More economic woes: Musicians Friend

[Dave W]

Last month I saw this article about layoffs coming at their big KC warehouse.

Today on an other forum someone in KC says it was announced on the radio this morning that the whole distribution center is closing and operations will be handled out of Seattle.

The KC center was just expanded a couple of years ago to handle all distribution for MF, Guitar Center.com, Music123 and Guitar Center's other "mail order" companies. I don't know if GC's retail stores were supplied from there, but earlier this year Moody's listed Guitar Center on their "Bottom Rung" list of companies likely to default during the recession.

Doesn't look good.

[Pilgrim]

That's not good.  Not everyone lives near a big box shopping center or has a local music store.  I hope they make it.  As much as people criticize guitar center, I think they're a good business to have available in local markets.

[Dave W]

It may not be as bad as reported. Someone else is saying that the radio announcement was wrong, that what they're closing is the KC call center and retail scratch and dent outlet, in addition to laying off 75 warehouse people.

Still doesn't change Moody's dim view of Guitar Center Holdings.

[Psycho Bass Guy]

That's not good.  Not everyone lives near a big box shopping center or has a local music store.  I hope they make it.  As much as people criticize guitar center, I think they're a good business to have available in local markets.

You're only going to find GC stores in large markets. MF is a completely separate entity even though they share common ownership, and their fortunes are unrelated other than in the terms of general market being down. GC has been through several ownerships, going public about ten years ago before going back private about two years ago. I know when I worked for them, they were incredibly brazen and fraudulent in their business practices and directly contributed to the ruin of several reputable manufacturers.

From what I understand, the main shareholders at that time were investment bankers and they ran that company exactly the same way banks were run up until recently. Since GC's gone private and can't rely on artificial speculative stock income to prop it up and actually has to turn a real profit, it's been in trouble. I know the local store now no longer negotiates on prices and have heard that it is a chain-wide move.

I also know that service is a fantasy at my local store. Just this past Sunday I called looking to buy an Alesis HD24, not a cheap piece of gear. The mouthbreather "recording specialist" I spoke to on the phone had no idea what it was (even though it is very common recorder that has been on the market for almost a decade) but said that they had one in stock and he would call me back as soon as he physically located it. I told him I needed to know ASAP at 11:15 AM and got a 'returning your call' message with no info about the recorder at all at 3:30PM. I'm glad I had other options.

Around here, most musicians avoid the place because they've either worked there or can't stand the employees, who are flakes by even musician standards. Screw 'em.

[patman]

Unfortunately in Cincinnati the locally owned stores are pretty much just as bad.  Years ago I would do business with the local chain (with the owner), and it was o-k.  Now they staff the stores with jerks who generally piss me off so much when I go in to buy strings, that I won't buy anything else there.  Lately I even stopped buying my strings there.  FWIW, the "owner" is never around anymore--at least I have never seen him for 20 years or more.

It's not just me--my all 3 of my boys all pretty much feel the same way.

[Psycho Bass Guy]

Unfortunately in Cincinnati the locally owned stores are pretty much just as bad.

You ever deal with Willis Music? They're headquartered across the river in Florence, KY. I used to work for them, too.

[patman]

rarely--I deal mostly w/ the other chain in town.
There's a store near my house.

You in Cincinnati?

[Psycho Bass Guy]

No, Knoxville, TN. They used to have a mall store here.

[eb2]

A friend lives in KC and was very sad to see the scratch and dent outlet close.  He has done very well there over the last few years, and got to know some of the characters who do lucrative ebay biz off the place.  One guy would get there and line up, then shop with a rolling pallet cart!   But the volume music biz is creaking to a halt, and people that made their money doing this are croaking.  Best Buy is doing well enough, but their foot print is much smaller.  GC is really in the "how are they staying in business?" phase.

[jmcgliss]

I've used MF a few times in the last two years with decent results, however their "item just shipped" email would sometimes arrive after the actual item was delivered. Most often I can call a local store that's been great for 20+ years and get a better price than any of the online stores.

Sweetwater.com service has been very good since I can reach the same rep. every time.

GC's challenge when Bain Capital acquired them was inventory reduction and profit margin improvement. Trouble is, private equity firms often want 30%-40% IRR which is only possible with high margins or rapid turnover at more moderate margins - neither of which translates to "deal".
You would think that giving instruments a playable setup would help generate more impulse buys.
How may people walk out thinking "that wasn't as nice as I had hoped from reading the review"?

[lowend1]

The mouthbreather "recording specialist"...

I got an instant visual from this and burst out laughing.

[Psycho Bass Guy]

GC's challenge when Bain Capital acquired them was inventory reduction and profit margin improvement. Trouble is, private equity firms often want 30%-40% IRR which is only possible with high margins or rapid turnover at more moderate margins - neither of which translates to "deal".

The margins on guitar gear run 100% or more on cheap items and accessories and rapidly decrease as the price tag rises in most cases. In general, subtract 15-20% of that for bass margins. Drums sometimes had a 2-300% markup on brands that you would figure ought to have a higher base cost. Also, their markup actually generally increased with price. DJ gear ran 40-50%. PA, which supposedly paid the chain's bills when I worked for them, was 20%, although the crap they hock now is undoubtably much more profitable (trouble is, nobody buys it). The least profitable area was keyboards, which often ran as little as 5% on high selling, big ticket items.

I'm extremely surprised that they have lasted as long as they have, as the company was running entirely on stock margins extending their credit during my tenure.

[lowend1]

I'm not sure if this is a good thing or not, but my hopes would be for a return of the local stores that had one or two locations and sold  a fair amount of used stuff. There were lots of them here in NJ back in the 70s and 80s (before everything was part of a corporation), and they were great places to shop. Then again, instruments aren't as big of a deal with kids as they once were.

[eb2]

Then again, instruments aren't as big of a deal with kids as they once were.

So true.  There are always kids who get into music, but the isn't a whole lot of cool in it anymore.

[Dave W]

I don't know about that. There are a lot of kids in this neighborhood who play, more than when I was a kid.

As for chain store employees, whether it's a music store, Best Buy or whatever, I'm always pleasantly surprised when they know their product. It does happen. But I learned long ago not to expect it.