the country. At the end of 2011, the project was scrapped. Apparently, the customer overlap wasn’t as strong as initial research suggested and Best Buy’s consumer electronics sales staff was less adept at presenting m.i. gear.
The Ash family is a uniquely American success story. In 1924 Samuel Ashkenazy pawned his wife Rose’s wedding ring and used the $400 proceeds to buy a tiny music store in Brooklyn. In the 1960s, on the strength of the Beatle boom, his sons Jerry and Paul, added locations throughout the New York metro area and established a reputation for marketing and merchandising savvy. In the 1990s, Jerry’s sons Richard, David, and the late Sammy, expanded beyond New York opening locations in fourteen states. Regrettably, the business model that served them so well—big, well-sited stores, stocked with the best brands at low prices—no longer works as well as it once did.
In the early 1920s, Baldwin Piano & Organ Company executive Philip Wyman created one of the first truly national dealer networks, complete with formal sales agreements, inventory and consumer financing programs, and ample promotional support. Sharing his decades of experience in a 1955 Music Trades interview, Wyman declared, “music dealers usually have a 20 year life expectancy.” After two decades, he noted, a majority close because of the owner’s retirement, new competition, a “mistake,” or some combination of all of the above. Phil Wyman wouldn’t recognize much in today’s music industry, however, his actuarial analysis is as true today as it ever was. This isn’t a business for the weak of heart.
For a better understanding of the shifting music products retail channel, get your copy of Music Trades Top 200 report, which ranks the industry’s leading retailers by revenue and productivity.
Brian T. Majeski
Editor?
