What�s going on with music retailers?

[resigned]

"Many" players complain about what music dealers do, but some people have no problem using local music stores for demos and then buy on-line. I won't do that. The last two keyboards I bought on-line. ...There are two local dealers in my town that are Yamaha dealers, and I knew before hand that there was no way I would deal with either one of them, no matter what their selling price, so I wasn't about to walk in their store, take up their time when there was no way they were going to get my business, and THEN buy it on-line. That's unethical. I have dealt with another Yamaha dealer that is about an hour drive from where I live and they service what they sell, as well as having a clue about their product line. I am willing to pay a little more and the state sales tax to deal with them because they add value to the sale. The other two dealers I previously mentioned don't and/or are not nice to deal with, so I don't give them my money.

 

 

Mike T.

 

I disagree with this. First, even if you have NO intention of buying a keyboard from your local dealer it doesn't hurt to go there to try out their keyboards. They are probably glad just to see you, and you might buy something else other than what you came to look at. For the store, any foot traffic is better than no foot traffic. The fact that you took the time to visit should be appreciated and taking a spin on the instruments is expected and encouraged. Tell them you intend to buy online and see if they are willing to win your business.

 

Second, your local stores are part of your community and vice verse, so having them know you as a customer never hurts even if you only buy a guitar pick now and then - they might be able to refer gigs to you at some point in the hopes of winning your business. Local money is reinvested in your community also.

 

[MikeT156]

Kevin:

 

The amount of profit a dealer gets by selling a MAP varies from vendor to vendor. There is not set formula that all vendors use to determine MAP. Sure, MAP should be profitable, but in many cases, the dealer is not going to get rich selling at MAP.

 

What the price a dealer is going to actually sell for is going to be determined by a number of things. Primarily the cost to be in business in the first place......Rent/Lease/Mortgage, taxes and MORE taxes, PAYROLL, Insurance, Shipping (Freight IN), Floor Planning-if they don't have an an adequate line of credit to buy the products, etc. I'm sure you can add some things to that short list.

 

Edit: The Pro.....

 

Jim, I guess we will have to agree to disagree. The two dealers I mentioned that are in my home town are not going to get ANY business from me. I've had experience with both those dealers and I wouldn't buy a guitar pick from either one of them. I won't "use" their stores as demo sites for my convenience when I know there is absolutely NO CHANCE they will get my business. I won't waste their time or mine, period.

 

Mike T.

[theGman]

I have switched over to buying a lot from Sweetwater, because I find they can pretty much match any price, plus the free shipping.

 

I appreciate the free shipping even more on some of my rather low $ orders, where the shipping would be half of the cost of the item; I do try to show some respect to their shipping policy by not just ordering one cheap item at a time.

 

I wish they could change candy though. How about some chocolate treats which would not melt for we chocoholic puppies out here?

[Aidan]

So these days, nobody hardly makes a penny off of a $3000 keyboard or whatever.

 

Which doesn't make their attitude any less irksome when you splurge half your life's savings on a big ticket item and they have the same attitude as if they were selling you a capo. And to be honest, that attitude prevailed long before internet sales.

 

 

[kanker.]

Kevin:

 

The amount of profit a dealer gets by selling a MAP varies from vendor to vendor. There is not set formula that all vendors use to determine MAP. Sure, MAP should be profitable, but in many cases, the dealer is not going to get rich selling at MAP.

I understand there is no formula, but having bought things at cost before, I also know that for the average keyboard, for example, there are often many (sometimes many many) hundreds of dollars difference between the MAP and cost. Oftentimes MAP is a lot closer (in terms of margin) to what list used to be.

[Bobadohshe]

I understand there is no formula, but having bought things at cost before, I also know that for the average keyboard, for example, there are often many (sometimes many many) hundreds of dollars difference between the MAP and cost. Oftentimes MAP is a lot closer (in terms of margin) to what list used to be.

 

I work at a family owned music store out here in L.A.. The reality is that Dealer cost varies.

 

Kevin is right for many items. Usually MAP is about 50% to 100% more than the dealer cost. The dealer cost is cheaper at GC and Sweetwater than it is at a store like ours.

 

But GC works out crazy special deals on certain things and it makes it so there is no wiggle room at all, especially for a company like ours. If you buy a BOSS DS-1 distortion pedal at Musician's Friend, you pay like $39. That pedal COSTS us $35, so damn straight on something like that, there's no wiggle room.

[MikeT156]

Many MI MFG have volume pricing. A large dealer or a chain that buys for all their stores can buy in larger quantities and get a lower unit cost than the average mom 'n pop store. The one local dealer I work with has been in business over 50 years and their building has long since been paid for, so no rent payment every month. Music stores in new buildings or in malls have a high monthly rent payment to add onto their cost of doing business. A music store chain I worked for part times some years ago also had floor planning on their big ticket items, and the longer it sat there, the more it cost them. So they would mark down those items and put a big red tag sale ticket on it to move it on down the road. They still made a profit on those items, but the consumer was getting a lower price.

 

 

Mike

[JMcS]

Cost isn't just the price the dealer pays the Mfgr. for the item, it is also that item's share of all the other costs of running the business. One of my copier dealers used to explain to his sales staff that profit was a cost of doing business. The lowest they could sell a copier for was the cost of all the items listed above. Profit was a cost of X% (I don't remember the exact # probably 8 - 12% depending on the size of the copier). If they sold it for that they got to keep their jobs and their draw - for a while. If they wanted to earn any real money, they had to become sales people.

[MikeT156]

The music store I worked for some years ago use to call their cost "freight in", which meant all the cost of doing business was added in to the unit cost we had in the computer system. The owner had figured out what the administrative cost and added a percentage to each item, which also included shipping and advertising too. So yeah JMcS, you are correct.

 

Mike

[drawback]

Cost isn't just the price the dealer pays the Mfgr. for the item, it is also that item's share of all the other costs of running the business. One of my copier dealers used to explain to his sales staff that profit was a cost of doing business. The lowest they could sell a copier for was the cost of all the items listed above. Profit was a cost of X% (I don't remember the exact # probably 8 - 12% depending on the size of the copier). If they sold it for that they got to keep their jobs and their draw - for a while. If they wanted to earn any real money, they had to become sales people.

 

AKA "cost plus 10" - employee pricing of just about anything.

 

 

 

 

 

[JMcS]

He didn't look at it as cost "plus" 10. The 10 was a cost. Plus was what the employee needed to get if he wanted to remain an employee. Otherwise it would be back to the mall selling Tom McCann shoes.

[drawback]

Yes, the "plus 10" was so my employer was at least able to break even.

[MonksDream]

Since I'm Canadian, I have no idea if I'm getting deals at Long and Mcquaude- I can't find the Canadian MSRP's anywhere. I only know what the products MRSP's and MAP's are in the US, and what L&M charges.

Very true. Add Tom Lee to that for Western Canada. Another thing is that Roland and Yamaha and a few other manufacturers don't allow Canadian stores to show their prices online.

 

I do know that when I bought my RD700GX, L&M was a couple hundred more than Tom Lee and wouldn't (couldn't) budge. Generally tough, I've found movement on prices at Mothers Music (AB & SK) but you have to shop in person if you're out there.

Another place is Axe Music out of AB. They're online and usually very good about "beating any price", usually by only a few dollars.

 

We don't have a lot of choices north of the 49th for online sales though, and the "brokerage and custom fees" that no one can seem to (or is willing to) estimate scares me from ordering states-side. Any other Canucks here had any experience with that?

[B3_borne]

I bought my XK3 Pro system out of a music store in Toledo Ohio. It was a floor model that they let go real cheap. I had it shipped to a warehouse in Washington State (by the border) and went down and pick it up (saved $200 by not having it shipped into Canada). I did the brokerage myself, it was easy. Paid the duty (made in Japan) and GST and I was done. save over 1,500 bucks from the one I was looking at ar Musician Friend

[JeffLearman]

"Many" players complain about what music dealers do, but some people have no problem using local music stores for demos and then buy on-line. I won't do that. The last two keyboards I bought on-line. ...There are two local dealers in my town that are Yamaha dealers, and I knew before hand that there was no way I would deal with either one of them, no matter what their selling price, so I wasn't about to walk in their store, take up their time when there was no way they were going to get my business, and THEN buy it on-line. That's unethical. I have dealt with another Yamaha dealer that is about an hour drive from where I live and they service what they sell, as well as having a clue about their product line. I am willing to pay a little more and the state sales tax to deal with them because they add value to the sale. The other two dealers I previously mentioned don't and/or are not nice to deal with, so I don't give them my money.

 

 

Mike T.

 

I disagree with this. First, even if you have NO intention of buying a keyboard from your local dealer it doesn't hurt to go there to try out their keyboards. They are probably glad just to see you, and you might buy something else other than what you came to look at. For the store, any foot traffic is better than no foot traffic. The fact that you took the time to visit should be appreciated and taking a spin on the instruments is expected and encouraged. Tell them you intend to buy online and see if they are willing to win your business.

 

Second, your local stores are part of your community and vice verse, so having them know you as a customer never hurts even if you only buy a guitar pick now and then - they might be able to refer gigs to you at some point in the hopes of winning your business. Local money is reinvested in your community also.

Say what you want, but this is why virtually all the local stores have failed, except in the biggest markets or specialty shops.

 

We *used* to have lots of good local pro shops.

 

Now we have a very limited number, simply because people would browse there and then buy online. It's simple math.

[SMcD]

MonksDream, why do some retailers refuse to let Canadian retailers put prices online?

 

In Winnipeg, my only options are Long and McQuade, Mother's Music, St. John's, and Quest Musique. St. John's is Yamaha-only, and Long and McQuade has the best selection of gear in the country. Unfortunately, they don't put everything good out on the floor. I don't think there's a Tom Lee out here.

[Chris Link]

Exactly right.

 

...I wasn't about to walk in their store, take up their time when there was no way they were going to get my business, and THEN buy it on-line. That's unethical.

 

Mike T.

 

Harumph for Mike T!!!

 

(From "Blazing Saddles")

 

Politicians: Harumph, harumph, harumph!!

Governor LePetamaine: I didn't get a harumph outta that guy!

Hedley Lamar: Give the governor a harumph!

Guy: Harumph!

Gov: You better watch your ***!

 

 

[JeffLearman]

I doubt there's any price fixing going on. If one company dictates prices for its outlets, that's not price fixing; it's perfectly legal and normal. Price fixing is when the different retail companies or different gear makers collude on prices.

 

Really, gear prices are astoundingly low these days, and the main reason for that is incredibly low prices of gear made in China (with a currency that's being held at artificially low levels by the government).

 

Furthermore, the main reason there's no bargaining room is simply that the advertized prices are so close to margins, following the WallMart model. When times were better and sales were up, there was more of a cushion and more possibility to take little or no profit on one sale to help lock in a customer. With all sales figures down, each unit sale has to earn a bigger portion of the overhead and total profit. So, less wiggle room.

 

I remember when a CP70 cost US$4000 and your order had to wait in line for you to get one. I was super lucky to get an (ab)used one for $2500. Now, a dollar in 1980 was equivalent to about 4 dollars now, so that's $16,000 new or $10,000 used.

 

That was for ONE sound -- admittedly a hell of an instrument, but not as useful as a good digital piano today.

 

Good poly synths cost as much or more then as they do now, meaning about 4 times as much in terms of income or purchasing power.

 

Guitar prices have held nearly steady, except for quality acoustics, where prices have about doubled. But that's still half the price, when corrected for inflation. (Cheap ones are cheaper and better than in the 70's and 80's.)

 

To my old ears, anyone complaining about gear prices sounds like whining. It's like complaining about the weight of a 50-lb keyboard!

[kanker.]

I doubt there's any price fixing going on.

MAP practices are just about as close to price fixing as you can get.

[DanS]

For some people, the price is never low enough. You guys in the US don't know how good you've got it.

[MikeT156]

Quote by LearJeff:

 

"Say what you want, but this is why virtually all the local stores have failed, except in the biggest markets or specialty shops.

 

We *used* to have lots of good local pro shops.

 

Now we have a very limited number, simply because people would browse there and then buy online. It's simple math."

 

The only way local music stores can survive these days is by adding value to the sale. They also need to invest (Training) in their sales people. It's difficult for many dealers in a small market to do that.

 

The regional dealer I work with is as competitive as they can me on big ticket items (although not rock bottom) they service their products under warranty with a Tech that has been working there over 30 years. If he can't fix something, the dumpster is where it goes next. He will service products not purchased there (not under warranty) and charges what I consider a reasonable rate for his expertise. They will also provide me with a loaner if my KB is dead and I have a gig. They don't crush me on the prices of cables and accessories either. They have been in business over 50 years, and I know why.

 

It has gotten to the point that the ONLY reason I would buy on-line is because they don't carry a particular item I want to buy.

 

The local stores here should follow that business model, because what they are doing isn't working.

 

 

Mike T.

[KeyMoe]

 

For example, I paid $1000.00 for the Motiff ES-Rack not long after it came out (06?).

 

Don't let anyone kid you, there is a huge mark up in musical gear. That $1000.00 ES-Rack, I purchased one for $649 brand new when they first came out and the dealer still made a profit. The margin on cables is also very large. Dealers are somewhat pressured by the manufacturers to sell at MAP or risk loosing the product line.

 

Regarding GC, they were taken private by while back by an investment company by the name Bain Capital. Bain felt that the margins could be increased by elimnating the ability to discount prices below MAP. So they implemented a policy in June of last year that took away the ability for sales folks to discount the prices. Sales suffered so they moved to a price matching policy late last year that if you can provide a lower internet price with shipping they will match it. As a matter of fact they will actually allow you to use an store computer to search the web for a lower price.

 

It's really a protect your product line and margin game....

 

[ProfD]

The most successful music store and online retailers went into business well before the internet took off and really made it even more competitive.

 

A brick and mortar operation is not going to lower profit margins and invest more money into products, sales staff training, etc. If anything, they are going to ride until it is no longer profitable.

 

I think my local store, Chuck Levins, will survive due to band sales (supply instruments throughout the area) in addition to having a worldwide reputation.

 

Otherwise, it is harder for any physical store to compete with a virtual presence and cheap consumers.

 

So, I believe within the next 10 years, musicians will be buying online exclusively and/or picking up gear at Best Buy.

[MonksDream]

MonksDream, why do some retailers refuse to let Canadian retailers put prices online?

 

In Winnipeg, my only options are Long and McQuade, Mother's Music, St. John's, and Quest Musique. St. John's is Yamaha-only, and Long and McQuade has the best selection of gear in the country. Unfortunately, they don't put everything good out on the floor. I don't think there's a Tom Lee out here.

I suspect that it's to protect their dealers from exactly the sort of online price comparisons that people in this thread are discussing. Check out L&M's or Tom Lee's or LA Musis's web sites. You can't find a price on Roland or Yamaha gear that's not a clearance price, and that extends to foot-pedals and other minutiae.

 

[MonksDream]

For some people, the price is never low enough. You guys in the US don't know how good you've got it.

Amen.

[MikeT156]

The US has always had cut-throat prices. I have noticed that some products have gone UP in price this year, like the Hammond XK-1, while the Korg M3 has gone down in price. I think we can look to paying more for gear in the future, if the US economy and the US Greenback keeps going down the toilet. The Euro is probably a safer currency.

 

Mike T.

[ADino]

At SW, Ive been dealing w/the same guy for a few years...if he doesnt beat the prices I throw at him, then it aint gonna be beat..

 

I did pick up my M50 as a floor/demo model..that knocked off a few clams, n really, it was bn...

[ADino]

I quit going to GC..they really give me the creeps..no one really knows much about the boards...luckily, theres a big retailer close to me, plus I live in between to larger cities where theres more shops to check..

[Jason Stanfield]

Actually, when major retailers get together and set the price and don't vary from that price, that is the very definition of price fixing.

 

Say what you want, but when pricing is exactly the same at Guitar Center, Sam Ash, Sweetwater and Musicians Friend, that reeks of collusion.

Well, that's the manufacturers' and distributors' fault, not collusion between big chains. We enforce MAP - Minimum Advertised Pricing - so, denied the ability to advertise at razor-thin-margin prices, dealers advertise at the lowest they can within the confines of their mfr/dealer contracts.

 

After 10 years in this industry, I'm still not sure where I stand on MAP on principle. It has its merits, but also comes with many faults. I've never heard a bulletproof argument for or against it. (Some challenge MAP's legality; it is indeed legal, but not because of any rational or moral principle - it's 'allowed' by Congress and SCOTUS so long as it isn't 'abused'.)

 

Back to the OP, I think the reasons everyone has adopted a no-negotiation policy recently are:

 

A) Big retail companies have to maintain profitability, especially when revenue decreases during a recession. They're stocking less and trying to make the most they can off the least they have to keep in inventory.

 

B) Due to lowered volume, manufacturers aren't offering wholesale deals as much as they once did. Mfrs have to eliminate as many variable costs as possible, and focus on keeping themselves profitable - the economy may be slumping, but keeping the lights on doesn't get any cheaper.

 

C) Manufacturing costs have reached a bottom-of-the-barrel impasse. There's no cheaper labor than China or Mexico, and no cheaper materials available than are already made.

 

D) Non-MI stores are aggressively getting into the instrument business. In less than a year, Best Buy has taken a lot of traffic out of local music stores and b&m chains, and Amazon is moving away from acting as a 'broker' for other retailers by actually stocking its own inventory now.

 

Basically, the changes are part of an industry-wide market adjustment. Will things go back to they way they were before? I don't know -- but does anything, really?

[burningbusch]

Hey you can buy a new Nord Wave for $1529 at 8thstreet.com

 

Deals do exist.

 

Busch.