Official Luthiers Forum!

I'm more concerned about their Music & Arts stores.

Where I live, every kid taking band rents his or her instrument from them.

Kevin Looker

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I'm not a luthier.
I'm just a guy who builds guitars in his basement.
It's better than playing golf.

Since the advent of GC (Guitar Center) Mom and Pop (M&P) music stores have been perishing all across the US.... It's the Wal-Mart story only specific to the musical instrument industry happening all over again.... Reminds me of a great John Prine line "I felt as welcome as a Wal-Mart Superstore..."

Don't know about others here but for me a great deal of my interest in music and guitars can be directly traced to the local merchants, the local M&P owners who where very good to me as a kid and later as an adult. As a kid I recall one local music store where the owner and his wife thought that I was a good kid... (well we all can make errors in judgement from time to time...) and were very comfortable letting me open case after case and marvel at the Gold Tops and early Strats and 335's.... I also recall Rex, the owner asking me if I wanted to learn how to tell if a speaker is blown as he came out with a chrome domed JBL with massive magnet in his hands and a D cell battery.... He lit a spark that has cost me tens of thousands since.....

I agree with Kelby that GC will be around in some form for unfortunately years to come.... Just like Ebola some toxic concerns don't die easily...... Although this was certainly not Kelby's point, my judgement call on just how evil GC is GC is likely not too big to fail but very possibly too big to just go off and die as I would hope.... Instead they will be around continuing to hurt the M&Ps in at least some markets for likely years to come....

I also agree with Kelby that the article's author, Eric hates GC and no wonder either, the vast majority of experienced players that I know also hate GC and so too do I....

GC is the Comcast of the musical instrument industry hated, despised, terrible customer service, etc but they are still around.... for now....

Nonetheless GC is in deep doodoo financially speaking and it just could be that there are limits to just how many times vulture capital can rape and pillage with reckless abandon.... GC has notes to pay, it's questionable that they can make the interest only payments that are due soon, and the new CEO as the article points out was anointed more for his skills at managing an entrenched, troubled concern than for his ability to inspire, innovate, and lead a "happening" for GC that would save the company the old fashioned way - earning it.... Instead this CEO is a master at not taking creditor calls, negotiating more time with creditors, and painting a picture that may resemble scifi......

Regarding the ripple..... the ripple may in some markets be a tsunami depending on how GC reorganizes. If a local GC store is liquidated it's very possible that the M&Ps in that market may have a terrible year.... Demand will be partly satisfied by the liquidation of the local GC making it even a tougher slog for the M&Ps....

On the supply side Fender has over 1/4 of their total annual production earmarked for GC. We also know that Gibson just raised prices 29% across the board which is usually not a sign of great prosperity and more likely an indication of struggles on the supply side as well.

If GC fails to pay a supplier who is on the verge already, like Fender, that ripple could result in the Fender that we all know going the way of other iconic brands and becoming simply a once well respected name that now backs cheap, Chinese f*ctory production.

Most of all though like Eric I have a bone to pick with GC and the slime-ball vulture capitalists who are taking turns gutting this company.... The M&Ps need our support, they are also an outlet for many of us who build and sell guitars. These local merchants in many cases have been there for us, they were there for me..., and as such I want to support them. If this support also means not patronizing GC for anything, ever, I'm on board and have been for years now....

The last point that I wanted to make is this: People WANT to buy from people. This is not just a belief with me but something that I studied for decades as well and can back up easily. Just like Rex Aldridge RIP who trusted me as a snot-nosed little kid to have free run of his music store local merchants have had and have often succeeded at establishing quality, supportive relationships with their customers. They know us, they know what we like, what we play, maybe even a bit about our personal finances. Local merchants may know our families, kids, wives, etc. In many cases these very fine folks have gone the extra miles for us time and time again and that means something to me, that means a great deal to me....

Unlike Eric I'm not shy about showing my true colors - I hope that GC goes teats up.... But I also know that when any organization has the reach that GC has with likely 1/4 of the entire industry dependent on GC for industry growth, marketing, etc. if GC does go down it will be felt and it likely will not feel very good for some and for a while.....

I've always believed that things will go full circle as I watched local music store patrons try out a Martin, bond with it, whip out the IPhone and check for a price at GC and then off they went leaving the local merchant relegated to be a heavily vested local show room only that funnels their business to GC thanks to the Internet and the monopolistic practices and favorable pricing that GC can command.

Fender could fail too and as a result leave our shores for good and in totality..... After all Fender because of Leo's manufacturing genus does not exactly need uber skilled labor to produce their wares....

If nothing else comes out of this discussion my hope is that more folks will gain more understanding as to just exactly the price that GC has made us all pay in the destruction of the local M&Ps.

Lastly even Bain got scared here..... and sought to insulate themselves to a large degree by selling some shares to another vulture capital firm.

What's that tell you when the vultures are reluctant to secure a kill just for themselves..... Maybe there is something even more toxic and rotten about GC that even the analysts don't yet know but the vultures can taste making them wish to pass or share......

Stay tuned.... this is going to be ugly and likely will limp on for years....

I have to admit I am a complete idiot when it comes to understanding economics. I do know however that the advent of the Internet on one hand killed my business and on the other helped it. I was doing repairs for 5 stores in circa 1995 and by 2003 all but one was gone. The owners attributed it to the big box store and online phenomena as well as a next generation of customers who thought that cheap prices trumped all and didn't ever realize that cheap is more expensive... Till now maybe? On the other hand I've sold guitars to other people thousands of miles away who most likely would have never had found me. Of course the local repair business was the bread and butter.

My nephew thinks Facebook is uncool... Yay for the next generation of quality minded consumers? Maybe IDK?

Like I said I'm dumb about it and freely admit it. I got my schoolin' in Geology so if ya wanna talk about rocks let me know

Also I had no idea GC was THAT big!

I hope no one here actually wishes that tens of thousands of Guitar Center and supplier employees lose their jobs. That seems very mean spirited and not what I usually see here.

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A constellation only takes shape when one maps the whole.
- Beth Brower

You like rocks?? Here's a bowl of finds I keep on my window sill. Got bored the other day and felt like taking pictures.



Reading an article in Rock & Gem the other day by the way, and got drawn in to researching Herbert Hoover's background as a mineralogist. Most interesting thing I found was how much of the article was copied and pasted from Wikipedia!

Anyhow, back to GC.

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Eschew obfuscation, espouse elucidation.

No Woody, I'm not sure how it could be inferred from anyone's posts here that they would wish ill on any employees (although I'm not sure which is really worse - working for Guitar Center or being jobless). I actually have a number of friends who are employed by GC, and am genuinely concerned for them. The jobs being lost there are certainly not ideal however, and likely to get worse as they try to squeeze more out of their employees for less to cut costs. If they die or downsize though, the market will not disappear, and other opportunities should open in other retailers who step in to take their place. As one dies, someone else will step in to fill their profile.

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Eschew obfuscation, espouse elucidation.

It sounds like a typical Bain Capital take over, that is: acquire the company, load them up with unmanageable debt, sell the company to someone not as 'cleaver' as them, then take the money and run didn't work. Excellent!!!

(I do like Guitar Center, but I Love the local independent shops.)

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Joe Beaver
Maker of Sawdust

Sadly, there is nothing new or unique about this scenario. David is correct, of course, and the the market will adapt. Yes, many decent, hardworking people will be left to look for new jobs and that is very unfortunate. However, when all is said and done, Bain will have made a tidy profit. That's how it works, which is a problem that should (and could) be remedied, but never will.

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George :-)

Well as long as they referenced Wikipedia I guess that's okay, still a bit faux pas in academics though.

My wife is also geologist, went on to get a PHD in fact. We have quite a few rocks laying around the house and out in the gardens

""Here’s what this really means: it’s the end of big box retail, an irrational addiction to growth, and the scourge of unregulated structured finance.""

Amen

""This unforgiving reality will work great for local stores and entrepreneurs with a classic, cautious approach to business management. For a while, suspending our disbelief in reality allowed standard-issue corporate financiers to run a pump-and-dump scheme on all kinds of retail, selling risky ventures to “dumb money” and reaping the rewards for a select few.""

If what this article says is true,
Sounds like this could be a good thing for local luthiers and Mom and Pop shops…. I think more people here are invested in this type of arrangement, than big box monstrosities … I for one wouldn't be sad to see GC go.. Then again I live in Canada and our chain outlet is Long and McQuade… who handles band rentals and things of that nature,
which someone here already brought up, GC rent to many HS band kids… that would be a sad vacuum.. I don't know who could fill that gap if GC vanished.
cheers
charliewood

I love local businesses, and when I make a purchase, I always give them the first shot. That being said, several years back, I wanted a particular model of Fender Jazz bass. I went to the local store, and their response was Fender won't sell to us. Next I drove 30 miles to a known Fender dealer. He didn't have it in stock, and would not order me one , even for cash "up front". I drove to the next state to another Fender dealer who did not have that model, and would not order it as well. I drove home, got on the internet to Musician's Friend and had my bass in just a few days.
I had cash, was willing to pay "up front", and these local dealers all turned away my business, I'm assuming that they wanted to sell something off of their shelf rather than make a special order. Bottom line.........sometimes even the local guy doesn't deserve your business. It's all about customer service.

I don't have a problem with GC.

I grew up not playing a musicial instrument. When I was 25, my wife and I were running an errand, and I saw a GC and suggested we stop in. I had never wanted to play before that moment, but I went in and came out with a guitar. 20 years later, I own more guitars than I can count, and I have two sons that play avidly (one is a jazz guitar major in college). Most of our instruments were purchased at family-owned businesses (or built by me), but a few (including that fateful first guitar) came from GC. If not for GC, I would never have started playing.

I know a lot of kids that started playing because they stopped into a GC one day.

GC has done a lot to promote guitar playing. They are able to advertise and generate interest in the hobby in a way that mom & pop shops just can't. And the people who become guitar players because of that marketing and promotion boost the size of the market for all sellers.

Having GC in business helps the entire industry. Without companies promoting guitar playing on that large scale, kids turn to techno-pop or electronica for their musical interests, and that hurts the mom & pop shops as well as the small luthiers.

Those are some nice rocks!

Kelley makes another good point and that is the marketing that GC and MF do does help both drive and create demand for guitars in general. That's not a bad thing unless for one reason or another the local retailers can't compete.

There is also the issue of the commodification of musical instruments where they become more likely something that is very well known and understood, a commodity, which invariably leads to the products being sold on price or having price have way too much to say about the value proposition.

Gold is an example of a commodity, we all know what it is, no one ever really inquires as to if this gold is better than that gold and it's sold on price....

When a behemoth such as GC that can command 1/4 of the entire industry sets the stage that price is the cardinal concern differentiation takes a back seat and products that are not sold on price are impacted negatively....

Still the local retailers do have an opportunity and have always had the opportunity of exploiting the idea that people really want to buy from people, not a big chain store, not the internet, etc. Local retailers have the opportunity to build positive relationships that GC also has but IME can't seem to do well at all...

GC will still be around and the local merchants the ones that are left... will still struggle for a while. OTOH I still think that this will come full circle someday and more folks will value the value add of the local merchants, the positive relationships that you just can't get from a chain store with a constant rotation of minimum wage folks who tend to come and go.

Related is the discussion that in the past decade or so we have seen more and more f*ctory instruments now sporting features that in the past we only found on Luthier built instruments. Bone nuts and saddles, sound ports, exotic woods, and now torrification, etc.

The f*ctories have been going to school on the likes of us and things that Luthiers have pioneered are now found on f*ctory instruments.... To me this verifies that Luthier built instruments are indeed addressing market preferences now the trick is for Luthiers who make their living building to learn to insert themselves in the paths of oncoming true prospects. Might be a good discussion.

I asked a local music store why they did not sell Gibsons.
The response was that Gibson required they maintain $50K worth of Gibson product on hand.
Ok, that seems reasonable.
The inventory at GC is mind boggling. It's hard to go in and not spend money.
If GC went away, I don't know how the local stores would be affected. It may come down to how the big manufacturers would distribute their product.

I edited this to comply with forum rules.
Dan

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wah
Wah-wah-wah-wah
Wah

Best Buy might pick it up. Some of their stores sell Taylors

Radio Shack, which was recently rated financially on par with Guitar Center, has declared bankruptcy.

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"I've been had again"
Tim Benware
Creedmoor, NC

2nd time in 3 years, I think.

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"Act your age, not your shoe size" - Prince

On the other hand... Best Buy was facing demise when somehow they turned it around. Don't know if GC could do the same...

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Steve Sollod (pronounced sorta like "Solid")
www.swiftcreekguitars.com

All I know is that YouTube video that was attached to the article proves Einstein was right about time not being linear, definitely the longest 37 seconds I have experienced on this earth. And while I'm not a venture capitalist, couldn't GC just do Quantitative Easing and get themselves out of this predicament, as it has worked so well here in the US, Japan and Europe.

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Kurt Thomas

"There's a first time for everything even if you do it by mistake."

I doubt they could. Best Buy at their lowest point was in much, much better shape than GC appears now. It seems like their dip in to the "junk" status may have been driven more by their talk of attempting to go private during a dip, than by the severity of the dip itself. Look at their 10 year financials, and the dip from a few years ago looks like a walk in the park compared to GC's current debt to income and prospects for getting out easily.

I'm certainly no economist though, and could be grossly misinterpreting what the numbers actually mean. I do find it at least interesting however, that one of the things Best Buy did change when they were at their low point was pulling out of the musical instrument market. Not saying this alone made any significant impact, but they did include dumping this market as at least part of their recovery, and the recovery seems to be going fairly well (so far). Couldn't have been that great a profit center for them.

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Eschew obfuscation, espouse elucidation.

I can't tell if you're joking, or just.... dumb. Which is it?

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"Act your age, not your shoe size" - Prince

Would you trust this guy?





Please meet Tim Martin, GC's CFO (Chief Financial Officer). Tim says in the following interview from last December that GC is healthy, profitable, opening new stores, and that GC's investors Bain and friends... must not be concerned or they would have used their board seats to object to the opening of new stores..... Wonder how much longer he will be at GC....

Here's the interview: http://www.musicincmag.com/News/2014/141217/141217_GC.html

Seems like a reach to me when it's common for companies on the chopping block... to do all that they can to maintain the revenue stream in the hope that a new chump, er.... I mean new suitor might be found to take on the roughly $2B in debt. This is the same reason why Radio Schaak secured a quarter billion dollar loan to help keep them operating through bankruptcy....

Interestingly Martin also says near the end of the interview/article that the debt structure of GC is Bain's problem.... Never professed to be the brightest bulb in the pack here but is this not a direct admission of the existence of a problem? Martin seems to lack the holistic view of the organization that has to include an investor's view as well or surprises are bound to happen.

Not sure that Martin did any service to GC in this interview and at the very least the guy could have worn a neck tie....

VC firms are not in the business of student loans where repayment in full may be 20 years out... Instead they typically want massive returns very quickly or they go to plan B which can be plan A depending on the VC firm - gut the company, write massive checks to themselves, and then pack it all in and let the bankruptcy courts clean up the mess.

For those of us who are genuinely concerned about the employees, nearly 8,000 of them... and to be clear one way to be concerned for the employees is to find it very unfair to them when the high rollers who have the levers for the organization do not exercise the proper levels of fiscal responsibility that would ensure the long term survival and health of the company.

Some of us may hate GC and I'll make no bones that I'm one of them but we are not the folks who have the employees at greatest risk, GC management and investors do.....

The mismanagers of GC are who is putting everyone's future on the line though their actions that to date have led to a very uncertain future for GC.

I'm wondering if I am not the only one who is even more concerned for the future of GC after reading the comments of GC's CFO, Martin.....

Didn't the French guillotine their 0.1% some time back?

Is this what happened to MARS (Music And Recording Superstore)? Remember them? What happened to their assets? ...Did GC buy them out?

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Steve Sollod (pronounced sorta like "Solid")
www.swiftcreekguitars.com