As a professional bassist, I buy a lot of musical gear. Let me highlight that, I buy as much musical gear as I possibly can, more than is reasonable or smart. As such, I patronize music stores – all kinds. I love ’em. There is no better therapy than OPG – Other People’s Guitars. One of the places I inhabit frequently is Guitar Center.
In the last ten years the music store landscape changed as the big-box retail model arrived in musical instruments. Mitt Romney’s (*see correction below) Bain Capitalpurchased Guitar Center and helped it buy up independently-owned music shops, giving it extra leverage with mega-vendors like Fender and Gibson and running the “category killer” retail playbook. Many independent shops have been put out of business, vendors are pressed to lower quality and reduce diversity of offerings, but the proliferation of Guitar Centers would make you think the whole strategy is going well.
So how’s it going?
The finance behind the operation shows major weaknesses. Its corporate bond has been downgraded to junk status.
Standard & Poor’s cut its debt rating on Bain Capital-owned Guitar Center Holdings Inc late last month, as the music retailer purchased during the height of the 2007 buyout boom struggles with “weak operating trends.” The corporate credit rating on the Westlake Village, Calif.-based company dropped to ‘CCC+’ from ‘B-‘.
“Although we anticipate the company (will) obtain the amendment to its financial covenants, we believe its capital structure is unsustainable in the long term and the company is dependent upon favorable business, financial, and economic conditions to meet its financial commitments,” S&P credit analyst Mariola Borysiak said in a recent note to clients.
Purchased using Bain Capital Fund IX in a deal valued at $2.1 billion six years ago, Guitar Center Holdings holds several debt instruments, including a $373 million ABL revolver, about $402 million in senior unsecured notes and $375 million in senior unsecured notes for its subsidiary Guitar Center Inc. It also floated a $650 million term loan.
S&P reviewed the company’s debt instruments in the wake of weaker-than-expected performance over the past two quarters and a “deteriorating liquidity position.” Guitar Center may have to borrow under its revolver to fund its operations and financing needs, S&P said.
For you musician types who never read contracts, let me decode this: Guitar Center be broke, and they are hoping that the economy gets better so people buy more guitars.
Dude, apparently all the musicians didn’t get the word that the Dow Jones is at 16,000 so they can go lay out $3200 on a new Paul Reed Smith. It’s like maybe the real economy isn’t doing that well…hmm…
But that’s not all, folks!
The employees of Guitar Center in New York, Chicago and Las Vegas have all voted to join the Retail, Wholesale and Department Store Union. I spoke with an employee at the local St Louis location who told me that following the Las Vegas vote to unionize, management gave all workers a raise of $1.25 per hour. Clearly, management is not interested in doing business with all union shops when their financial position is in the toilet.
The end of a terrible model
Guitar Center has the remnants of an inferior business model, one that prizes huge brand names, big volumes, low wages and non-existent character. I love walking through Guitar Center because I love playing anybody else’s guitars – but otherwise it is a catalog with walls. There is nothing special or charming about the place. The workers there, while nice people, don’t have 3% of the knowledge of the people who run Killer Vintage, a place that will set you up with either a vintage Strat or a terrific local instrument – and tell you stories of how the music industry really runs.
I would not miss Guitar Center, much in the way I did not miss Circuit City.
Retail in the 21st century will be centered around specialized knowledge, unique offerings and personal relationships, both local and digital. Any retailer – even one backed by Mitt Romney (*see correction below)– is doomed if they defy those requirements
*Editor’s note: Romney had little to do with the acquisition of Guitar Center. I didn’t expect this to go viral and did insufficient research. Mea culpa. Then again, if you know my past, I’m kind of a douchebag to Mitt.
**Second note: Romney may still have been profiting from the Guitar Center deal through 2009 as part of his retirement from the company of which he was sole stockholder. While Bain may not have been in Romney’s control, the model applied to Guitar Center was absolutely the one pioneered by Romney during his tenure at Bain. And that model, I maintain, is fundamentally flawed.
CHECK OUT ALL THE FUN: Since the publication of this piece, much has happened with Guitar Center. Check out all my articles.
I always thought “category killer” was an unintentionally revealing term. First, they kill the competitors, and then they kill most of the suppliers, which kills the category itself. Eventually the killer dies, too, but not before eliminating the variety and quality of merchandise offered by the earlier generation of suppliers and retailers.
And like with mother nature, when the apex predator disappears, the system regains its balance and the dance starts anew. It’s all just balance.
The Meek will inherit the earth!
I love working with Austin Guitar House, Rebel Guitars in Alabama, Mountain Cat in New York, Carter Vintage in Nashville, the Santa Barbara Guitar Bar, the Guitar Emporium in Louisville. These cats love to hug, play and cherish guitars. And find a home for ‘m. Mike Rock and Sammy Ash at Sam Ash still love music and are crazy about guitars. There’s two scores of Sam Ash stores and i particularly like the one in Indianapolis. The guys at GC in Nashville are great guys. I’d love them to buy my guitars. I just don’t want them to sell Teye Guitars. The GC stores don’t breath any love. Guitar Sanctuary in Dallas does. And so does the Chicago Guitar Exchange. Let’s buy and sell our stuff at these independent stores. Once the Titanic goes down the big three guitar makers will suffer. A lot. BGut we’ll survive with our beautiful indie retail friends. Evert @ Teye Guitars
And not before Bain Capital rakes in the $
You’re an idiot
Why bother with that response? It conveys nothing and is useless for discussion.
However, while your are factually incorrect, I’ll give you marks for grammar.
ITS YOUR AN IDIOT
Uh, no. You’re (contraction for You Are) is correct. “Your” would be showing ownership. Wait, how did you get be a mod and not know the difference?
And by the way, Eric, “Its your an idiot” is wrong, too. Should be it is or it’s.
Thanks for playing.
Are you guys serious?
You got trolled, too. Good game.
Not that I care about the grammar stuff but just want to point out for the funk of it that it would be “you’re an idiot” AKA YOU ARE an idiot. I learned that in like third grade or something. All of that aside Eric Garland I like your article and your point of views. The main problem I see in all of this is US meaning the consumers. If we would all stop going to big box retailers, especially WalMart, Home Depot, Guitar Center, and went to our local shops instead the Big Box jerks who have all the upper hand would lose out and quickly because they can not sell product to someone if they are not there to buy it. We all need to take a look in the mirror and realize that we are part of the problem. We are giving them what they want and that is why they are continuing to destroy America and what it meant to live in America. Opening your own business, making a living, human interaction and caring whether or not all of these huge companies have destroyed so many people’s lives. I for one am disgusted with this country right now and all of the kick backs the rich assholes get and all of the kicks in the face everyone else gets. It is time for a revolution but it will never happen if we, as the people of this country, do nothing. I for one this year have made it a goal to not buy any cheap crap from WalMart for my daughter’s Christmas. Instead I have bought from local shops and also from people’s online businesses. How about instead of letting them run the show we tell them how we want the show ran.
Chad, I think he’s being ironic.
“Ironic.” Look that one up, youngin’.
haha – I got it.
Bass players arguing about grammar. What next? Drummers debate constitutinal law?
Go fuck yourself, but…well, on second thought this is really funny. Never mind.
You don’t like people having a go and yet you are extremely rude. Why not just ignore the trolls. You make yourself look like a gutter rat with your foul language.
Ouch. That’s a little extreme, don’t you think? Have a laugh. You sensitive bass types. So quiet until you lash out or do free form jazz side projects.
What does a bass player use as a contraceptive? His personality!
The worlds greatest Jazz bassist and the worlds greatest Blues bassist meet for lunch. Who pays the tab ? Neither, they don’t charge for the food at the soup kitchen.
What’s the difference between a bass and an onion? Nobody cries when you chop up a bass.
What do you call someone who hangs around with musicians? A Bass Player.
How many Pop bass players does it take to change a light bulb? None. The keyboard player does it with his left hand.
What do you call a bass player with a job? The pizza delivery boy.
A man decides to go on a vacation on a Pacific island. When he steps
off the plane, it is amazing: Cool, light ocean breeze, palms gently
swaying in the wind, white sandy beaches, drums off in the distance. He
goes to his hotel, checks in, starts having the time of his life.
When he turns in on the first night, he can still hear drums off in the
distance. They were charming at first, but now it’s little annoying,
and he has a hard time going to sleep. The next morning, he goes to
concierge and asks about the drums. The concierge replies: “The drums,
they never stop. Very, very bad if they stop.”
So the man goes about his day in paradise, having a great time, but the
drums never stop. He tries to ignore them, but they interfere with his
sleep the second night. The next morning, fuzzy-headed from too many
island drinks and too little sleep, again asks the concierge if
something can be done about the drums. He gets the same reply: “Drums
not stop. Very bad if they do.”
The rest of the day is not fun. The drums are driving this man crazy,
and he isn’t getting any sleep. The next day he is ready leave. He
packs his bags and goes up to the front desk to check out. But first
the man finds the concierge to give the concierge a piece of his mind.
Suddenly, the drums stop.
He says to the concierge: “They finally stopped! Thank god, I can get some sleep. I was about the leave.”
The concierge says: “This is bad. Very, very bad. Flee from this island while you still can.”
“Drums stop. Bass solo next.”
I’m joking about fuck you – the drummers constitutional law thing is funny.
I’m partial to the joke about the marriage counselor who hired a professional jazz bassist:
Couples would come in with problems in communication. The wife says “Doc, he just won’t open up, so I don’t try any more.” The husband says, “She doesn’t understand me and she never listens, so I never try any more.” The counselor calls the bassist over to do an unaccompanied ten-minute free-form solo over an Ornette Coleman tune.
The bassist begins to play, and instantly the couple explodes into loud, boisterous discussions.
At least you didn’t tell me to eat you dick and reveal that the whole bass player act was a hoax.
Dammit, you caught me: I play bass trombone. And triangle.
No actually, he was correct (and only grammar-wise, not in his insult)…”you’re” is short for “you are”.
NO IT’S NOT. YOU’RE is a contraction of YOU ARE (AN IDIOT)
YOUR signifies ownership as in is that YOUR IDIOT you let reply to a message?
So Eric, Bassplayer69 is right and you are wrong.
Who’s (not whose) the idiot now?
Are you like seriously taking him serious?
It’s “seriously” actually… Grow up people.
I was like taking him like seriously. I guess I like got like fooled like.
Actually, it is you’re. As in you are… lol!
No, it’s “you’re an idiot (contraction of the words ‘you’ and ‘are’).”
Huh? Is that supposed to be ironic?
It’s insightful commentary like this that makes the Internet great.
Not only is the economic model unsustainable, they’re practice of “customer” service and sales is unsustainable.As a small business owner in the music business , for over 30 yrs., who is growing, you have to throw out the idea of customers and customer service and get into the business of human service.
Guitar Center as a whole is an outdated business model. There is one niche market, however, where I have found them to be useful, and that is on the used gear front. OK I will stipulate that they pay very poorly for their trade-in and used gear purchases, and then hike the prices to market average…..that is a generally accepted fact.
The thing that works about this is their online searchable database for used gear. Last I checked they had 58,500 items listed, with pictures, location and price.
I was in a search for a new Guitar Amp and found the one I was looking for at a decent price in California. I paid online, and they shipped it to Maryland, where I was able to inspect and play it before I left the store, and STILL had 30 days to return it if I did not like it…… much better than ebay and other online stores for used stuff…..
That’s interesting – I find their used gear to be very limited and almost never well maintained. Would it kill them to do a truss rod adjustment on a piece they want to sell?
By the way, if anybody runs into a Yamaha VR4000 or VR6000 solid state amp from the 1990s in good working order, I’ll pay cash.
As usual, Eric Garland provides insight, and vision, all wrapped in a humorous tone of sarcasm. We can only hope that consumers appreciate the value of knowledge (beyond big brands) and the unique environs only found in locally owned stores (you can find an example of this in Crestwood’s “City Music”). The story goes beyond guitars however, I think that bookstores used to offer that same feeling, and fine art is also now out of reach. But then we have Ebay and Amazon for those things? What we need is a lifestyle or entertainment mall “movement” that brings all these things together for people who want to experience life beyond the brand. Think local instrument played by local artists for local consumers reading local novels while eating local food…..hm.
Hey Dan! “local instrument played by local artists for local consumers reading local novels while eating local food”
Yeah, where have I heard that before…oh yeah, it’s how life ran for thousands of years. That said, I think that the modern era has opened our tastes to more global goods and services, so they will still be important. I imagine that local markets will regain primacy because they are more efficient and ultimately distribute more of the benefits of a business back into the community.
This is the reason my co host and I make Gear Guys Radio a gear show all about the awesome gear that is ”not” in Guitar Center I hate that place and love the local shops and the great gear out there that works hard and actually cares about people!!!!
Yo Jon, send a link your show – I am pretty much never tired of discussing gear.
Like I said, Guitar Center is great for many things, but it specializes in things that are easily mass produced. While Boss effect pedals may be the same everywhere, guitars require a special touch. This is why I think that specialty retail will win in the long run.
After your comment, I looked at my wall o’ basses – nothing I play can be bought at a mass market shop. This is my main axe, a John Suhr J-Bass: very few vendors in America carry it. I have an Azola Ampeg Baby Bass, a 1990 Pedulla Buzz, and a customized Fender Sting P-Bass. Because I’m focused on quality and playability, the cookie cutter instruments, poorly maintained, never turn my crank.
That said, I find the people of Guitar Center very friendly and helpful. They create a nice environment. Hopefully they will enter the retail space with their own small businesses.
Excellent choice of brand. I love, love, LOVE my Suhr.
YAY! Suhr is a genius. It has taken me time to grow into this bass, but his company makes amazing pieces of musical art.
Eric, got some stuff to show you!
So where can we hear the music made with this amazing instrument? I am always curious when I see non plus ultra labels on something: what is it being used for?
I had a great boss sometime back with your name…We both worked at the best GC in TX. We are gone now…too bad, that store went from #1 to yuck
Do check out Jon’s show. I try and catch it every Tuesday on the drive home. Some cool stuff from a music lover on a cool station.
Matt – Earth to Ashes PDX
You are spot on, Gibson is making guitars for Guitar Center that would not have met their own standards a few years ago. I hate to say it, but some of the Chinese instruments look as good as some of these GC Gibson’s and Fender’s. I can attest to this because I bought one of their Traditional Pro Gibson’s and the (True) Gibson quality is just not there. The finish is not great, It sounds great, which is all that really matters. However, Made in the U.S.A. used to mean something to Gibson……. But hey lets be real, all anything is ever really about is money. You want great service you go to a local music store, you pay a little more but you get the better value in the long run. The instruments are better quality, you are talking with someone that knows something about their products, and you get personal service, not some kid trying to make a commission. But if you like a “Catalog with Walls” Guitar Center is just right for you. Peace out.
The Gibson story is tragic. I know several smaller retailers who have eschewed Gibson entirely because the quality is far below the price point, and evidently they are difficult to deal with when any product has a problem from the factory. I have heard retailers complain that their mantra is, “We’re Gibson, and you’re wrong, so suck it up.” That’ll work…for a while. But when Boomers with law practices or car dealerships are no longer shelling out $13,000 for a korina Explorer as a way to relive their garage band days, the brand will have to be carried by the new generations – less nostalgic and less prosperous. They will change their ways or go out of business.
Ironically, they built our Guitar Center here on the west side of Cleveland in an OLD Circuit City building. Foreshadowing. I won’t be sorry to see them go… however they do employ a decent number of local musicians/friends. I would hate to see them lose their jobs.
Now that I think back about it.. I think it was a Fretter appliances store… but, same difference. LOL
I really like a lot of the young cats who work at the local Guitar Centers, and I hope they go on to create small businesses of their own focusing on high-quality goods for working musicians.
thanks because I am one of them, having this post on my facebook page is degrading for what I work and live for.
why would they do this? They’ll never survive.
Similar in Sacramento, but on the east side in a space behind the old Circuit City that now houses a Total Wine & More.
GC in sacramento isn’t going anywhere. Sorry.
I didn’t say it was.
In San Mateo, CA GC is in a building that used to be a Tower Records. I *really* miss Tower Records.
I would agree that Guitar Center is an antiquated model. However, what you describe is even more antiquated and was pushed out by the Big Box style of retail. I see very little going the way you describe, as that is local business and we all know they are falling to the big box store. Rather, we shall soon see large stores only in certain areas.
Listen this piece has little to do with music and music stores and everything to do with a personal political agenda. In the same article we talk about unionizing the workers, yeah that’s smart. As dumb as the fast food protests paid for by unions. All big box stores hurt small businesses, welcome to reality. Better prices little customer service. However, as a consumer, it’s MY choice. Get over your issue with Romney and spend your time doing something productive.
Do you think Nancy Pelosi personally lowered their corporate bond rating from B- to CCC+ because Romney? I WOULDN’T PUT IT PAST HER! The Democrats also made Guitar Center Holdings take out that $650 million term loan. Why? Obamacare – that’s why! Because the Obamacare broke the Capitalism, and that is sooo mean.
JOE BIDEN SHOULD PLAY BASS!!!
Bain is known for “Loading up the Debt” on companies! Also known as “PUMP & DUMP”! They have Law Firms that funnel $$$$ back to them when the time is right. The research is right there for everyone to see! The Top Brass usually make out like fat rats and everyone else is screwed! Great business model!
Yup, and that model is coming crashing down. Extremely high leverage is like the Hummer of financial models: very mid-2000s, but totally impractical now.
No it’s not. Extremely high leverage is the VERY POINT of deeply discounted interest rates, which is why there are fewer listed companies on the NYSE and Nasdaq than there have been in 70 years.
Leveraged buyouts fall into and out of favor. They will be back — even if the banks have more conservative lending strictures there are trillions of dollars from non-bank sources available to back buyouts if the insiders can profit from them.
Actually, at the moment, corporate scale interest rates are SO low, it’s cheaper than holding cash and losing value due to inflation. Think about it …
Bain Capital. That pretty much puts the tombstone right on top the grave before it’s dug. Bain destroys US companies. Always has, always will.
GC follows the typical Bain philosophy…buy into a struggling company, leverage it to the hilt to give themselves a huge payday, then wait for it to go belly up or survive. Either way they win. If it survives, they keep getting paid year after year. If it doesn’t, they declare bankruptcy, sell off the assets, and leave their creditors holding the bag. A scum way to do business.
Guitar Center was not struggling when Bain bought it, hence the >10x purchase multiple. Bain (or any PE shop) doesn’t get any money by leveraging it up initially. Yes, the PE shop gets a management fee each year. If a company goes bankrupt, the equity holders lose their full investment and hand over the keys to the lenders that have first claim on the assets.
That’s the “free market” competitive structure for you. One can’t have too much “good” faith in neither the corporate or small business. I was once at a small music store, the only one at the time, and had to get in between a customer and the owner. I over heard the owner trying to make a fool of the customer who was there buying a beginner snare drum for her son, the store owner was charging her WAYY over price for a piece of shit product because the lady clearly seemed to have no knowledge on instrument quality and price. She left and bought nothing. Everyone in town that played an instrument was well aware that the owners of that store were advantageous of customers, even many of their instructors quit due to that. Afterwards another small shop opened not too long ago and has taken most of the other shops business. The people who work there are MUCH more honest and modest to the individuals looking to purchase their first piece of gear, people that don’t have too much to spend and can’t afford something very high-end. Some things are a bit more expensive as compared to Guitar Center, but essentials like guitar string etc are of a way better price than that other store. Although one common experience that I have gone through from Guitar Center and some other smaller store, employees trying to push you to buy gear that you could never afford, and in very sarcastic approaches.
there is a current trend to ‘slam the big box’, I believe Guitar Center
is slightly different. For one thing, there are plenty of customers,
like myself, who have spent, and continue spending, at GC. These
customers, and I can name several of them,
have all purchased gear from GC in numbers around 7 figures. These are
loyal customers-some for 30 years plus. The truth is, I do not know
where else they would purchase their gear, and for the prices that they
can find at GC.
Further, there is a ’boutique’ and ‘high-end’ retail
part of GC that caters to such customers, known as GC Pro. What
customers who shop at GC buy is not your ‘run of the mill’ sort of
merchandise, to boot. Most pros that I know are not your ‘weekend
warrior musician’. GC caters to the pros, in general, as well as the
normal sort of retail customers. This is something which is much
different that most retail chains.
In addition, unlike most ‘big box’
retail chains, the sales training program, and GC’s uncanny ability to
continue to hire retail ‘superstars’ is, in my opinion, second to none!
Lastly, GC, again unlike other ‘big box’ establishments, have a few
other ‘extras’ that set them apart from other retailers. For one, they
also have a large repair business. Another extra is the fact that many
of their stores have rental gear policies, which I believe is to become
implemented, chain-wide, next year. Add to all of this the new addition,
at several stores nation-wide, of rehearsal rooms, where gear can also
be rented. In my area of the country, music schools and ‘rock school’
private music schools are thriving. GC meets the needs of this segment
of society, as well.
Additionally, I don’t see ANY other ‘big box’ retail
chains inculcate themselves into the local communities, as GC does. The
whole philosophy of this company is so different than any that you may
have happened to mention, and certainly does not meet the ‘standard
criteria’ for what you may have in mind, Mr. Garland.
Though you seem to
be quite an analyst, it appears as if you have over-looked many of
these other facts that set GC apart. That you admit you are a musician,
though you make your money as an analyst, tells me that you are not a
‘working pro’ in the music biz. Perhaps your viewpoint is shaded by this
fact? I make 100% of my income from the music that I create.
Oh, and I do NOT work for GC or own stock in an Bain Capital
company. I have seen similar chains come and go (Mars Music Stores, for
instance), and at a time in the worst of economies, GC continues to
grow, despite any naysayers. My opinion.
Now, as far as any political stance insinuated in this article…..well I believe the spin is obvious.
I will refrain from any other ‘economic analysis’, though I believe my ability to do so probably outweighs your ability to play bass (just a fact, sir…..what I’ve spent at this retail outlet supports that. I’m sure you have not made such an investment……in ANY business). Only time will tell. From where I stand, GC is not likely to soon close it’s doors, and as a 30 year plus customer, I will do all that I can to make sure they do not!
This anonymous intellectual combatant is record producer Bob Parr, who I mistakenly assumed to be a reasonable commenter on my Facebook site. I answered all of his points there in a gentlemanly fashion, a courtesy which he returns by ad hominem attacks on my bass playing of all things.
It is the clear sign of a weak argument and a weaker character. Discuss the argument or disappear.
All that and you could’ve just said, “Too big to fail”, LOL.
A similar thing happened to one of our specialty food companies – Harry @ David – a few years ago. An otherwise solvent and profitable company was stripped of all it’s assets, leveraged to the hilt and left to die. Fortunately they righted the ship and it’s on it’s way to a recovery, but not until the pensions were all lost… Funny how the wage earner always pays the price.
As a individual luthier (freebornguitars.com) GC has never been in my purview, or I in theirs, but having worked in music stores in the 70’s and done business with many in the years since, I can say that a music store is at it’s core a specialty shop and is inherently incompatible with the big box mentality. “Catalog with walls” is a perfect analogy. I only went in to GC when there was some sort of sale or promotion going on and I knew exactly what I wanted. I have never bought an instrument or amp at one. Only accesories and parts.
Few things to correct in this article. And just to set the record straight I have been in the MI industry now for well over a decade. During that time the company I work for has seen Guitar Center grow and does do business with them.
1) It is not in GC’s business model to buy out independents. The only businesses GC has ‘bought’ are those who have decided to go out of business and GC has merely purchased the remaining inventory.
2) The MI industry has several thousand independent retailers in America. The can survive by counter programming Guitar Center. Figure out what GC doesn’t carry and there you go. Also – the biggest hurdle independents have is online dealers like Amazon. There isn’t a GC or Sam Ash in every town, but there is the internet.
3) GC’s leverage doesn’t affect vendor relationships as much as people think. A lot of vendors (some of the big boys and almost all of the boutique companies) do NOT offer special pricing to GC or Sam Ash because of volume. GC has to play by all the dealer agreements that everyone else has to as well, in fact, because of GC’s size, it is often singled out and held to the fire by vendors.
4) The idea that GC only carries big brands is false. Several boutique makers do business with GC but are not in every store because their production capacity cannot deliver such inventories.
5) While some GC’s have chosen to unionize, several stores have voted and have turned down unionization.
6) The MI industry is diverse with many different makers of gear, far too many for any one store or chain to carry. Sam Ash and GC, and other regional chains co-exist with independents.
Why let the truth get in the way of a good story. lol
Point 3 is wrong. GC absolutely screws their vendors who would not dare hold them to fire. Where did THAT come from? I’ve been on the wrong side of a GC margin battle too many times. Their attitude is if you want our floorspace you’re gonna pay. There are so many little extra discounts beyond marketing that they get through force not persuasion and 90% of them are never passed onto customers. It is naive to believe otherwise. As for the Bain/Romney/Obama stuff, it is simply irrelevant. The business model used to by GC lives and thrives today as always. Advisers get fat fees to help with a buyout and the business is loaded with debt because by paying interest they are not paying tax. But always the balance is so fine that if there is a tip in the industry or business, as there is today with the slight decline of guitars and amps and the increase in lower price dance music gear then the debt is not as easily paid and the vendors get hit with new proposals (i.e. “pay for our freight”). It is not a pretty picture when you are GC vendor.
I don’t know the industry well enough to dispute most of what you say but I do know tax (I’m a CPA with over 35 years dealing with business and personal tax) and I need to point out that $1000 in interest expense does not reduce your tax bill by $1000. At the corporate tax rate it would only save the company approximately $350 for each $1000 of interest.
Hi “John Roeb,”
If you are going to be in the business of anonymously commenting on websites pretending to “do business” with Guitar Center, you should perhaps get your tech guys to spoof your IP address so that it doesn’t point to GC’s headquarters outside of Thousand Oaks, California.
Guitar Center INAP-LAX-GUITARCTR-1887 (NET-216-52-243-0-1) 220.127.116.11 – 18.104.22.168
Internap Network Services Corporation PNAP-8-98 (NET-216-52-0-0-1) 22.214.171.124 – 126.96.36.199
Seriously, get some game. This isn’t the minor leagues.
Executive Educator in the field of competitor intelligence
haha, nice work Eric. LOL
Well, I was replying to a comment that the moderator took down. Repasting my comment, which has a lot of other info, but might be missing a little context. A commenter had harangued the author on this being the wrong way to conduct oneself and that he should have answered all the questions from this “John Roeb” stealthy GC Detective. Here is what I had tried to respond with:
I believe the author was simply pointing out that to have an honest discussion, one should identify themselves, as opposed to using an anonymous account and claiming to be from a different company when they are from Guitar Center (GC). I think Eric’s article was great, I’d like a shot at answering those questions just based on his article and facts. He went to the trouble of writing the piece, and it really annoys me when people tell others how to behave, especially when it is the owner of the domain you are visiting and the creative behind the writing! I would not have wasted time answering a comment from someone that disingenuous either. Yet there are answers.
Quick disclosure, I own a music services company that has a retail division, very different than a store, yet I buy from GC all the time. Our company came up with a retail program that is great for our customer base, and GC is a part of our supply line, a rather integral one at the moment. Which is weird because I could also be seen as a competitor. I’m simply providing some observations I’ve learned over the last 20 years.
1) It is not in GC’s business model to buy out independents…
Ask WestLA Music about that. It is absolutely their policy for certain markets.
2) The Interwebs…
GuitarCenter.com is the one of their few profit drivers. That, and GC Pro which handles studios/corporate/worship – therefore GC itself is an incestuous victim of show rooming, which is why Best Buy still sort of exists and Circuit City does not. BB finally came up with plans to embrace tech instead of holding out, they are still limping along.
3) GC’s leverage doesn’t affect vendor relationships as much as people think…
Sure it does, they will go to someone like even Fender and buy out stock in bulk for less. It’s how they can offer lower pricing, they get the stuff cheaper than anyone else. I’ve been told by manufacturer reps that it is often easier and cheaper for me to just get something from GC Pro based on the pricing I get as a reseller. Sometimes GC will have more in inventory than the manufacturer themselves, really depends on the product cycle.
(4) The idea that GC only carries big brands is false…
They will carry some boutique brands of pedals, and they will carry ANYTHING they can make the most profit on. BUT, there are waaaay more brands that either will not have a chance at GC shelf space or refuse to use GC as part of their sales strategy. If you go into a GC, they will try to sell what is in stock first, and might prioritize it by brands they own as they make a higher profit. Guitar Center mostly carries major brands is a fair statement. There are also big brands that they do not carry, that has been a longstanding way to compete (Peavey, Carvin, Boogie)
5) While some GC’s have chosen to unionize…
I’m staying out of this one. What I will say, is that newer stores that open are a much smaller footprint and they are fumbling with ideas like rehearsal, recording, etc. but completely missing the point that GC does not, and probably never will, feel like a cool place to do actually use your gear… I say this, because I believe in the future, the GC storefront will have to be much smaller and no more large warehouses, thus unions might not be as much of an issue depending on where they go with this crazy train. Mayhap they focus more on education and younger consumers in a different type of store while keeping the pro division and the online division.
(6) The MI industry is diverse with many different makers of gear, far too many for any one store or chain to carry…
Absolutely. But if I need something today, chances are GC will have it or have something I can use instead. They have tons online that are not in stores. For the most part, I have had no problems ordering thru my sales rep who will just ship me anything from the site if it’s not in the store. Like any other big company, you want good service, you have to find the person willing to provide it and I got lucky with my rep. I used to buy from a music distributor – the main one that all the mom and pops go to – GC has lower prices than they do, assuming you buy enough to make it worthwhile. Indie stores can’t compete when buying from a middleman. The places staying open and appearing to be immune either have great service (Pro Drum Center in Hollywood for example) or a business model that doesn’t solely revolve around retail music gear (Drum Doctor for example) or they sell their brand direct as mentioned before. As we head towards more fixed pricing models (Apogee, Apple, Blue, Monster) it will be in GCs best interest to figure out how they can buy more for less.
In summary, people have been saying GC is going to close for years now. I see them as a pretty great distribution model that needs someone to come in and make some big changes, leverage what is working (the site, GC Pro, install services) and really think about what goes in a storefront. Apple, Nike, etc., they have all figured it out. What’s the difference? They are their own brand. But so is GC in some ways. They own Acoustic, Harbinger, Sterling, and several other brands. Maybe they focus on that as a differentiator. There is real value there as well, it will be interesting to see how it plays out and I will be very interested to see what happens. The author is correct – they have a dated business model that is unsustainable currently, and not practical for the future. Guitar Center will never be perfect, but it might just last longer than the people who feel burned by GC might wish.
Interesting article, thanks Eric Garland!
PR flack gets spanked by spook! Brilliant!
So Freaking Classic.
I wish I had Eric’s superpower. Damn that is sweet science.
This is the WRONG way to conduct oneself.
Why must you ostracize someone attempting to commence in a debate?
If you have evidence to rebut his claims, so be it. State your refutations and present your evidence; emotionally charged mockery does nothing for anyone. If you are going to get unreasonably offended to the point that you choose to pull up his IP address, maybe you shouldn’t blog.
One of the major flaws of our society today. You are starkly undercutting democratic values by deeming an opposition party’s viewpoint to not only be irrelevant, but should be kept private.
I hope this is not how you conduct yourself in your relationship with other clients and businesses.
Eric, Regardless of where the rebuttal came from, I felt he made some valid points.
OUCH! I felt that spanking all the way up here in Chicago! Way to go, Eric.
Have to call bull@@#$ on #3. I’ve been to many a NAMM show (where music merchants see new gear from manufacturers) where GC bought out ENTIRE runs of products before the show begins. Little stores can’t even put a bid in for certain models. At that point, they have a monopoly on certain items. For example, if Fender has a cool Christmas package that will sell like mad, GC could buy all of them so that no one else can have them. (This is an illustration. The actual lines they buy out are different but still effective).
GC did that with Ernie Ball Cobalt strings. We couldn’t get a box in the store to save our lives, while GC had cases of them stacked to the ceiling.
Another example would be Wampler Pedals. A couple of years ago at NAMM they showed us the GC only pedal. Great tone, but you can only buy it at GC.
Now that’s rocknroll
So Freaking Classic
1] I am a Guitar Center employee. 2] You outed ‘John’ as a GC employee but didn’t counter or deny any of the points he made.
Talk about minor league.
Your article is reminiscent of headlines that I read in the Enquirer for almost 7 years about ‘Bob Hopes Tragic Last Days’. According to supposed economic experts [or self proclaimed “Executive Educator in the field of competitor intelligence”] Guitar Center has been going out of business for the last decade yet we just opened two new stores in the last month.
I agree [having to sometimes deal with less than intelligent and even less helpful employees at other stores] that you will run into a handful of our staff who can be less than knowledgeable. But what makes us resilient to slanderous internet puff pieces is our ability to acquire knowledge, the willingness to investigate and research for our customers and our commitment and respect for both the novice and professional musician.
r. andrew exile
salesman in the Guitar Dept [you figure out which store Mr. Big League]
Eric, you should feel privileged “John Roeb” was willing to provide the information he has. I’m a former buyer for Musician’s Friend/Woodwind and Brasswind and most of his points are the truth.
FYI, my IP address should point to South Bend, IN.
Good day Mr. Mike Boles in Granger, Indiana, former buyer for a company acquired by Guitar Center,
We should all feel “privileged” that a billion-dollar corporation has its marketing executives plant “PR crisis response” talking points anonymously in the comments section of an article while pretending to be a third party because it hides the interest inherent in the statements themselves?
Are you kidding? What kind of deranged, sycophantic nonsense is that?
I have zero problem with Guitar Center making a statement regarding this blog post that took me about six minutes. After all, this isn’t about me, but about the almost 100,000 people who clearly have strong feelings about the role that giant, conglomerated companies play in the American economy. They are responding to their customers, not me. But if they are planning on doing so in a dishonest fashion, they are going to have it pointed out in public.
Oh thank you, PR departments acting like individual consumers on Yelp!
Thank you DC lobbyists, setting up fake “grassroots” nonprofits in the name of “consumer choice” who are getting Congress to pass laws that enable their market position!
Thank you journalists who print press releases near verbatim!
Thank you mendacious flacks, for all that you do for American society!
People are really sick of this garbage.
HAHAHAHAHA thats so awesome! total fail.
I own a music store about 15 minutes down the road from a GC. I can tell you first hand, they DO NOT co-exist. GC employees have been “sent” into our store to keep tabs on us, and on occasion have left GC branded picks around just to let us know they were there. We’ve had customers come in and tell us GC employees told them not to come into our store.
not to pile on but back when i first moved to nyc i worked at manny’s for a few years. unless the MI retail landscape has changed drastically in 20 years, the big buying retailers (then manny’s & sam ash, now GC, zzounds, sam ash, etc) absolutely get a preferred buyer priced that the small guys do not. in fact, i vividly remember henry at manny’s having arguments with wholesalers about them giving better prices to S.A. and them having to match. I’m sure you guys buy at far lower prices than ma&pa.
I’m a manufacturer. I do business with Sam Ash, which when I started with them in the early 90s, was interested in new products from unknown manufacturers. My products eventually got distributed. Guitar Center tested my product in key markets and it did well. I was then faced with selling it to them at a very low price that would kill off my mom-and-pop retailers or they would use one of their agents manufacturing in China to knock my product off, which is what they did. Americans largely buy on price and big boxes like Guitar Center are a race to the bottom.
This is exactly the problem with that model – please spread this message. It’s about quality manufacturing and stable economies. And bitchin’ guitar tone.
Yes, but on the other hand, big-box is the model that delivers the cheapest stuff, and that’s what most Americans want.
Good point Landree.
Landree is dead on right. Americans are bombarded with paying less! I manage a brick and mortar store and the battle is getting customers and clients to understand that the Big Box is no less expensive than we are AND we do it better.
“Americans buy based on price” he says? No way!
How Dare GC try and get me a guitar at a lower price. What scumbags!
I heard the CEO responded to this from a friend of mine who works for the company how come you never addressed it?
If people only shopped at big business retailers, nobody could make a living. Then the 5 coorperations would merge with the government, and hello Orwellian nightmare.
Didn’t Mitt Romney leave Bain Capital eight years before they acquired GC? Romney seems to be mentioned a lot in the article considering he has absolutely nothing to do with the situation in any way what so ever.
Romney was still consulting with Bain before his failed (and if there is a God) his last presidential run…
Hmmm, everything I’ve read indicates that Romney was completely out of Bain by 2002 at the latest and really uninvolved by 1999. The GC acquisition was in 2007 wasn’t it? I certainly could be wrong on any of that I suppose as I don’t spend a lot of time following Romney or Bain Capital or GC. : )
I worked for guitar center over 25 years ago. At that time the model was to put ALL the small shops out of business through various methods. If you think that had they gotten the money from a different source the outcome or philosophy would have been different you are sadly naive. So if an Obama backed company had bought them, the credit rating would have improved and everything would have been amazing right?
Pretty certain that the fact that Mitt is responsible for this company had a LOT to do with the sales plummeting. Just sayin.
Totally off topic… What exactly qualifies you as a “professional bassist?” The article is well written and informative… but I can’t help feel insulted. As someone who busted their ass to become a real professional musician (meaning I earn all my income from music), it really bugs me when a casual musician claims professional status. I may use eTrade but I’m not a professional investor.
I have been playing bass for money since 1990. I have been composer, producer or sideman on multiple records since 1997. I have played probably 1500 gigs in the jazz, pop, celtic, salsa, and country idioms, in highly competitive scenes or on the road. I started my strategic consulting firm in Washington DC based on income earned from playing music every night of the week while I established my business. I have played as many as six to nine paid musical engagements a week for months at a time which provided me housing, food, insurance and other necessities of life.
I’ll tell you more, but first you must put up your full identity (name, picture, website) and links to your own work for the last twenty years.
Does that seem fair?
You mad, bro? I bet you’ve hardly begun busting your ass…
Making your income from music hardly qualifies as a “Professional Musician”…
Really, you ignorant, cowardly, anonymous douchenozzle? What about Wes Montgomery, the legendary guitarist whose first several groundbreaking albums were recorded while he continued to make a living for his family as a welder in Indianapolis?
Or Tal Farlow, an earlier but equally genius jazz guitarist who made most of his livelihood in southern New Jersey as a sign painter?
Put up your name, location and links to your music.
If you’re so bothered about anonymous ‘douchenozzles’ (whatever the heck that is – WTG on finding new bizarre ways of trying to insult anonymous people. Err, yeah OK) why not disallow anonymous comments? It obviously seriously bugs you. And while we’re on the subject, why does having links to music somehow qualify us? All it means is that we have been fortunate enough to be able to record our music – not everyone can or does.
of, relating to, or connected with a profession.
“young professional people”
synonyms:white-collar, nonmanual More
(of a person) engaged in a specified activity as one’s main paid occupation rather than as a pastime.
“a professional boxer”
Yeah, I could’ve found my own dictionary thanks.
“Professional” just means one makes income from one’s work. This income has absolutely no relationship to the real value or artistic merit of the work, of course. Remember that some consider “amateur” a superior aspiration, as an amateur only works out of love of the work, not for income. The financial motive can easily corrupt one’s musical soul. Of course, few of us have the luxury to take no concern about income.
Oh boo hoo, you feel insulted. Get a grip man! There are plenty of ‘professionals’ who are rubbish (look at the X Factor) and then there are a myriad of ‘amateurs’ who are kickass. So what? Who cares that you earn all your income from music? W’re not all that lucky. I, for example, have been playing for over 30 years and am pretty good, and I do earn some money from it, but not exclusively. Does that make me unprofessional? Or just a good amateur? Does it really matter? Your notion of being a “real professional musician”, which you yourself define, could be taken as insulting. However, I CAN help whether I’m insulted or not. Maybe you should spend less time busting your guts and showing off and more time learning how to grow a thicker skin.
Totally agree with you Eric. It also seems that GC has dropped prices (over 30%) to try and gain more traction. T’aint working. I was in my local store just last week (first time in over a year) and it was a ghost town.
where will all the guys in crappy bands work now?! 😉 BTW. Bain bought GUITCENT AFTER Romney left… just sayin…
I would say this, it’s about darn time and i am glad to see Guitar Center go, the instruments in that store and the prices are ridiculous especially when you can go to E-bay and see the same thing wholesale or go direct purchase which some manufacturers who have a outlet to purchase the instrument you desire to own, bye bye Guitar Center.
I agree, yes we have a lot of capitalism going on. But to tell you the truth circuit city was far better then what bests buy and its customer service has to offer. I am big into technology so I end up knowing more usually, same applies to guitars and musical instruments. But I would rather have guitar centers then sam ash. Or online websites to take over. Who buys a guitar they haven’t played? Plus they usually get new stock frequently, I’ve been to way to many local stores with the same stuff. I once handed a sam ash manager a used guitar that was in perfect shape.. He ended up putting a hole in bc he hit the corner of a table… if that was my LP I would decapitate somone! Smh
I have given more money to Guitar center in the last ten years than I care to admit. What irks me though, is that Martin and Gibson issue cookie cutter models, made exclusively for guitar center and name them like their classic models. I almost bought a Gibson Hummingbird, because I always wanted one. I went to guitar center and played it every day. Something was bothering me. It didn’t sound or feel as good as my friend’s classic hummingbird. Upon investigation I found that Gibson is producing these guitars for Guitar center. They are not as good as the originals and sell slightly cheaper. Martin is doing the same thing. The last two guitars I bought from guitar center were used, and I was very happy. That teaches me that what I really love is an older, seasoned guitar. I guess I don’t need guitar center for that, but they sure make it convenient to show up and try them out. I would never but a guitar without playing it a bunch of times.
The next time I buy a guitar I will find a local shop. They are becoming fewer and further between. maybe if guitar center goes out of business, they will come back.
This is from June…just saying
Didn’t notice that. As far as I can tell, Guitar Center is alive an kicking.
I heard these rumblings a few years ago, but I could not believe my ears .. because every time I visit my local GC (there are probably a dozen stores here in New England) .. it is packed with customers. I usually have a hard time getting waited on. On any given Saturday you can watch high ticket instruments going out the door all day long. If the company is failing .. then maybe their prices are too low and/or discounting too heavy. I get a 15% off offer just about once a week via spam email. As a working musician and dreamer .. I would be heart-broken if this place closed. While I agree with others that they mostly sell production line chinese gear, and not the vintage boutique items we musicians crave, it is still a place to explore new technologies, shop bargains on supplies and mingle with other musicians. I hope that they can right the ship otherwise I will have nowhere to hang on days that my wife drags me out shopping.
Exactly my thoughts. While the author has opinions on how retail should be run, I don’t think it’s the primary reason for GC going down the drain. Also, the author speaks about catering to working musicians and be told stories of “how the industry works”. Let’s not forget the beginners and the tight budget customers. The author seems to have cobbled together some industry news and gave them a hammering based on personal observations. It’s like saying Walmart (or any big box retailer for that matter) is failing because their sales people are clueless and / or not specialized…
Sounds familiar. My favorite independent music store in Atlanta, American Music Center, got bought by GC about that time, and was shut down. The guys in there were very knowledgeable, had a good product line and prices, and would listen to what you want and even tell you that something they don’t carry might work better for you. What they lost in the occasional sale that way, they more than made up for in trust, and purchases. They were my go-to store…killed by GC.
I’ve been hearing this for years now. Yet, GC still exists.
These soulless, corporate m.f.ers never had any business in the music business. As true today as it was decades ago.
Hi everybody: Sign your whole name to your comments like an adult that is proud of his or her role in society. Deal? Thanks. I do it, you can do it.
Guitar center has become the Walmart of musical instruments….unfortunately, it doesn’t seem to be working for them.
As a current GC employee, I must say the amount of strong profiling in your article is pretty ridiculous. Your slanderous, ‘factual’ numbers regarding the level of employee knowledge is nothing more than an indignant insult. I have always held to the opinion that you know a professional musician by their level of humility.
I have spent 27 years playing guitar and bass and thus have allocated ample amounts of my salary to the purchase of musical equipment. There’s nothing slanderous about saying that part-time, young retail workers do not possess the expertise of small businessmen who started retail operations after many years in the music industry, as was the custom years ago.
Having spent thousands of dollars with Guitar Center over the years, and having had innumerable conversations with the staff, I am comfortable stating that the average employee there is not generally a professional or an expert compared with the boutique retail experiences of years past. I like many of the people I meet working at Guitar Center, but their relative expertise does not compare to Be Music in Rutland, Vermont, Advance Music and Burlington Guitar and Amp in Burlington, Vermont, Fazio’s Frets and Friends in Ellisville, MO, Bass Club Chicago, Chuck Levin’s in Wheaton, Maryland, Rudy’s Music in Manhattan, and many, many others. My reference of “3%” of knowledge is obviously a rhetorical device, but a flourish considered over thousands of hours of experience.
And by the way, slander is verbal, libel is written. My comments meet neither standard, legal or otherwise.
Best of luck in your career.
I guess my store must be an exception. We have many actively gigging musicians who’s knowledge surpasses most of that of small shops I have visited. On a separate note, I do agree with your other comments regarding the declining quality of Gibson’s guitars. All of my coworkers would agree with that statement. Even the Epi Sheraton from 10 years ago surpasses the build quality of their newly released 335’s. We’ve had a few Heritage guitars come through the shop recently and they seem to be offering a glimmer of hope for the old Gibson build quality.
All of you are missing the point here. Companies come and go, but the desire to create and play music will live on long after GC or any company is a faded memory. No one cares where your instrument came from. Can you play it well enough to brighten someone’s day?
The real issue is the pitiful state of the music business in general. Musicians are getting screwed from all sides of the business ( club owners who pay the same dollars as they paid in the 1960’s vs. record companies who missed the revolution vs. unfair royalties to recording artists from streaming and satellite radio).
As for being a pro vs. a part timer, I know for sure the “best” musicians I ever heard never played in public. They play for the love of the music. You sound like spoiled brats.
The author of this post is simply stating his view of the fiscal position GC finds itself in today. (snarky Mitt comments aside). He, like everyone else is entitled to their opinion. So kids, put away your daggers and focus on making music that will matters… music to enrich people’s lives. Focus on finding a business model that makes sense for the 21st century instead of self-rightously complaining about this store or that one.
Note to the Grammer Police: I think my spelling and grammar in this comment are correct. If not, get over it. I don’t care.
You the man – this is the whole point.
Don’t you mean YOUR THE MAN?
Thanks for this sober reply. The OP has a little bit of a political axe to grind which muddles his point. I’m pretty sure he won’t be happy until music equipment and accessories are only sold at your local farmer’s market.
The elephant in the room IS the economy, which I’m pretty sure is the more insidious force grinding out the ‘little guy’, music equipment by and large is a luxury and budget conscious consumers aren’t buying much of anything or are buying less than they would. GC rose on the power chord of rampant consumer spending that dampened when the music stopped (we all know what that means, the exact time it happened depends on your political persuasion). No big box chains, car dealerships, or clothing stores are doing as well as they had, it doesn’t mean it’s a failed model, it doesn’t mean we all stopped believing in the brick and mortar incarnates, or that we don’t WANT to worship, we just have no alms to give. We are buying less and fewer of everything, especially luxuries.
I’m gonna get a few more years out of my current guitars, when the economy improves, I have my eye on a few things, but right now, I don’t need them. And if I just have to have it, I’ll look for it on Craigslist or Ebay first.
In the meantime, I agree, business models evolve, let’s find or wait for the next one.
Good point. Did you notice Willie Nelson’s guitar? He can afford a new fancy guitar, but he loves the tone of the one he plays. As far as business models are concerned; music is about music not business models. Businesses come and go but music lives on. Alot of great musicians and artists died broke; maybe they had poor business models but their music and or art withstood the test of time unlike the businesses of their era. Example: do you remember the businesses, nobility or patrons during the great ones time? for example Bach’s time? But you know who Bach is. (not saying Bach died broke-just an example-Mozart died broke) Painters or poets etc who’s art didn’t make them much money during their lives but they are remembered not the rich of their day.
Well…I had a good friend who owned an excellent small store who decided he couldn’t compete with GC when it came to town. I sympathized and bought some of his inventory. And…I started shopping at GC and on the net. And when I moved to San Diego, I shopped mostly at GC there as well (though I did buy a beautiful Azola electric upright bass from the mfrs at NAMM). I would comp[lain about them, and their low education threshold for employers but honestly, when I needed help I could usually find it from a store manager. I was also able to make relationships with managers where I shopped the most, and because of that I found that I got special consideration in terms of pricing, holding items till they went on sale and so on. And now…I live between rural central Mexico and the pacific coast of that country and I would do almost ANYTHINg to have a GC within 200 miles. When I visit San Diego, I love to just walk through GC, knowing that I can pick up and play just about anything–yes, they don’t have everything, but who does? Hell, just to put my hands on a new HAmmond SK1, or a new Korg, or a decent set of VDrums, or an Epi hofner violin bass knockoff…yeah, baby. You don’t know what you have till it’s gone, I tell you.
No one ever made me buy things from Guitar Center. It’s a personal decision, so I can’t bitch about it.
Interesting article and comments. I don’t know anything about investment banking, but it seems like these big money guys come riding in on mountain of borrowed cash, use it to put strain on (or kill) established dealers, then often file for bankruptcy leaving someone else holding the bag. I know it’s not illegal to use your influence (in this case, financial) the buy in and take something over, but it seems like you should feel some obligation to do so in a way that is sustainable. At least then you could say, “I took away some people’s livelihood, and gave good jobs to others”, instead of doing all of that and ultimately having to let employees go and default on your loans. I sometimes wonder how much of our “financial crisis” is actually more of a moral crisis.
“I sometimes wonder how much of our ‘financial crisis’ is actually more of a moral crisis.”
A lot of financial crisis is a policy decision by powerful people. Check out the podcast here: http://www.ericgarland.co/grm/quantum-bankruptcy/
Exactly; but that’s the history of music: Beatles, Hendrix, Stephen Foster even Mozart and before him. Those who pay the musicians or hundreds of years ago provided patronage to them, always had financial interest or selfish interests above the music. Or when a band or musicians has hits and their sponsors want them to play similar stuff rather than create something new. That even happened will Bill Monroe.
Leonard Skinner (said it in a song called “working for MCA”) The good news is music lives on no matter what the money does. If GC goes under there will be always be other choices. CBS bought out Fender and ruined the quality for a while. Music always wins in the end; it outlived individuals,
businesses, nobility, governments, societies and civilizations.
Once Bain Capital acquired GC..it became all about selling stock not musical instruments. customer service and loyalty are not in the dictionaries of comptrollers and CPA.
Good riddance when they go. I had tried for the better part of 5 years to get them to stock one or two quality left hand acoustic guitars with no luck. They have over $100,000 retail value of right handed acoustic high-end inventory, some that have sat there for over two years, yet could never find the space for a single lefty. It was the small local guy who got the Taylor folks to come to town with several, I now own one.
As briefly alluded to in the Reuters piece, the big issue isn’t necessarily the amount of debt they carry (though… damn). It’s the fact that debt comes with covenants that must be met. These covenants are like circuit breakers, requiring key financial ratios to stay within reasonable boundaries. If you don’t meet the debt covenants, the circuit breaker blows and your loan gets called in. If your bonds are junk, you have nowhere else to go for cash.
When a company gets to the point where it needs to constantly negotiate amendments to these covenants, the end may be near. The final stage is the Balance Sheet From Hell, in which a company not only borrows for ongoing operations, but it also leverages its inventory. Ask Borders how well that worked out for them.
I like how they almost admitted they were wrong. They stated in the addendum that Mitt had “little to to with” the acquisition. Another correction: He had ABSOLUTELY NOTHING to do with it. Mitt Romney left his position at Bain in 1999, and completely leaving the business in 2002. Bain didn’t buy out GC until 2007. Once again, people jumping to conclusions before they know all the facts. This is the reason this country is in BIG trouble!!!
I’m just gonna guess that Bain’s financial techniques–which were honed by a young and greedy Mitt Romney–have done more to mess up America than people jumping to conclusions. Sorry.
While this is a relevant topic, it is symptomatic of a much more complex set of circumstances which have unfortunately conspired to marginalize the collective music industry as a whole. For the first time in any living person’s memory, we are living in a time when the retail infrastructure for audio recordings has become disenfranchised to the point of non-viability outside of online sales. Why is that relevant? Because in the past, when kids went in to buy their favorite instrument it was because they heard a cool song on a recording that they bought. It is now known that the major labels were “bought out” by streaming music networks like Spotify. The result was the final neutering blow of the distribution of major label recordings via all but a few stores. This has a direct impact on other satellite music industries who in the past needed the original model of the music recording industry to remain robust. Like it or not, we are quickly moving to a time before the record industry where performing artists get most of their income from long tours, and people think of performing music as a quaint hobby.
The root of all of this is the centralization of entire economic sectors into a few oligopolistic companies. I believe that music is being crushed by this. Despite the openness of the Internet, most people still need cues from a powerful brand to decide which music is relevant. Given the small number of media giants, this reduces the total output of music down to mass-market acts designed for the lowest common denominator. The importance of music in society as a whole has been diminished. Thus I agree – buying a mediocre Strat in a box store pales in comparison to the loss of music as an importance cultural force.
Bullseye, and thanks for the response. Not sure how long people will stay in denial about this-probably until they realize that the yellow light down the tracks is a train coming for them.
I used to work for Musicians Friend, and Bain’s decision to move them out of Medford Oregon not only screwed their customers who enjoyed the benefits of getting their gear without paying tax (or maybe screwed the local stores by offering them a way to buy while avoiding tax. Plus, I think many states are forcing tax on purchases anyway) but it also cost about 200 jobs in Southern Oregon, where they retained about 20% of the work force down in Los Angeles. They have since laid off most of the workers that were there, rebranded twice, retro branded once, gotten rid of their free shipping and shrunk their catalog to a quarterly affair for a user base that loved the catalog.
The company was making great money in Medford, though not GC money, and it was sustainable as a great online dealer. Whether it would have been able to compete with Amazon and Sam Ashe and other dealers who knows, but the purchase by GC killed the culture, eventually killed the business and now it is not much more than an additional brand that supports the GC machine. Like Music123 and Woodwinds.
Very sad and as much as I blame GC for ruining it, I am not sure that its model would have been able to have much growth over the long haul, but right now it is little more than the equivalent of the O’Callahan brand from Tommy Boy…
tThe customer service in the guitar center in totowa NJ is atrocious. I had to beg people in the store to sell me a $900 bass. They all seemed too busy trying to sell fender starter packs to unknowing parents. More than once I have had someone with less gear buying experience than myself ask me if what they were being pressured into buying was the right purchase for them or their child. That has always bummed me out on shopping at GC. They are in a unique position to turn the youth of America on to playing music and they could care less. I know there is more money in selling triple rectifiers to dudes in marginally talented metal bands than selling a jazz bass to a13 year old, but establishing a positive relationship with the kid could be a benefit in the long run. Musicians deserve better.
Made the huge mistake of going to East Coast Music Mall here in CT. One son bass one guitar. I fell into the trap of sales and advertising. Sick of corporate america. Thankfully I didnt buy from them. Instead I pulled into a small place in town that I knew nothing about other than the small guitarhangar sign by the mailbox! Small, knowledgable, special treatment and great quality guitars. Plus they have a website and they can special order anything and ship anywhere. I was intimidated at first, thinking it would be too expensive. Not true! I wouldn’t ever go to GC. But they have the power to advertise and lure, unfortunately. Not me!
The comments section on here is fantastic! Eric you are my new hero. I work for a large independently owned/operated music store, and I can say for certainty that this company (more specifically in our case its subsidiary Music & Arts) tries hard to squash the local independents. I’ll not name names, but they tried to buy us out, saying more or less that if we didn’t accept the offer they’d run us out of business in 5 years anyway. That was about 7 years ago. We have had a number of small music store owners over in California contact us asking how we managed to stave them off, as they are hitting California hard and trying to dominate all the local independents.
Thanks for the read!
As a seven year ” resident” of GC, I can tell ya the company is fucked. Managenent is based on cool factor,instead of experience. The average store manager and sales manager age is under 23 and one year experience retail. And yes, the gear from big name manufacturers is waning on quality. Most initiative for the sales staff to sell ( outside of losing their job) is gone. The companies focus is the internet ( no overhead).
Guitar Center Associates Suck …….Ten Years Ago It Was Awsome.. Now I Only Go When I Need To Get What Other Music Stores Don’t Carry……Hope GC Get’s Better…I Wait Patiently….
I want to publicly dissent on this point. I really like a lot of the GC associates I meet, and do not feel that they “suck.” There is a major difference between their knowledge base and that of a dedicated small business owner running his own operation after decades of musical experience. But the people I meet at Guitar Center are almost always friendly and helpful, which is why I have spent thousands of dollars with the company.
When GC bought out The Woodwind & The Brasswind in 2007, I saw the writing on the wall for my job there. I am now happily ensconced as a Band Instrument Repair Technician in a local independent music store.
While I agree with the majority of your article I have to disagree about the employees. There are some really awesome people at GC. Unfortunately GC doesn’t pay enough to keep the best of the best though and they do move along. Sadly, I would give more insight but I can’t afford to be “outed”.
I’ve noticed lately that GC employees seem to trip all over themselves to make sure you end up buying something. More than they used to. I went there looking for some stuff, and one of the instruments I wanted wasn’t in stock, so I was like, ‘no prob, I’ll just order it from the website’, and the guy wouldn’t let me walk out of there until he had placed the order online for me. And they do this e-mail follow up thing now that borders on creepy. They’re in the same boat as Best Buy, who are now honoring any online price you can show them in the store. Definitely putting in the effort to compete with online retailers, but likely not succeeding.
If the employee helped you in any way, why not let them do the online order for you in store or over the phone? That way, at least your helpful employee gets to see some commission on said sale as opposed to getting ZERO when you go home & order it via your iPad while sitting on the couch?
Agreed, help a guy eat and pay bills. You buy it solo online, all the money goes to corporate. Help out the little guy.
Mega corporations take the soul out of everything: their product, their employees, their customers. I guess that’s ok when you’re selling pencils. But music? The vessel of soul? Terrible idea.
I buy a lot of electronic music gear (not guitars) but in the last 10
years I bought it all through the mail from Zzounds and Sweetwater for
two reasons. NO taxes — I’ve literally saved about $5,000 in taxes — and it gets delivered to my door. No need to get stuck in traffic.
Eric – I have worked for GC in five stores over seven years from east coast to west. Though your financial analysis of the Bain template is mostly, and painfully, true, the integrity, decency, spirit and honesty of 99.9% of the associates and managers I work with make me disappointed that you could have spent more words on that. Thank you for at least noting it in your comments.
I too, as a 35-year vet of road gigs, clubs, studios and concert halls, love the boutique shops and play only the best vintage gear. However, as a 16 year-old buying my first Les Paul, I was asked to ‘show me your money’ before I could play it, and you will never, ever, experience that at a Guitar Center. That is a mom and pop model that I am glad to see gone for good, along with the condescending nature in which I was treated as a young artist, as well as the exorbitant list prices that dominated the industry for years.
I constantly hand expensive guitars to younger and older players alike, not because they might buy it, but because they are our customers, and how often does that kid – or the $100 a night player who is feeding his family – get to play a $4k instrument and see their own potential.
It is easy to poke at the GC giant-monster, forgetting that it has been a successful company for almost 50 years in a tough MI market, well before any leveraged buys and such. Many of those people who built the company are still there, carrying the same love for music that you do. Come to my store, meet some very inspired young folks who came to work here because it is their passion, and can tell you “how the industry really runs”… for them, in real time. Maybe they don’t know everything you would like them to know, but I do, and I am the one who is teaching them. Come visit my store, stay for a day, then write about that.
Hi there – this is nice comment, and thus you should actually use your own name.
I’m glad you bring up the issue of high-end guitar stores and their tendency to be a pain in the ass. That arrogance gets old very quickly and it is even used on people (like me) who are actually their target market. If I’m going to drop $3800 on a James Tyler guitar, I’m damn well going to play some licks for a few minutes without worrying about some stupid comment from the staff. On the other hand, if you are in the market for a serious instrument, you probably don’t want it handled by every kid who wants to play Smoke on the Water while wearing a sharp belt buckle. That’s a balance that needs to be struck, and it can sometimes bend toward cockiness. Guitar Center is very open and welcoming, which is why I have spent thousands of dollars there in recent years – though outside of the Hollywood mother ship, the guitars are not up to the same level as the ass pain boutique shops.
As to “poking the GC giant monster,” my brief and incomplete analysis isn’t about the personal qualities of the staff, but about the systemic effect of a “category killer” that has the ability to distort the market by strong-arming vendors. We see this in many sectors, from banking on down. Its effects are often deleterious. This really needs to be the subject of my fourth book, as there is too much to describe here.
Bottom line: it’s great to hear from happy employees, but it will be quite interesting to hear from Guitar Center’s vendors and acquisition targets. Many have written me in the last 24 hours. Perhaps there’s another article on this topic.
Awesome. Look forward to more on this. There is also the issue of the unforeseen and problematic timing of the Bain buyout, which couldn’t have been worse. That has certainly affected the company’s position for the last five years, and thus the current financial standing. Though from over here, it recently looks to be improving, in stores that is. That will take some time to reflect in the bottom line, but is good news for everyone, not just GC. Niche retailers have been hurt the most, and I have to argue that although it may be a fun subject for a financial analyst, it is way too soon to play Taps over the GC grave, or any other niche retailer that has made it this far through.
About the idea of ‘category killers’, it is hard for me to let go of the fact (and I do see it as fact) that MI retail in my lifetime was always a distorted market, via distortedly high margins. Seeing it as a distortion now, is, just my opinion here, but… late to the game, and that view is being blamed on ‘big-box’ in your piece. That’s not the whole picture, as GC was beating those margins long before Bain, and killed the idea of list pricing years ago. While that may have simply been a good business plan, it was certainly seen as a favorable one to working players.
It is good to see mostly fair-minded posts coming from your followers on this. Obviously, without the reins in either of our hands, it is impossible to see every facet of this difficult and interesting time in GC’s history. We are building stores and making very positive changes, both in our ability to serve our customers well, and in holding on to the good people that make that happen.
By the way, it’s Ray. And here’s the link you’ve been asking for from your posters, forgot to do that. – reverbnation.com/littlebabygiants
Hey Ray, thanks for the smart insights, especially the historical positioning of Guitar Center vis-a-vis the rest of the “distorted” market. I have a feeling that eventually this debate will not come down the GC’s first few decades, but the culmination in a whole style of business that is epitomized by Bain Capital. Remember, when Bain bought GC, it was the height of the cheap credit, suburban retail, dogshit mortgage boom – the nexus of stupid, evil crap. Now we’re seven years out, well post-bubble-burst. Their troubles are part of the end of one chapter of the global economy.
Another chapter starts right now, and I’m pretty positive.
Here’s a link to my latest record as sideman to Alt Country songsmith Cree Rider: http://crfb.bandcamp.com/
Not quite seven… the deal with GC was agreed in June of ’07, and closed that October. In the few months between, both Lehman Bros and AIG saw their first credit troubles and the writing was on the wall. One year later we saw them both go bankrupt and the rest is history. Bain’s original intent with GC was most probably to ‘fix up the house’ and IPO it again, which might have already happened without the crash. In fact, they have done just that, fixed up the house, and built some more. Some of those changes were difficult for customers and employees alike, and you can bet that this period has been painful for the vendors as well. You can’t fault Bain nor GC for AIG/Lehman’s collapse and the economy that ensued.
But I am with you on a positive outlook after a global shakeout. And it is happening in real time as we write, I mean that in just the last few weeks either the customers were going to begin to buy for the holiday season, or they weren’t as in the past few years. They are coming, and we have the gear, so someone was projecting it fairly well, because the processes required to have it began a year ago as I’m sure you know. So from the trenches, it’s looking pretty good so far. Like I said, that’s good news for everyone.
Solid bass on the Cree tracks. Boy can play. I’ll let you know if I see one of those old Yamaha VR’s.
One Night Stand, that’s really nice! Actually, everything I’ve listened to so far is great! thanks for sharing!
I agree, you’re kind of a douchebag.
There’s nothing dumber than a nitwit with a blog about a music store trying to talk about politics that he knows nothing about.
How can you possibly blame Romney for this. He hasn’t set foot in the place for years. So he gets a pension. With that logic every GM worker is responsible for all car crashes. Dopey statement focus on the facts not the politics !!!
Makes one thankful that they didn’t vote for the Mitt. Good at investing? Hmmm…
This article/post leads me to believe you think Bain Capital bought Guitar Center to make it better. That’s not how Private Equity works. They generally purchase a company using the brand’s name as “equity”. They (Bain) then borrow against that name and pay themselves back putting the burden on the business to repay the loan. In the case of Bain Capital and Guitar Center, Bain purchased Guitar Center to the tune of $2.1 billion dollars with $540 million in cash and $1.56 billion in credit. Then they slashed everything, froze pay for YEARS, and said no to anything that would change Guitar Center’s course. If Guitar Center is in business past 2017 it will be a shock to me. The worst part will be that Guitar Center is 30%-35% of the music retail business. If they go under they will pull a lot of small businesses with them.
Your assumption that they have extra-leverage with the likes of Fender and Gibson would be misguided. If Guitar Center had it’s way they would move into a market, advertise guitars at rock bottom prices and drive out competition. Then increase prices to reasonable levels. Instead, Guitar Center and it’s subsidiaries were constantly hand-cuffed and reprimanded for breaking big vendor’s pricing policies. All the while smaller retailers were able to break these policies virtually undetected.
ahh, but Culpability does not mean he is not running the show, via one of his punks, err sons….
Possible dupe – as a 35+ year veteran of the investment industry (!), let me congratulate you on this article. I think you are spot on.
I live three miles from a GC. I would rather drive 38 miles in my F-150, spend 45 minutes and a six dollar bridge toll
to go to a shop in San Rafael, California, called Bananas At Large. owned and operated by one Alan Rosen, I wish that you could meet him. He is perhaps the most passionate, and compassionate, businessman I have ever met. I am honored to call him my friend. You should see the things he does for the community, without a lot of fanfare.
My wife says that I spend far too much money in his store, and I assure you that I will continue to do so.
If you are spending that kind of money you must be on the sales end of the Investment business , no?
I predicted Best Buy’s Music section would go out of business when I asked the if they want to run a add in Houston’s Largest Music Monthly. They just played checkers….
Actually, Best Buy’s bewildering entrance into the MI sector is what makes me think about the end of big box retail and distortions of the market. All those cookie-cutter, awful guitars stacked high and sold cheap. That they quit was not surprisingly, but that vendors were all set for that kind of distribution made me think about what had happened to the industry itself. Guitars ain’t DVD players.
Agree, Best Buy is doomed anyway….
Ur so right all they carry is the same old stuff well the past 20 years anyway. When I buy my new guitar it’s going to be a BLINDWORM custom. I will never buy a factory guitar again unless I get a really good deal
typically don’t step into the conversation every time there’s some
negative chatter in the press. I’m also not interested in carrying on
any conversation further beyond my brief remarks here, but the press
(bloggers included) has the right to take a position and I’m under no
false expectations that it’s always going to be written in our favor.
Still, when I see that someone is misrepresenting the truth, or missing
important facts entirely, I think it’s important to call that out and
let readers form their own opinions from a more balanced (if not
Garland’s not a bad writer, and I wish him all the luck in the world.
Anyone who’s written for HBR is all right in my books. I do think his
recent blog post “Guitar Center and the end of big box retail” is one of
his weaker pieces and quite unoriginal in its hypothesis. People have
been writing that story for years, and you know what? Next year is GC’s
50th anniversary, and we’re still here, going strong. All 255 of our
stores are profitable. 100% of our stores are delivering great results
because of our incredible associates. Big Box retail isn’t dead. There’s
no question it’s evolving, but we embrace that. The reality is you’re
going to need a lot more than 700 un-researched words on a blog post to
convince any credible audience that its days are numbered. It’s
incredibly disrespectful and insensitive to the thousands of
hard-working GC associates and their families to suggest their company
(and livelihood) is about to expire without any real understanding of
our financial position.
of the main problems with Eric’s blog post is that it’s based around an
S&P report on Guitar Center’s credit rating in early June. What
Eric failed to also include in his story was that at the same time,
Moody’s Investors Service also issued their own credit analysis, and
they considered Guitar Center to be quite “Stable” and their rating was
in fact “Unchanged.” Two “trusted” analyst houses offering very
opposing views of one company. My point is that analysts do what
analysts do, and they seldom all agree one way or the other. If
reporters like Eric only want to include statistics from firms that are
favorable to their position, their readers are usually missing half the
story about what’s really going on. It’s a shame Eric didn’t reach out
to our Communications team to understand our company’s position a little
better before he wrote it. We would have been happy to share with him a
host of additional facts that would further prove his article is
Guitar Center isn’t going anywhere but forward, and Eric could’ve quoted me on that. – Mike Pratt, CEO, Guitar Center
Well spoken , Mike. You don’t shoot a racehorse out of fear that he’ll grow old and pull up lame one day.
Hi Mike, so great to hear from you. Yes, isn’t it amazing that one of my weaker pieces of work went viral like this? I have had this happen a few times, when my best work (like my HBR piece on Michael Porter’s
insufficient views on nation-state competitive dynamics, for example) do nothing and the essay I do on Guitar Center takes off like a shot. These things go viral because of what the *people themselves* are
feeling, not because of the nuggets of information and opinion contained there within. That should be utmost on your mind, not this post on a no-name blog by a guy without any inherent credibility in the MI
That said, y’know, you are right – This topic needs a much deeper treatment! I should really collect a wide variety of information on your company’s impact in the market including updated financial performance, your status with vendors, how its going with your unionized employees and more.
Why, you’re absolutely right – to get a better view of this, I should find out detailed information about how many of your employees are part-time versus full-time, average compensation, and whether they have healthcare.
I’ll bet manufacturers, luthiers and your smaller competitors have much to say about the impact of your company on the market as well. Several have already written me – they have a great thirst to hear their story told, it seems.
It will also be great to hear about how the company’s policies have changed between the days of Guitar
Center in its public days and the new managerial practices since Bain Capital took it over.
I thoroughly accept your criticism that my research was insufficient pertaining to your company’s actual role in the dynamics of the musical instrument industry. And further to this, I hereby pledge to tell this story in vivid detail. I will of course be asking you for direct comment on whatever I find. I agree with you, Mike – let us do this correctly!
Sure, it went “viral”, but so did that train wreck, “Friday” by Rebecca Black. Both are painful to experience by poor writing and the same rehashed “beat”, so to speak.
As far as the smaller competition goes, yeah, that sucks. Sucks balls. However, that’s Capitalism, and that’s America. It’s been this way ever since we had commerce. If someone does it better and cheaper, they prevail. If you don’t like that, rally against Capitalism as a whole and America for that matter.
I have to agree that it is disrespectful to employees, of any business, to make statements that they are about to be unemployed with the same pathetic screech like running into a theater and yelling fire.
You are a grown man with a journalism degree (I hope). Find something useful to “blog” about. Perhaps how the Tea Party is ruining America? That’s a good one. Go tackle it! :::throws bone in Rush Limbaugh’s direction::: Go boy, go!
Guitar Guru? Wow.
Mike – it is awesome to see you step into the conversation. Well done!
Well said. I’m not a huge fan of big Corps, in fact I can’t handle structure at all, it makes me miserable, However it is a necessary evil..I guess it’s the musician in me, but I am also in the financial services industry, albeit not in an Analyst role, its been many years since I was in that role and times have changed. However back in the day I did write for a small analyst’s news letter which did require financial analysis, and deep investigation beyond the numbers and always involved conversations with the Corporate representatives to get the full story…. This was way back in the early 80’s, but I can’t imagine that a full investigation of the facts before printing wouldn’t at least involve getting the story from the Company as well as from other sources….. Rating Bureaus do often vary in their opinions and should not be construed as an absolute. The press always slants things for the outcome they seek…Eric really needed to get an expert analyst involved to do a long term analysis and not just point out individual anomalies, but trends over time….. All it takes is for the rumor mill to start and things spiral completely out of hand……Similar to wall street , my belief is that these rumors generate intended results that benefit a few at the cost of many. In this case a story that generates a lot of feedback for the writer and his publication at the cost of stock holders, employees and customers…. As for guitar center as a consumer; I’ve only had one bad experience in 25 years and it was partially my fault….but all of the gear I bought was quality and performed admirably. I’m a plug and play kind of guy…I’ve bought a few keyboards/workstations and several guitars and basses as well as a really great “steal” of a used Gibson Blueshawk ….GOOD instruments do flow thru these stores, and there are good employees as well as marginal like anywhere else…Most of them are musicians working to pay bills and buy more gear….I rely on them to know what they are talking about and show me the basics so I can plug in and play….It’s worked so far, and I am sure I will buy another instrument or gear again from them….. Now as for Eric, I liked the story for stirring up a great conversation so you did your job there, however, my I have to agree with Mike, more work was needed in your investigation for a truly great story…. and believe me I HATE agreeing with any CEO or Corporate Suit, but the Left side of my brain outweighs the right side on this story and I am obliged to do so.
@ericgarland:disqus , Thank you for the lively discussion(s) that your choices of topic and subject have yielded. I have 4 cents to add for one point out of a few academic “it’s-abouts” being argued. My third and final tour of duty with Guitar Center, found me recruited back from a manufacturer’s rep job (Dr. Song Straps, Backstage Videos, small but viable) , by Larry Thomas ( having followed Ray Scher as Pres.), …got the context? My first tour was Wayne Mitchell (founder) era opening San Jose, CA store. I wholesale rep.ed old school general merchandise before that and dealt with the G.C. rumbling giant syndrome at the beginning of flex und drang. Second time , just more growth, slow but steady. Almost there.
So, in 1990, I was placed on the M.I.S. Conversion team of select employees to live and travel and work together converting 15 existing stores into computerized, inventory-SKUed, password-assigned staff trained in Laser-gunned, ,price-controlled automation —- brand ,new big-box Guit-Zillas! Shrinkage and theft? Nearly obliterated. Flexible “beat XYZ’s low-ball price” because we need the GP? No relevance , inventory advantage now. End of an era, beginning of an epoch… So it goes… (as were Joe Desmond’s last words, Rest his Soul —G.C. legend, dear friend) which NOW brings my point…finally : Guitar Centers/Bain Boxes , ARE NOT the Music Community in ANY city or state. They are A Medium, not the Message. The Musicians’ as associates/salespeople , the audiences and students who interact and grow with them because of the MUSIC they all share, do not close or fail or turn into farmers and beggars and rag dealers when the buildings are shuttered or the stocks tank . The Music doesn’t stop and the people adapt if and when the Business model changes. Am I wrong? I don’t think so. Am I pedantic? No doubt there. Am I still a musician contributing what I can wherever, however? You bet. Just like all the good folks writing in to you. Thanks for getting us together so we can keep in touch.
Well Said Well Said. Shopping Local is the new standard of doing business ethically and getting the most bang for your buck! >Poorly Ran< Unethical, Big business (not all, but clearly Guitar Center) has destroyed a big chunk of humanizing life and a good standard of living.
Eric, you state: “Retail in the 21st century will be centered around specialized knowledge, unique offerings and personal relationships, both local and digital.” So you can use that to pummel GC’s business model, but you offer no counter. What does the 21st century rock instruments retail operation really look like?
As a performer of nearly 40 years, I have very low demands for a guitar shop. Have a bunch of guitars and amps around when I need them. That’s pretty much it. And due to the great equalizer which is Ebay, I don’t really need to include guitars. I can buy whatever brand guitar I want, any model and age, on Ebay and have been doing so for well over a decade.
Now it just so happens I do have a personal relationship with a small dealer about 2 hours away from me. But he only fills about 25% of my overall needs – an occasional amp, special gear, some boutique guitar brands.
It may be that the 21st century guitar dealer is mostly virtual, relying on the internet to educate his customers via reviews and sound samples, focusing on getting the right instruments in the hands of the right musicians in as little time as possible.
Huge question! I shall be considering this. Check out the book from Doug Stephens “The Retail Revival” – it’s a tremendous blueprint for what retail is becoming.
Don’t forget J Gravity Strings if you are a guitar player in St. Louis!
Guitar Center has still never had a store close, they still have huge profit margins compared to other retail industries, and they’re still opening up a new store every couple of weeks. If they weren’t getting a good return on investment they wouldn’t be expanding further
I just edited GC’s Wikipedia page to reflect it’s shiny new junk bond status. That ought to give the flunkies that usually edit their page with all the glowing descriptions the vapors!
Disqus: destroying conversations the Web 2.0 Way.
Anyhow, a repost …
This statement is inane: “Retail in the 21st century will be centered around specialized knowledge, unique offerings and personal relationships, both local and digital.”
Rich folk will get a coupon for a hand job with every purchase, but everyone else will deal with Amazon or someone like them. Whoever that is will make Guitar Center look like the Salvation Army.
But I see the author is part of the hand job set anyway, so this colors his opinion: “I am a future trend analyst, author, educator and keynote speaker, providing insight to executives around the world. My clients over the last two decades include: AT&T, IBM, GM, Ford, Dow, Dupont, Siemens, Energizer, Eli Lilly, Toshiba, Cummins Diesel, the Environmental Protection Agency, the national government of France, the Prince of Monaco, and many more.”
Did Guitar Center turn down a speaking engagement or something?
Who cares what a bass guitarist thinks?
Generally, I’ve found that the inferiority complex comes from guitar players whose bass players can outplay them.
Eric, stop telling people to post their names! Some of these people are current employees and are protecting themselves.
Nonsense. Why should anybody benefit from anonymity when I have my entire professional life available for discussion?
The majority of the self-identified Guitar Center employees sticking up for their company should be excited to stand up and be counted as company men. If they are embarrassed because they are engaging in juvenile character assassination, then they should be embarrassed – and ought to learn something about business analysis and honorable conduct before entering public debates.
And for those who work for the company and have negative things to say, they should probably keep their comments to themselves until they get a new job. It is disloyal behavior, no matter for whom you work.
So no, EMAN, I don’t buy that argument. It is pure cowardice.
They fired quite a few people over facebook remarks back in the day. I understand if people don’t want their names on here. I no longer work for them.
Dude, you should go to work for WalMart. They would love you!
and i will just stick with Sweetwater..FT. Wayne IN..when i walk in there..the janitor follows me around with a mop…its a great place to hang out…
While I try to make most of my music purchases at my local independent – nice, knowledgeable people who live in my community – I also must say that price and availability are big drivers in my purchasing habits. If I can buy the same amplifier for instance for $30 – $40 less at the GC in Portland, I’m going to buy it there. Every time I go there, it’s pretty busy so I’m doubtful about the premise that they’re on their way out. I check my local music store, GC and online retailers. Then I make my decision. As far as actual stringed instruments, I’m unlikely to purchase one online. I want it in my hands and ears before I plunk down my hard earned cash.
^^^smart. Only a moron buys a guitar without playing it first. Sorry, but true. If you do have to buy it online, at least go to a GC and have the kid behind the counter order it for you. It’s the same thing for you, he can make a few bucks to buy gas and food, you can probably get a deal AND you have in store support if you are unhappy with the guitar and not some non-musican over the net. Believe me, if you just point and click and then go in the store for support and tech from a commission paid salesperson, you will have a unhappy employee doing work and not getting paid for it, which is not right.
I stopped shopping at GC when a salesman at the Nashville store lied to me and conned me out of $179. I had just got my first road gig and needed a Les Paul to cover the sounds on the artist’s record. I’ve never made much money playing guitar and this was a big purchase. A salesman spent about 30 minutes with me picking out one that felt and sounded right. We negotiated a price I liked, he went and rang it up, and in my excitement I just swiped my debit card and hurried home to plug it in. Sales tax is nearly 10% in Tennessee and at first I didn’t think about the total. Then I looked at my receipt and realized I had been charged $179 for the case–something that is supposedly included in the purchase of this particular model. I called the store and he said they have to do it this way for inventory reasons. I explained that I was quoted a price for the guitar, which included the case, and that I felt taken advantage of. He said they ring up all cases this way and that he couldn’t help me. To make sure I wasn’t crazy, I called a GC sales rep at Gibson and he told me very bluntly that I had just been screwed.
If the grand scheme of life, $179 isn’t a lot of money, even though it was to me then, and I love that guitar, but that’s no way to run a business. So GC management, if you’re still reading, know that it is my honor to drive past your store on the way to my favorite local store. If you want to make it up to me, you can give me a great deal in the going out of business sale.
I had the exact same situation when I bought a new Gibson guitar….after doing the research on pricing I ended up at a guitar center where the manager said he would match the quote I had from another retailer…..after leaving I reviewed the receipt and found the charge for the case was on top of the price match. On calling I was made to feel like I was stupid and was told I could drive back and return the guitar. I didn’t but was left with a very bitter taste and have vowed to never deal with GC again.
I am an amateur musician, having played for almost 50 years, but never for money. I pursued a professional career in another field, but never left my music. I have a respectable collection of vintage gear, much of which I was able to find due to one of my best friends on earth. He was manager of a busy GC store for a long time. I drove almost 2 hours, passing other GC stores, just to shop his store, because he ran a tight ship. He made a lot of money for GC by selling stuff to me, yet NEVER ever told me anything that was not 100% true. He never wasted my time on marginal stuff. I grew up in a family of salesmen, and this guy is as good a salesman as I’ve ever met. He has a huge client list of folks that go to him. personally, when they need stuff. He’s also a fabulous musician. He’s won sales awards. Well, good old GC decided that after his many years of dedicated service, during which he trained many who went on to become managers at other GC stores, GC decided to get rid of him, likely due to his (by this time) significant salary. Not unheard of in the corporate world, I certainly understand that. However, they did not have the basic human decency to go directly to him, and get rid of him. They assigned a new regional manager (as a physician I could make some learned comments about his personality structure, but lets just not go there) who proceeded to torture my buddy by showing up unannounced, and writing him up for the most inane, picky stuff imaginable. After about 2 years of this, the little manager dude shows up, unannounced of course, just before Christmas, and walks my bud out of the store. They didn’t even give him a chance to say goodbye to his crew, who he truly cared for, one and all. He was “offered” a job in sales at another GC store, that would have been a huge drop in pay, and a sizable commute. Oh, and least I forget, they hired someone he trained to run his store!! Personally, I could not do a job that involved treating people like this. But, admittedly, that’s just me.
It doesn’t surprise me at all that several GC higher ups have posted here, in a deceitful fashion. I will admit that I didn’t think that they were ignorant enough that they’d do so in a way that evidently was easy to flesh out.
A discussion such as this, will not change much. However, exposing poor behavior is important if there is any hope that things will become more positive in the future.
I apologize to all of my many GC friends who I’ve made over the years. And I’ve made some dear ones….many in fact. It’s not your faults, individually. It’s your employer. I sincerely hope things work out better for all of you, then it did with my buddy.
Hey guys, new thread here! Since Guitar Center’s CEO told me that I need to do lots of research on his company, I’ve been getting right to it!
Anyone care to look at their financial position from their third quarter 10-Q filing? I’m not a great financial analyst, but I’m good enough to get a basic story.
Is the operating income of Guitar Center in the third quarter really a $358,937,000 LOSS? Dude, that’s almost half a billion dollars in a 12 week period.
I see that the finance department revised Guitar Center’s goodwill downward by $360,000,000 this past quarter. The company’s comments around this are:
“During the third quarter of 2013, operating income at our Guitar Center segment fell significantly below our expectations. Based on a forward projection of our recent operating performance, we determined that if
current trends were to continue there would be uncertainty as to when or whether our Guitar Center business would be able to achieve historical operating results. Given these uncertainties, we determined it was appropriate to revise our projections of future cash flows from the segment. Management concluded that these changes in facts and circumstances represented a triggering event, requiring us to again test the reporting unit’s goodwill for impairment.”
You see, this is really weird, because just this morning the CEO was admonishing me for jumping to conclusions about the company’s finances, but wow… that is some serious red ink.
But wait, when I check the whole nine months of 2013 so far…it doesn’t look any better. Net sales of $1,557,354,000, and operating *loss* of $334,638,000, still including that $360,000,000 hit to goodwill. But even without that one-time charge, GC’s operating profit would only have been $26,000,000? On $1.5 billion in sales? Have I got that right? I’m not a financial expert, but wow, those numbers don’t seem balanced.
I’m not a financial analyst, so can somebody help me with this? Am I missing something major?
This isn’t my final report by any means. Mr. Pratt said to be thorough, and I absolutely refuse to open myself to that sort of critique again. It wouldn’t be professional on my part.
I have to say, as a professional in the business, as GC suffers, so will major brands like Fender, Gibson, and wholesalers such as KMC Music and Guitar Center buys most of their stuff on terms, which will likely not be paid in the event of a Chapter 11 restructure. That’s not to say some “other” company will buy their assets and do something similar. I’ve seen success with GC over the years of doing private events for their corporate office in California. I do not see them going away for a while. It is unfortunate that they do not provide a good pay or quality training for all of the employees that work there. I’ve seen Sweetwater succeed by leaps and bounds on this front. It will certainly be interesting to see where the MI business goes over the next few years, esp with government the way it is at this point in history.
First, Eric, no one of any value in the industry is going to post under their own names. Either they work, have worked or will someday work for Guitar Center or a vendor who supplies GC with gear. The industry is small
and very few people would want their names attached to an opinion either defending or attacking GC. It’s just not good business. You can post all day about GC—you don’t and will probably never work in the industry. We can give you some honest opinions, though.
Not that many independent shops have gone out of business. Check with MMR or Music Trades and you’ll see the number of shops has been around 6,000 each year for a while. About the same number open as close each
year. Guitar Center certainly isn’t buying them up. The Music and Arts division bought a few years ago, but these guys were small, mostly band and orchestra shops doing a lot of lessons and school rentals. As I have traveled around the country, I have seen more shops wanting to be bought by GC than being bought up by them. The internet sellers are putting them out of business, not GC. As far product knowledge goes and GC people being idiots compared to small independents, also not true. The talent pool is all the same and young musicians are about the same wherever you go. I think if you go to an independent shop and talk to the owner—sure, he’ll know his stuff. Maybe he’ll have a #2 guy that’s pretty good. After that, a third guy – if there even is a third guy – the talent pool gets down to the level of new GC people pretty quick. If you talk to a GC general manager and sales manager at any location, I think you’d find them on par with the two decent guys at a small shop. Just my own personal opinion: Guitar Center never put anyone out of business that wasn’t going out anyway. Think about the great shops around Los Angeles, Chicago and Austin – they are surrounded by Guitar Centers and they are doing just fine.
Does GC get a better deal on gear? Sure. Do they get stuff for half of what the other guys do? Hell, no. They do big biz and get an extra 3-5% off. Maybe, just maybe, an extra 10% from a few vendors on select gear.The independents that “can’t compete” just don’t understand their business or have a bad mix of gear. As for the special run stuff—yeah, so what? GC puts in an order for all of something with a little change and the vendor has a guaranteed sale. Computer places, mattress shops and sports stores do that all the time. Because it’s music gear, it’s somehow less honest? That’s just bullshit.
As far as Guitar Center going out of business … meh, who knows? Not you, that’s for sure. It kinda depends on how Clear Channel, Gymboree and everything else in Bain’s portfolio is doing, now doesn’t it? That
GC is loaded up with debt is irrelevant. Bain loads EVERYONE up with debt, whether they keep them or not. Does the US need about 250 music stores around the country? Yeah, that number is probably about right. Like Hostess or whoever, maybe it’s going change hands and it’ll be a little different, but someone will keep it going. As far as them having a bad business model, I don’t really know what you mean. They get gear in and they sell it. Pretty much the same as any other music store, just on a larger scale.
I don’t know what independent music stores you are going to, or in what city, but you should probably never go to THAT one again. I too have gallantly traversed this country on a trek to keep Guitar Center (heretofore “GC”) from being vilified. Well, at least the first part is right. You’re doing it wrong. If you want to talk like a musician, stop Googling Bain’s portfolio, go to GC and buy an instrument, and take some lessons.
Eric, I am going to try and defend this article from a different angle. I have been a musician my entire life. I’m talking flew out of the womb with a guitar in hand. I would assume, due to your credentials, that the numbers you quote are fairly accurate. I think arguing their validity as being exact is asinine. There are so many credit bureaus, analysts, etc. that can give all sorts of numbers. Mr. Pratt was absolutely right in saying that one can find numbers for their own benefit, as he himself did. He went further as to offer up his own people to verify those numbers for you. Which is like going to trial, saying you’re crazy and having your good buddy Big Tony from Staten Island testify as to your looniness. I don’t know why I used a mafia metaphor, but whatever.
My point is this: I think Guitar Center is a bad business model for the sake of being a musician. I have had to go there because no one else had what I needed. Guitar Center is good for that (side note: I am refusing to refer to them as “GC” because, like so many other musicians, I refuse to conform). Big business is bad for music in general. Guitar Center is monopolizing the music equipment industry through sheer quantity. I live in Seattle where there are many, MANY local shops that are rad. But sometimes when I need something, it’s just not there. I recently got married and with part of the dowry and needed a new acoustic bass for one of my outfits (read: band). I went to a few local joints and they just didn’t have anything close to what I wanted. Guitar Center was the best I could do. I as a musician will always go to the local joints first because I believe that they are still pure. But sometimes I just need to get some ______ done. (Is swearing allowed if used tastefully? I promise to be tasteful.)
The dichotomy is that we need Guitar Center. We need “The Man”. Just as music always has. We need people like Mike Pratt to come onto these threads after marketing saw what was going on here to twerk the discussion (no offense to Miley. Well, probably…) into how a multi-billion dollar company is the good guy and doing fine. It worked for Enron, didn’t it? Wait…. Now, as far as claiming profits and celebrating 50 years and the whole, “look, we’ve been doing fine the entire time!” is a little misleading. That’s as if to say the current state of affairs is what actually got them through 50 years. As opposed to being bought by the Mighty Mormon Power Ranger (seriously, Google “Mitt Romney nicknames. It’s awesome.) withing the last decade and being immediately put into debt. But we NEED this. Rock and roll needs something like this to keep us political and smart and conscientious of what’s going on.
Personally, I can take or leave the actual numbers. I do believe that Guitar Center is not doing too good. Or else there wouldn’t be any hoopla. A CEO wouldn’t deem it necessary to actually respond. They’ve done good by me, they’ve screwed me. I hope this helps in the discussion.
(website under construction)
588-43-5980 (real, I swear…)
I have gotten some very high-end, quality instruments from Guitar Center and also acquired some very nice and very expensive VINTAGE guitars from a very knowledgeable staff at Guitar Center! I supposed the Guitar Center store you frequent has a lot to do with that. I happen to shop in a Guitar Center PLATINUM Store which has much more merchandise available on hand than non-PLATINUM stores. A Guitar Center store can only reach Platinum status by making over $1 million dollars in sales for the fiscal year. Yes I have my issues with BAIN CAPITAL, face it, they are running the business WRONG and only interested in showing “GROWTH,” “the more stores we open then higher our stocks climb, the quicker we can unload this acquisition at a profit” and that’s ALL BAIN is about.
As far as the smaller music stores… well as a young man in his teens I would walk into my local music store and ask to play a guitar, which was met by “show me how much money you have in your pocket” by a store sales associate. Thankfully when Guitar Center arrived on the scene idiots like that were put out of business and are now relegated to online sales out of some dingy warehouse some place in New Jersey! Yeah Karma is a bitch bitches! But the smaller retailers have no one else to blame but themselves. I started playing guitar at the age of 5, classically trained by some big name musicians who hold/held world acclaim, performed at Carnegie Music Hall at the age of 10, so I know how to treat an instrument. When the time came that I was making enough money to purchase that $3600-$4000 electric guitar and that $6000 acoustic guitar guess who I didn’t buy them from?
Granted I HAVE no love for BAIN and often refer to them as the “dark side” I still make all of my musical purchases at Guitar Center but only because of the report I have built with the knowledgeable/friendly staff there. As for my “collection” which has reached critical mass status I have all that I could ever need and really have no need for more instruments at this time, I don’t get G.A.S. (Guitar/Gear Acquisition Syndrome) and other than making small “accessories” purchases strings/picks/cables/stands the Guitar Center staff does not try to push me into making a big purchase knowing my history of purchases in their store, nor do they treat me as a “deadbeat” because I haven’t made a large purchase over the past few years.
The musical instrument business is something that BAIN has no business being in, that type of business just doesn’t fit into their corporate greed driven business plan.
It’s “rapport”. Brilliant strategy! That hurt little boy really showed that mom and pop store!
Well said! It’s business model is flawed. This is yet another example of how ‘top down’ models are dumb. Like you said, the small shops are more sustainable in the long run, more down to earth, have personality and are more fun to patronize. Thanks.
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