Slow Demise of Your Local Guitar Shop

I could have picked two or three different titles for this rant, yet effectively they would all have amounted to the same thing – Why has my local guitar shop closed down ? – Or, why does my local guitar shop no longer stock major brands like Fender, Yamaha, Gibson or Marshall ? – This rant was written in the summer of 2014, so whilst the general gist and principle of this topic will remain valid for many years, a few specific details may well change

The obvious answer as to why your local guitar shop may have ceased trading largely comes down to economics and the internet, and sadly there is no getting away from that fact – So are the big dealers simply getting larger? – Suppliers and manufactures use to claim that around 80% of their sales revenue was generated by only 20% of their dealers – I suspect today that figures around 90% of the business generated by 10% of the dealers may be more appropriate, hence smaller dealers will suffer and inevitably fall by the wayside – So whereas Sainsbury’s, Tesco and Asda receive the bulk of the spending with regards to your weekly shop, the leading UK guitar stores have increased their turnover substantially, at the expense of the smaller dealer – Yet on its own, the power of the internet, plus on line shopping, is only part of the problem – Big changes, over the last 10/15 years, with regards to distribution of the leading brands, has made a serious impact as to the selection of products that are now available to buy at your local dealer

At this stage I would like to discuss the distribution of Gibson Guitars, as an example – This is not to have a go at Gibson and blame them alone for the impact that changes in distribution have had on smaller dealers – It is a) about a number of factors that can be clearly accounted for and b) you could effectively apply the words Yamaha, Fender or Marshall, plus many other major brands, instead of Gibson

Looking at UK dealers listed on the Gibson web site, the following towns do not have a Gibson dealership, so in no particular order :- Bath, Chelmsford, Gillingham, Colchester, Watford, Ipswich, Coventry, Worcester, Wolverhampton, Swansea, Derby, Grimsby, Blackpool, Preston, Hull, Bradford, Harrogate, Darlington, Lancaster, Blackpool, Durham and Sunderland, to name a few – half the towns listed have football teams that have played or currently play in the Premier League, as such they are not small towns – Furthermore there is only one Gibson outlet for the whole of Wales, 2 for Northern Ireland, 5 for Scotland, none for Cornwall, only 2 for the counties of Derbyshire, Nottinghamshire and Leicestershire – If we draw a line across the UK that is north of York, then takes us up to the Scottish border, there are only 4 dealers to cover that area – Then if we look along the M60 and M1 corridor that covers the vast Yorkshire conurbation of Sheffield, Leeds, Bradford, Halifax, Huddersfield etc there are only 3 dealers to cover that large populated area – Please note that this list of towns does not even cover the 100’s of smaller market towns in the UK, but to be fair we can’t expect a major brand to be available in every small town – After all I can’t buy any ‘house hold brands’ like Apple, Samsung, Nike or Adidas in my town – Yet I’m sure many customers will have noticed that new Gibson Guitars are no longer offered for sale at their local small dealer– To be fair to Gibson, the larger dealers that commit to the brand have probably the best selection of new models you’ve ever seen in one showroom – Now as I mentioned earlier, please do not blame Gibson alone for this situation – I recently found out that Marshall are about to reduce the number of UK accounts from 400 dealers to 100 – So in due course, expect the dealer in a smaller provisional town to be no longer able to sell you a new Marshall amp – Think about it, 400 dealers down to 100 dealers, that is 75% of UK accounts closed down – Yet we all know that whilst Marshall will no longer have to spend funds servicing the ‘smaller accounts’ they will not lose revenue, so this further supports the 80/20 rule moving towards 90/10

So why has this happened? – Again let me use Gibson as a good example and take into account, this example will include Epiphone Guitars – Until around 2008, Gibson Guitars where distributed to UK dealers via a wholesaler called Rosetti – Like many of the older traditional wholesalers, a catalogue of products would be offered to the appropriate accounts – This catalogue would include major brands like Gibson, Epiphone, Rickenbacker and Shure microphones, along with accessory based products that a local dealer would require, for example, clarinet reeds, guitar cables, tuners, stands, gig bags, music stands and possibly a selection of brass and woodwind instruments – Effectively, as a dealer, big or small, if you had an account with Rosetti, you had access to all the products listed in their catalogue – Effectively a large majority of UK dealers would have had an account with Rosetti, hence full access to Gibson Guitars – Granted larger dealers, who purchased more Gibson and Epiphone Guitars, would acquire a more favourable buying price, with a view to offering you the customer a substantial discount on new Gibson Guitars – For example, dealers like Coda Music and Peter Cooks purchased large quantities of Gibson Guitars, so for a period in time from the late 90’s and on wards, they offered the lowest UK prices on new Gibson Guitars – However, at the start of each month, Rosetti would release a ‘special offer’ list to include a number of products that were again available to all dealers – So with regards to Gibson Guitars, this list might include a big reduction on say old stock, discontinued models, discontinued colours, excess stock, or even a few tasty models that might not necessarily be the best selling Gibson, but nevertheless they would offer the dealer the chance to acquire an interesting model at a far more attractive price – For example a Firebird V11 with vibrola, a 3 pick-up LP Custom, or how about an SG Standard in white – At these special prices, the dealer who could not offer a competitive price on the bestselling sunburst LP Standard, or heritage cherry SG Standard, would buy select models, then over a period of time, acquire an interesting selection of Gibson Guitars, that can be offered for sale at attractive prices – Furthermore, Rosetti would offer a selection of shall we say ‘B Grade’ Gibson Guitars, that might be ex-show or ex-display models, ex magazine review or indeed have some minor finish blemish that failed a quality control check ( no jokes please that asks ‘don’t all Gibson Guitars fail QC on finish issues’ ?) – Bottom line is that if we look again at the list I posted above of towns without a Gibson Dealer, then 10/15 years ago, every one of those towns would have had a guitar shop that sold some new Gibson Guitars, whilst many towns had 2 or 3 stores that offered a selection of new Gibson Guitars

This has now all stopped – Gibson Guitars now distribute their own guitars to a smaller selection of privileged dealers – Remember, when I say Gibson Guitars, this also includes Epiphone Guitars – This scenario effectively now applies to Fender, Marshall, Yamaha and many more as well – The days of the distributor offering major brands in their catalogue has just about died – I think that today, Martin Guitars and Mesa Boogie products are the only 2 major brands of any size that do not have their own distribution channels within the UK, albeit they still offer a restricted dealer network – The dealer now has to make a serious financial commitment to Gibson, then achieve and maintain a required sales target in order to meet the dealership terms set in stone by the manufacture – In most cases, the smaller dealer can’t or won’t commit to such terms – In some cases, your local dealer might wish to be a Gibson Stockist, but if he is too close to another dealer, often a larger Gibson stockist, then Gibson will not allow two dealers to ‘compete’ with each other – Maybe good for the larger dealer in that he has no competition within a certain town, area or county, but not good for many customers – As I mentioned earlier, Marshall are now moving down a similar route and will erase around 300 small dealers within the UK – Rest assured, the larger dealers will benefit

So where does this leave your local dealer when he can’t commit the required funds or achieve the sales figures that Yamaha, Fender, Gibson, Marshall etc etc require – One option is to offer more used products, yet instantly E-bay becomes the biggest competitor – If the used value of say an LP Standard is worth £1200 at your local store, then that dealer will probably need to offer you around £750-800 for it, yet on a good day you might acquire around £1000 by listing it on E-bay – Bottom line is then how does the dealer acquire a good selection of used guitars and still make a sensible profit to survive – The other option is to buy new brands that are ‘less popular’ – ‘Less Popular’ is not meant to be a derogatory term that may imply ESP, Vigier, Fret King or Vintage Guitars for example, are of an inferior quality to say Gibson or Epiphone, as that is not the case – It is a simple statement that Yamaha, Fender, Gibson and Marshall are amongst the bestselling, well known brands – Effectively if your local dealer fills his guitar wall with Fret King, G&L, Vintage, ESP and Vigier, chances are that it will be far harder for him to sell you the guitar you require, hence he finds it hard to make a living and in many instances he calls it a day

I’ll give you another example – Probably two of the bestselling well-known brands of electro acoustic guitars in the UK are Takamine and Yamaha – If your local dealer does not commit to a serious financial agreement with Yamaha, that dealer simply has no account – Fender currently own and distribute Takamine, so again if your local dealer is surrounded by a larger Fender dealer, then chances are they will not have an account with Fender, hence no Takamine Guitars can be offered for sale in that store – Therefore the dealer then has to look at ‘less bestselling’ options like Tanglewood, or Vintage – Again, nothing against those two brands whatsoever, but they are certainly a less well-known brand with lower sales figures, hence you generally don’t see them for sale in many, or indeed any, of the larger guitar stores – Going back to the 80/20 rule, or 90/10 rule, then in fact you now start to see a situation whereby the larger dealers have a very similar stock profile, made up of the bestselling brands, so very little differential between those dealers, yet between them they will account for around 80-90% of the UK’s guitar sales – Therefore the ‘less selling brands’ now have to acquire as much business as possible from the remaining dealers, who account for only around 10/20% of the UK’s sales revenue

Let me put in to some context the size of the two major USA guitar companies – PRS Guitars is without a doubt the third largest electric guitar brand in the USA and whilst it has achieved considerable success in the more expensive, boutique end of the market, if you are a larger dealer it is a line that they can either stock or do without – It can add value to your business, your stock profile and your image, yet as a percentage of your turnover, when compared to Fender and Gibson, it will probably pale into insignificance – According to recent figures within the USA, Fender Guitars achieved 350 million dollars’ worth of sales (note this figure is for Fender products and not associated brands like Charvel, Jackson, Guild or Gretsch that are owned by Fender) and Gibson achieved 325 million dollars’ worth of sales – Whilst PRS achieved 43 million dollars’ worth of sales – That is around an 86% smaller sales revenue than Gibson – Hence Fender and Gibson rule the waves and as such all the associated sales and stocking policies that go with it to a major retailer – If you are in bed with them, then all well and good – If not you are part of a smaller dealership fighting hard for a living

Finally to add some additional support to the 80/20 rule, a recent set of figures for the ‘Top 50’ UK dealers indicated the net worth of the Top 10 dealers was about just about equal to the net worth of the next 40 dealers (ie those listed 11-50) – so spot on for the 80/20 rule – 100’s of smaller dealers who did make the Top 50 now start to fade into insignificance for the big companies – Again, for these figures, chain stores like Dawsons, PMT etc count all their stores as one store

Please note – the above is not a gripe from me towards the large corporate companies and despite how I may have portrayed the above information, it certainly is not a case of sour grapes – It is only my opinion as to why many smaller dealers, throughout the UK, do not stock, or can’t stock the major guitar brands – From day one, I chose an independent policy for my business and I do okay with such a business model – Fortunately this business model allows me to work with only myself in the business, hence only one mouth to feed, coupled with low rents and rates – If I had to pay 2/3/4 staff, coupled with a larger rent, in what would probably be a larger town than Ashbourne, then I think I would not survive – So whilst I can’t beat them, I don’t need them and they don’t need me – When I worked at Academy of Sound for a while, up to around 2004, my old boss, Keith Woodcock, was part of the old stalwart who fully supported the 80/20 rule – The sales figures for Academy of Sound placed them within the top 2 or 3 dealers within the UK – Keith always stated that only the biggest will survive, whilst the smaller dealers would have to become very specialised to survive – As such he feared for those in the middle – Wise words that in principle are bearing fruit – Yet in the UK we have seen the demise of some ‘big boys’ which in recent years includes Sound Control – Once they had purchased The Academy of Sound chain, to give them over 20 stores, they were easily the largest UK music retailer, yet in part due to a serious number of management issues and direction, the largest UK dealer to bankruptcy only took a couple of years – This was shortly followed by the demise of Digital Village and Dolphin Music – All dealers who became part of the big league within the UK – Whilst in the USA, Mars Music closed down shortly after 2000, whilst currently the world’s largest chain of music stores, Guitar Centre, are in a serious financial crisis – Due in part to a large financial burden imposed on them from a venture capitalist buyout – So the big boys can go under and leave repercussions for the manufactures in doing so – But the point in these situations is that when the big boys have closed down, will your small local store still be open ? – If so, will they wish to go back and support the large brands who have neglected them for so long – I have my opinions so let’s see how it pans out