Interesting Article on the Business Behind Fender

[Scott Fraser]

In today's NY Times Business segment. The comment about Guitar Center's financial condition & the interdependency of them & Fender is sobering.

 

http://www.nytimes.com/2012/09/30/business/fender-aims-to-stay-plugged-in-amid-changing-music-trends.html?pagewanted=1&_r=2&nl=todaysheadlines&emc=edit_th_20120930

[Larryz]

I think GC (and MF) are the biggest sellers in the US of Fender guitars, but they are lagging in sales for the same reason Fender can't find investors for their stock offering...consumers are going away from buying guitars in this economy (to include all higher priced brands made in the US) and focusing more on the basics of life.

[Dannyalcatraz]

Thanks for posting that.

 

I think one area in which Fender flubbed is in their handling of the companies they acquired. For instance, the article talks about how Fender was "forced" into entering the acoustic guitar market. In order to keep from cannibalizing "Fender" acoustic sales, some of the other acoustic brands they own have been downplayed and/or ceased production. Some even had their operations moved to new plants, which required retooling.

 

This was a mistake. Imagine if car makers had tried the same thing- who would have bought a $2.25M Volkswagen? I bet it's fewer than have bought the Bugatti Veryon. Would you buy a Jaguar F-Type? What if It were sold under the parent comapny's badge, Tata?

 

Instead of trying to establish Fender acoustics in the market, they should have tried to expand the market presence of the acoustic brands they already owned*. Both Guild and Tacoma had great reputations. Tacoma already had "entry level" brand of their own- Olympia- and I would be surprised if Guild didn't as well.

 

A bit of $$$ from Fender's marketing department could have pushed those brand names deep into the market's psyche,

 

 

 

 

 

* without moving their factories, of course. That was an unnecessary expense, IMHO.

[harvey]

Thx Scott, good read.

[Winston Psmith]

Interesting how GC is losing market share, after driving so many independents out of business. Moving on . . .

 

Fender isn't the only company that's so entwined with Guitar Center. GC has had exclusive pedals from MXR, notably the Classic Distortion & the Classic Overdrive, both of which seemed to be versions of other MXR boxes. (The Distortion III, and the GT-OD.) There have been a few bargain Les Paul models, that were GC exclusives, and I've seen at least one Ibanez guitar model available exclusively through GC, the DXQM. There have been other products from Lovepedal & Deltalab, too - those are the ones I can recall, offhand. To my knowledge, no one else sells or stocks Laguna guitars. I don't know if any, or all, of the other product lines were developed exclusively for GC, or if GC bought up a bunch of overstock & prototypes - I suspect it's a bit of both.

[desertbluesman]

I don't think that Fender or Gibson guitars are worth the money they want for them. Simple as that. It is no wonder they are losing money. They simply charge too much for the product.

[harvey]

The biggest chain down here recently went into receivership:

 

http://www.smh.com.au/business/musics-over-for-allans-billy-hyde-20120823-24oa5.html

 

 

[Strategery]

Hmmm....Fender and GC/MF aren't the only folks in bed somewhat.

 

Sweetwater and other companies are also doing exclusive deals, are they not?

Also....to say that Fender Guitars are not worth the money....compared to what?

Are not Gibson Guitars pretty darn expensive?

How about Marshal Amps?

 

Lots of things are jacking up prices, the main one is the present state of the economy and the value of the U.S. Dollar.

I am not getting political here...just stating facts.

Factories have had to resort to going overseas resulting in quality loss, but the reason they have is based on OUR buying habits and less disposable income.

 

Are not WE CONSUMERS partly responsible for who is and who is not still in business now by means of where we buy?

Does not LOCAL business partly share in that responsibility?

I mean...if I can buy a Strat for $999 at GC or buy it at a local music store for $1299, is that not a no brainer?

 

You can go to GC or anywhere....and buy a new American Strat for $999.00.

It's a well built, American made guitar with great quality and sound and will last a lifetime if cared for properly.

 

I don't know about you...but that's a REAL deal.

I should know, I have 2 fantastic Strats and one Tele.

One of the Strats I bought new in 1989 and it ROCKS even better now than when it was new.

 

Fender, Gibson, Martin, and several other companies are American musical instrument institutions.

We should be supporting them by making our wishes known to them.

After all...without US...there is no THEM.

 

Randy

 

[Eric Iverson]

Ouch! This hits home to me, living in NYC. For years I'd go to 48th St. for the music stores - and now Sam Ash is moving??

And Colony Music is closing, with its fabulous selection of sheet music for all kinds of instruments and musical styles, and lots of music videos, including lots of instructional ones.

I don't hate corporate America, per se, but they have never had artistic criteria as their priority, to say the least! NOT TRYING TO START A POLITICAL ARGUMENT HERE, MR. MODERATOR, LOL!

I also hated to see major bookstores close, that I used to love to go to and check out their merchandise, as well as hitting the CD section of course.

I doubt if Fender or Gibson is in danger of going belly up anytime soon, but it'd be a sad day if they ever did, IMHO! But yes indeed, they are no longer the only places to go (plus a couple others) for quality instruments, and they are definitely overpriced!

[Scott Fraser]

And Colony Music is closing, with its fabulous selection of sheet music for all kinds of instruments and musical styles,

 

Same with that great sheet music shop on 56th St, behind Carnegie Hall. Can't remember the name but I used to buy scores there while on tour in the 80s & 90s. Gone now.

[Eric Iverson]

Well, you can still go online and buy stuff.... I guess I'm old fashioned. I like to hold the book and/or CD in my hand, check out what else they have .... and sometimes strike up conversations with real flesh and blood people... what a concept!

[Dannyalcatraz]

Yup!

 

[Scott Fraser]

Well, you can still go online and buy stuff.... I guess I'm old fashioned. I like to hold the book and/or CD in my hand, check out what else they have .... and sometimes strike up conversations with real flesh and blood people... what a concept!

 

When it comes to guitars I definitely need to hold it in my hands. A guitar is a talisman & you need to know if the magic is there or not. Can't tell about the magic thing with mail order.

[Dannyalcatraz]

You just need a better crystal ball!

 

So far, the only guitars I actually handled before putting money on them were my starter Alvarez acoustic (long dead & buried), my Ovation Elite, and my Washburn Fretless Bass.

 

All my other guitars- another 8 in total (and soon to be more)- were purchased via special order, telephone, or Internet.

[Scott Fraser]

You just need a better crystal ball!

So far, the only guitars I actually handled before putting money on them were my starter Alvarez acoustic (long dead & buried), my Ovation Elite, and my Washburn Fretless Bass.

All my other guitars- another 8 in total (and soon to be more)- were purchased via special order, telephone, or Internet.

 

To me that would be like expecting a long happy life with a mail order bride. I need a long dating & courtship period.

[Dannyalcatraz]

Then clearly, you're not as ugly as me!

 

In my case, the predominance of long-distance ordering is because- usually- what I want cannot be gotten locally.

 

Weird, since I live in the Dallas/Fort Worth Metroplex. But I am who I am.

 

When I went shopping for my first electric, I tried out all kinds of Fenders, Gibsons, Ibanezes- you name it, I tried it. Nothing clicked. Then one day I was watching an old tape I had made of Headbanger's Ball and saw Steve Stevens rockin' out on his Dean Cadillac.

 

B-twaaaannnnnnggggg!

 

I went to my local music shop. They carried Deans...basses only, though. So I asked if they'd do a special order for a Cadillac. The 3HB Time Capsule Cadillac in tobacco burst. The answer was yes, and a few weeks later, it arrived. I couldn't make it down there immediately, so it sat there a week and a half (though I told them to open it and give it a good examination). When I walked in, everyone was watching to see my reaction. Slowly, I opened the case...

 

It was the wrong one! It was a beauty and a TC Cadillac, but it was an all black 2HB model.

 

They contacted Dean and got it corrected. The local area rep came out to deliver the correct one in person. The rep wanted me to buy the black one, too- they didn't want those headed back to the factory for ANY reasons- and wanted to cut me a deal. I simply didn't have the $$$$, though.

 

That guitar is STILL one of my primary axes.

 

Funny thing: the 2 Deans I got through that store- I also bought a Special Select EVO- were so well received by the store, so drooled over, that they started stocking Dean guitars. They are now one of the region's biggest sellers of Dean guitars.

 

Oddity Cherry on top: this was back in 2002, after local hero Dimebag Darrell had jumped from the Deans he had been endorsing to Washburns (I have a Washburn catalog with his photo on it from when I bought my bass), and you simply couldn't find Deans for sale ANYWHERE around here.

[Winston Psmith]

Does not LOCAL business partly share in that responsibility?

I mean...if I can buy a Strat for $999 at GC or buy it at a local music store for $1299, is that not a no brainer?

 

Absolutely - but a little while back, GC did away with their price-matching policy, for one thing, meaning if you did see a better price somewhere else, GC wouldn't budge on their pricing. In areas where GC has managed to eliminate the local competition, your only option may be shopping online.

 

Another factor to consider. According to at least one Music Business article I read, the employee turnover rate at GC is near 100%, within eighteen months - it may even be more rapid than that! At my favorite local music store, I've been dealing with same couple of guys for nearly twenty years. Anything that's ever screwed up on me, they fixed or replaced it, and I get better pricing from them, than I do at GC. It's nice to go to people who know their business, their inventory, and their customers, instead of having to deal with yet another new, disinterested GC employee, who probably won't be there the next time I go back. That's my feeling, anyhow.

[Dannyalcatraz]

While I primarily deal with small family music stores, I have to say that my experience with GC over the past year has been largely positive, and the guys I've dealt with have been patient and knowledgable.

 

(I know, sounds like I live in the Twilight Zone, right?)

[Scott Fraser]

Does not LOCAL business partly share in that responsibility?

I mean...if I can buy a Strat for $999 at GC or buy it at a local music store for $1299, is that not a no brainer?

 

It's not that straightforward. GtrCtr can buy in such large quantities & thus exert so much downward pricing pressure on manufacturers that often their retail price to consumers is lower than the mom-and-pop stores' dealer price.

[Dannyalcatraz]

Yup. Ditto Amazon, Wal-Mart, and any other major retailer.

[Strategery]

I'm agreeing with a lot of "ANTI-BIG BOX" ideology here.

I much prefer the local stores, the advantage of always dealing with someone I know and trust.

But even at the local stores there is turn over.

 

Back in the day....many local music stores would get the "big head" and go crazy with their high prices...because they could.

I could name names in my area but will not.

Could this not have helped to spell their own demise?

It could be the spark that got the creative juices flowing that BEGAN the BIG BOX stores founding.

 

To expand....what stopped the local store owner from becoming a Guitar Center?

 

I'm not trying to say that you either have to become a Big Box store or go under.

But isn't it COMPETITION that is the engine of our economy?

Again, not taking this in a political direction.

 

Companies like Fender, Gibson, Martin, Marshall....whoever....will give a price break for quanitity bought.

Money is also saved through production techniques and technological advances.

 

In everyday business...isn't this kind of how we all operate?

"A bird in the hand is worth two in the bush", is an old adage.

Is this fair?

I don't know....what do you think?

 

But we all work in companies that have much competition and you are always trying to find that "edge" that gives you an advantage over the next guy.

If you're not competing..which serves us all to help keep prices down, then would there be a million Mom & Pop stores selling the same goods and their only reason for success would be, "who you know" or "how much you know"?

 

The simple fact of company's existence, like Fender, is due to production line like technology.

Prototype first built by hand by an extraordinary craftsman with an idea, who took a risk with his capital, time, and belief in himself and what he was creating.

Then tweeked and perfected and brought to the masses by means of watching his production costs while retaining the original quality, where possible.

Otherwise...every product would be a one off, very expensive that only a few could afford, and expensive repair costs would have to be performed by the builder himself instead of having interchangable parts.

 

The above paragraph describes a BIG BOX if you will.

So the question will always come back to WE CONSUMERS....

Is this what we want or are we willing to pay the higher price?

 

I personally believe the conflict is within ourselves.

If we don't like what we are seeing....then we can control it with our spending habits and self discipline.

Should we form a CONSUMER'S UNION?

Would that be fair and what effect would that have on the products that would be available to us?

Would that make most would be inventors or business people throw in the towel before they would even start?

* Do we have it so well that we are now over looking the obvious?

That is we could be so spoiled and have lost our appreciation of what we have?

After all, we do still have the opportunity to buy from anyone we choose.

 

Just my honest opinions.

 

Randy

[Scott Fraser]

..what stopped the local store owner from becoming a Guitar Center?

 

You know, Guitar Center USED to be a mom & pop local music store. I shopped there when I was in high school in the 1960s & the first GC was in Hollywood, on Sunset Blvd. Although they had moved across the street, there was still only one branch when I moved back to LA in the late 70s. The huge growth spurt seemed to start in the 80s.

 

I'm not trying to say that you either have to become a Big Box store or go under.

But isn't it COMPETITION that is the engine of our economy?

 

Competition certainly pushes the economy. However, competition, without regulation or restrictions, also has a built in flaw which works against the very idea of competition. Once a company has out-competed everybody else & achieved market dominance, it becomes the opposite of competitive, i.e. monopolistic, & can no longer tolerate competition. It then does everything it can to suppress & eliminate any potential competition & the consumers who benefitted from the low prices accompanying well-fought competition end up being the losers once the monopoly imposes total control of the market.

[Eric Iverson]

Well, nowadays aren't a great many people buying equipment online and bypassing music stores altogether? With their markups and rude/incompetent personnel sometimes....

You can even buy STRINGS online. If you play an odd instrument like a 5 or 10 string electric mandolin, you may HAVE to, LOL.

Or if you're a sarod player and need a pick.... (a fond possession is my sarod pick, made out of coconut. It gives a great lead tone, but you can't play fast rhythm with it worth a damn.) I may buy one for my best friend, at a music store in the Village selling all sorts of odd instruments - the guy owning THAT place ain't ever going to spawn a chain of stores, LOL - unless there is suddenly a mass market for instruments from India, Africa, lutes, vintage electric sitars.....

[Scott Fraser]

Well, nowadays aren't a great many people buying equipment online and bypassing music stores altogether?

 

Yes, & I believe the largest of the Internet dealers is Musicians Friend, owned by, you guessed it, Guitar Center.

[Dannyalcatraz]

Should we form a CONSUMER'S UNION?

 

First, know that my fundamental education is one half in Economics, so am 100% pro-free market.

 

(With some regulation.)

 

Your concerns are valid, and they drive that quote above. But you don't have to go that far. All you have to do is practice what is known as "acting with enlightened self-interest." When you do so, you do not purchase items based solely upon price or name or any single . That applies both to manufacturers and retailers. Even political parties.

 

For manufacturers in our current context, this means you don't necessarily by the Gibson LP because it is a a Gibson, you are open to other makers LP clones. This puts downward pressure in Gibson's prices by increasing competition. You also don't buy the cheapest LP out there merely because it is cheapest. You make sure it is also at least well-made enough to suit your needs. This provides upward pressure on the QC measures of low end makers.

 

Similarly, with retailers, you don't necessarily buy at big box stores where the price is lowest if you have small music stores that offer more services. You are willing to pay a higher price there in order to ensure that they continue to offer the services you like. However, you don't always buy there either- by shopping at the big box stores (which often have a broader, deeper selection), you force the mom & pop stores to continually reevaluate their offerings.

[Strategery]

Good points by all...and makes the conversation an enjoyable one and a learning experience.

 

Randy

[Terrell]

GC was purchased by Geoffry Girrafe and the gang at Toys R' Us some time ago. Since then, it become less of a place to make a deal, and more of a commodity house. So, if I need a commodity and I didn't have the forethought or don't have the patience for online, I go there. I've found that whatever Value Add, other than convenience, they had at one time is absolutely gone!

 

Fender has made themselves a commodity brand. They should have expanded the boutique brands they purchased instead of shelving them. Jackson for instance...

 

The smarter local music stores cater to the boutique crowd. Where the added value of knowledge and service is still valuable.

[Dannyalcatraz]

Yeah, I REALLY wish Tacomas were still in production.

[Mark Schmieder]

I was surprised to see that Fender now owns Latin Percussion (which is part of Kaman). I had no idea. And though it's listed as a bad move, it seems a wise move in my view as covering percussion instruments should help in times and markets where guitars aren't king.

[skipclone 1]

I have never shopped at GC but, one part of the consumer market in Japan that sometimes drives me nuts but I have come to see the good points of, is that a place like GC may have a wider selection of guitars than a small shop-but they are the same guitars-from the same brands-at every GC. If you`re looking for something off the well-beaten trail, ferget it, you`re either shopping online or buying an airplane ticket. In Japan you can barely count on a brand being on shelves from one week to the next. It doesn`t matter if it`s good, doesn`t matter if it`s popular-you walk in one day and its just gone, and something else is there instead. If you like something grab it, because it will not wait for you. But that also means that you are always seeing brands, or products, that you didn`t see before. That is why the big music fair here is so interesting-sure, you have the big names but right next to them is a guy doing almost all the work himself. That is why Foot Locker came here and then beat a retreat. They have three brands of shoes, and that`s what they have. Even among a dedicated consumer base, you know what? that is BORING.