Chapter 11 / MARS + manufacturers

[Dan O]

Will there be some manufacturers hurt by MARS closings ?

 

Particularly accessory type products ?

 

KORG , YAMAHA , TASCAM , ZOOM etc will lose distribution in some areas throughout the USA .

 

Were manufacturers prepared for MARS closings ?

 

Maybe a good time for the mom and pop stores to get products they couldn't get before !

 

dano

[RABid]

Did anyone notice is certain brands disapeared right after the announcement? I wonder if MARS had deals to sell some items on floor plans.

 

Robert

[Felix_dup1]

I could be wrong, but I don't see Mars' failure as a huge opportunity for Mom and Pops.

 

Rather, I think that next year will see increased expansion by the remaining Chain Stores (Guitar Center, Sam Ash, and Brook Mays), sometimes in the exact same locations that Mars formerly occupied. Don't forget, the liquidator only bought the inventory. The remaining assets (leases, fixtures, rental contracts, etc.) are all for sale.

 

There are certainly lines that have holes right now. They're going to do whatever they need to to sell product. If that means re-aligning their loyalties with a different chain, then that's what they'll do. If their business would be better served by opening up some independents in certain markets, then that's what they'll do.

[Dan O]

Originally posted by felix:

I could be wrong, but I don't see Mars' failure as a huge opportunity for Mom and Pops.

 

Rather, I think that next year will see increased expansion by the remaining Chain Stores (Guitar Center, Sam Ash, and Brook Mays), sometimes in the exact same locations that Mars formerly occupied. Don't forget, the liquidator only bought the inventory. The remaining assets (leases, fixtures, rental contracts, etc.) are all for sale.

 

There are certainly lines that have holes right now. They're going to do whatever they need to to sell product. If that means re-aligning their loyalties with a different chain, then that's what they'll do. If their business would be better served by opening up some independents in certain markets, then that's what they'll do.

I thought that MARS would just transfer what inventory they had to the remaining stores .

 

Does a liquidator have to take over when a company goes chapter 11 ? dano

[Felix_dup1]

As I posted in the other Mars thread, a liquidator has purchased all of Mars' inventory, and the Going out of Business Sales have already been in place for a week in all 37 remaining Mars stores.

 

By the time Christmas gets here, there won't be any Mars stores left.

 

As for lines, some will certainly be hurt, while others will find a new network of dealers. It's certainly a changing landscape out there, and will most likely continue to be.

[zatoichi]

Had a rather long conversations w/ the digital audio guy @ the local MARS yesterday.

 

It seems that everyone @ MARS has known for a year now that they were going out of business; those weekend blowout sales they've been running have been cleverly designed to move as much gear as possible while avoiding the GooB feeding frenzy.

 

His tale - too much of the wrong product, never enough of the right product, no communications between the sales floor and the buyers, management indifference to employees and customers - is an old one, unfortunately. I doubt the Mom+Pop shops will profit or prosper from this; if anything, I suspect this will RAISE the bar for those who want to enter or expand in music retailing.

 

For the record, there was no frenzy during my visit, tho the salsa was turned up VERY LOUD. I was surprised to see that the prices had scarely budged from my last visit a month or so ago. Perhaps I'm jaded in my old age: 10% is a welcome discount, but it's the sort of thing you do for your good customers; but it is not a meaningful inventory-reduction move.

[Felix_dup1]

Originally posted by zatoichi:

Had a rather long conversations w/ the digital audio guy @ the local MARS yesterday.

 

It seems that everyone @ MARS has known for a year now that they were going out of business; those weekend blowout sales they've been running have been cleverly designed to move as much gear as possible while avoiding the GooB feeding frenzy.

For the last three years, I had been working at the Mars corporate office. I can tell you that the things you were told were not true. The reasons for Mars' failure have been very well-documented in recent news articles (just do a google search on "mars music" and click the "news" tab).

 

Weekend blowout sales are pretty much par for the course. If what you were told was true, then Guitar Center has been going out of business for over a decade now .

 

And if I'd known a year ago that Mars was going to be out of business by the end of the year, I wouldn't be looking for a job right now - I would have found one a long time ago!

[Felix_dup1]

Originally posted by zatoichi:

For the record, there was no frenzy during my visit, tho the salsa was turned up VERY LOUD. I was surprised to see that the prices had scarely budged from my last visit a month or so ago. Perhaps I'm jaded in my old age: 10% is a welcome discount, but it's the sort of thing you do for your good customers; but it is not a meaningful inventory-reduction move.

This is just the way that Gordon Brothers does going out of business sales. Just the obnoxious signs and the press has been enough to create some pretty brisk business at the Mars stores. The discounts will get progressively deeper as the sales near their conclusion - that way the liquidator will get as much as they can for everything. The best gear will move at a lesser discount, and the rest will go when the price is right. Gordon Brothers closes stores for a living - they've been doing this for decades for various companies - so they're just following their typical liquidation formula.

 

Originally posted by zatoichi:

...if anything, I suspect this will RAISE the bar for those who want to enter or expand in music retailing..

It certainly won't if everyone continues to buy based strictly on the lowest price. I'm amazed at how many people comment on how 10% off Mars' already low prices is a crappy discount - and complain about chain-store mentalities in the same post. You can't buy a 5-star restaurant dinner on a Happy Meal budget.

[Dan O]

I worked for GC for over 3 years .

We had a MARS right down the street here in BAltimore .

The #1 thing that I could not stand was THE PHONE SYSTEM at MARS !

I Hate being put through menu options ( getting more common these days).

I give GC some credit , a person always picks up the phone at GC .

 

MARS management missed how important the phone is . A musician needs to talk with someone !

 

dano

[Dave Pierce]

Originally posted by dano:

Does a liquidator have to take over when a company goes chapter 11 ? dano

Short answer? No.

 

When a company files for bankruptcy, all major transactions must be approved by the court. This includes liquidations. The company has to get the best possible price for its assets. Sometimes the company as a whole is worth more than the sum of its parts, in such cases the courts may require the sale of the entire company to the highest bidder. But in other cases companies are liquidated piece-meal.

 

Personally, I wish I was still blissfully ignorant about this topic, but unfortunately I know it quite well. OmniSky was fun while it lasted...

 

--Dave

[RABid]

I wonder how this will affect Guitar Center. I have slammed GC many times on this forum and rightfully so, but two weeks ago I went to the one in Knoxville searching for a special deal on Acid 4 and was pleasantly surprised. Lots of software in stock. Keyboards in good shape. A sales person that knew the difference bewteen Reason, Acid and Sonar. It was the first time since the grand opening that I came out of that store with a good feeling. Now the question is, will GC feel they can slack off with Mars out of the picture or will they realize that they could be next if cutsomers don't like visiting their stores.

 

Robert

[Felix_dup1]

A few things:

 

I totally agree on the phone comment. Many of us at the corporate office felt the same way. Obviously, some others with decision-making power didn't.

 

As for what I did at Mars during my 5-year career there, I started as a Keyboard Dept Manager in Houston, Tx (it was the fifth Mars store). After that, I was a Store Manager in Arlington, Tx, after which I came to the corporate office to begin building the website in Nov 2000.

 

I was a copywriter for the Keyboard dept and about half of the Recording dept of Marsmusic.com for about a year and a half - until the first round of layoffs in April 2001, which took the deepest cuts in e-commerce. In other words, I was in the middle of the dotcom bubble that burst. The e-commerce merchandising team was cut from 10 people to 5. From that point on, I managed 4 online departments (keyboards, recording, dj/lighting, live sound) for Marsmusic.com. (Resume available upon request )

 

I lost count of the layoffs, but there were probably 5 more rounds at the corporate office before the day I was sent home and the website was shut down.

 

While part of the Merchandising group, I was involved in many meetings where we were made very aware of what was going on. I honestly don't think that anyone knew a year ago that Mars was going to go under. The reorganization that began with the first round of store closings was well publicized, and Mark was quite forthcoming in interviews. By the middle of 2002, it was common knowledge that a bank note was due and that a new line of credit would have to be in place. In fact, the existing line of credit was extended several times. From day to day, I'm not sure anyone really knew what the outcome would be.

 

Bottom line is - Mars ran out of money. I think much of it was due to timing. If the plan was to get investment money, grow the company to a point where it could be taken public, take the company public, then use that money to continue to fuel the company's growth - then timing was everything. The economy took a downturn before the company was taken public, and then it stayed down, making it difficult for Mars to be self-sustainable - and nearly impossible to get additional investment capital.

 

What led to Mars' failure? The story would probably make a great book. But the largest factors (which were mostly documented when the reorganization began in 2001) were several leases that were signed in advance of the recession that Mars wasn't able to pull out of in time, some costly decisions with questionable return (like sponsorship of the Metallica tour in 2000 and naming rights to the Coral Sky Ampitheatre and more, I'm sure)... The money that these represent would have been more than enough to get Mars over the proverbial "hump" and offered enough time for a successful reorganization.

 

Having seen things from both sides at Mars (from the sales floor and from corp), I know firsthand that Mars could have done many things better. And I know that there were (and still are) plenty of people with really good, worthwhile ideas on the salesfloor who didn't necessarily see their ideas materialize.

 

I also think that Mars did a bunch of things right - and that Mars changed the music retail world. In hindsight, the necessary changes that were made were obviously too late.

 

Of course, this is all from my personal point of view. I won't pretend to have been in Executive meetings or privy to top-level information.

 

John Grabowski

[Felix_dup1]

Originally posted by Rabid:

I wonder how this will affect Guitar Center. I have slammed GC many times on this forum and rightfully so, but two weeks ago I went to the one in Knoxville searching for a special deal on Acid 4 and was pleasantly surprised. Lots of software in stock. Keyboards in good shape. A sales person that knew the difference bewteen Reason, Acid and Sonar. It was the first time since the grand opening that I came out of that store with a good feeling. Now the question is, will GC feel they can slack off with Mars out of the picture or will they realize that they could be next if cutsomers don't like visiting their stores.

 

Robert

I don't think they'll slack off - they're an organization with a very agressive sales culture. In markets where they used to compete with Mars, they won't have to spend quite as much time price-matching, and they'll probably make a little bit better profit overall on the gear they sell.

 

I don't think they'll purposefully shift the way they do business, though.