This is an obituary for Guitar Center, a chain of big box musical instrument stores that was captured and infected by private equity during a national trend of greed and reckless expansionism in the late-1990s and early-2000s. The company started as a Los Angeles organ store, became a successful purveyor of guitars after the Beatles arrived in the United States, evolved into a national competitor over a period of decades, and shall finish, with sad poetry, as the symbol of everything dysfunctional about American corporate finance, management, and retail in the modern age. Its demise is really the end of a generation of business managers, illustrating how they lost their moral compass as well as any ability to lead individual companies or national economies into a stable, rational, prosperous future. This story will focus on the final days of this one company, but it is really about our painful transition to an economic system that obeys objective reality and serves people in a durable, holistic manner.
The original sin, and events leading to collapse
I have been tracking the evolution of this company for over a year now, and the evidence is incontrovertible: the corporate entity known as Guitar Center, Inc. is in the midst of irreversible collapse dynamics and will cease to hold its position as the industry leader in the short-term. In the mid-term, the company may cease to operate as a going concern and will be reduced to a group of trademarks, service marks and patents that will be sold to a buyer with considerably different plans for the company. Its days as the national industry leader are over.
I shall support my thesis with easily accessible public information, though I also possess considerable insights from industry insiders who prefer not to be named. The idea that this is a doomed entity which can only submerge deeper into dysfunction and, ultimately, oblivion is not widely held. The vast majority of the musical instrument industry exhibits what we intelligence analysts call “normalcy bias,” the attraction to a worldview that things are normal and will remain normal, despite considerable evidence to the contrary. People refer to Guitar Center as “too big to fail,” despite the fact that the firm shares absolutely no characteristics with companies that normally acquire that moniker, such as Citibank, ExxonMobil, or General Electric. They assume that another buyer will emerge to make a simple change of ownership behind the scenes without considering the financial complexities that make such a transaction nearly impossible. Most often, stakeholders in the musical instrument industry assume that the mechanics behind Guitar Center are more complex than they can easily grasp, and so they simple ignore the matter despite its potential impact. As a result, when I visited the NAMM Show in Anaheim, California only days ago, I found that the overwhelming majority of industry figures with whom I spoke spent very little time or energy on the critical analysis of a firm which represents 28% of the industry, a total $2.1 billion out of $7 billion. As a result, we can assume that few people will have contingency plans for potentially disruptive scenarios resulting from Guitar Center’s fate, but that is hardly unprecedented in the history of business. Reality does not need our permission to have its way with our destiny.
Moreover, the media which covers the musical instrument industry is deeply uncritical. Nearly everything I have read regarding the current situation has been either a regurgitation of corporate press releases or a subjective analysis riddled with factual errors and shallow knowledge of business in general and finance in particular. I am told that the tight budgets and intimate nature of the industry make some publishers afraid to engage with controversial subjects that might jeopardize a customer relationship. Either way, many industry professionals are basing their assessment of the market on dangerously incomplete information.
I am not going to provide a long-hand analysis of Guitar Center’s capital structure and every gruesome event in the company’s recent history; if you are so inclined, you may review my past work and browse Google.
A quick summary tells the tale of how close we are to the end, but first we should revisit the beginning. Guitar Center grew with the help of private equity firm Weston Presidio to become a national competitor and, eventually, a publicly-traded company. With the leadership of Marty Albertson, Larry Thomas, and others, the company continued to grow and prosper as a public company until leaders enlisted the help of Bain Capital to take the company private through massive leverage just prior to the largest financial crisis in a century. As you consider any of the other events associated with the present, this Original Sin of the past is the very root of the problem.
Private equity firms like Bain take mid-sized companies and pump them full of debt with the express intent of making them industry-dominating competitors, selling them to the stock market as a candidate for massive growth, and cashing in. To make this possible, private equity’s stake in the company is usually represented by “payment in kind” (PIK) notes, a type of bond that pays crushing interest – in this case 14.09% – but requires no cash outlay until the bond’s maturity. So that 14.09% is accruing, but it isn’t due for years, ideally after the company has been sold to what is often charmingly referred to as “the dumb money,” the retail investors who buy a stock without knowing the company’s true financial position. Before any of the company’s real problems are revealed, the private equity firm receives its payback in the form of stock, since PIK notes can be paid back in any medium of exchange. If all goes to plan, the stock price shoots up after the IPO and the PE firm makes a tidy profit – all in about three to five years.
Bain made two critical mistakes from which it cannot recover. First, it attempted to run this playbook on a company that had just done this very thing with Weston Presidio five years prior. Second, it did so just as the housing fraud and financial insanity which characterized the late 1990s and early 2000s nearly destroyed the U.S. dollar and left us with martial law. Every business maneuver that follows this initial error is too little, too late. Compound interest on debt is the strongest force in the universe, and retail has changed too much for any predictable corporate management technique to have a noticeable effect. The rest of this story is details.
To explain how close the company is to collapse, consider the following timeline:
December 2013: My blog post “Guitar Center and the End of Big Box Retail” goes unexpectedly viral just as GC management is negotiating with its creditors to deal with the fact that it does not expect to be able to honor its financial covenants in the near-term. In response, management claims that the firm is stronger than ever, that every single store is profitable, and that the $1.6 billion in debt with short-term liabilities of over $1 billion is manageable. The company has $25 million in cash going into the Christmas season. The Securities and Exchange Commission begins to investigate irregularities in how GC considers the interest on its bonds to be outside of expenses that would impact EBITDA.
March 2014: The company reaches an agreement with its largest bondholder, Ares Management, to exchange the latter’s PIK notes for equity. $401.8 million in PIK notes are retired in exchange for holding company preferred stock. In a statement by Standard & Poors, the agency expects to lower the corporate credit rating to “SD” which is “selective default” and considered tantamount to bankruptcy because it is a “distressed exchange” in which investors receive less than what they are promised.
April 2014: Bain and Ares offer the bond markets two new bonds to pay back existing bondholders, a $615 million offering of Senior Secured notes with a coupon of 6.5% maturing in 2019, and a $325 million offering of Senior Unsecured notes with a coupon of 9.625% maturing in 2020. These securities are purchased by institutional investors such as LeggMason, GoldmanSachs, and Prudential for their high-yield income funds which go to round out the assets of pension funds, ETFs and other, more conservative portfolios. They produce less than $50 million in free capital for Guitar Center and will still require an all-in coupon payment of around $35 million every six months. Guitar Center press officers attempt to portray this as a dramatic improvement of its financial situation in what is probably the best possible example of the Yiddish word “chutzpah.” Moody’s and Standard & Poors assess the company’s family rating as subprime and its unsecured bonds as junk, with outlook negative. Bond covenant analyses note that the restructuring will only produce enough free cash to pay for the interest on these instruments- there would still be little chance that the company could make strategic moves in the industry. This view assumes that business condition will remain the same or improve. If they get worse, all bets are off.
August 2014: Guitar Center secures a lease in the most expense real estate on earth – Times Square, Midtown Manhattan, New York. CFO Tim Martin claims that not only will this not be a drain on finances, they would make “a lot of money.” He also announces that then-CEO Mike Pratt’s “2020 Vision” was to achieve $3 billion in revenue in just five years – a 20% year-over-year growth in a slow-growing industry. The Times Square Guitar Center debut was accompanied by a 36-second video from the grand opening described as “a new gateway to hell,” featuring fifteen metal guitarists and three drummers playing nonsense simultaneously. It received 500,000 views in the first 48 hours.
November 2014: Guitar Center is forced to admit to bondholders that despite its promises to thrive from its new capital structure, its EBIDTA has slipped 35%, same store sales are down, and total revenue is flat. Secondary debt markets double the yield on its bonds overnight. Investors who committed to the bond months before are willing to take a 10-35% loss in a few short weeks rather than commit to the company’s future. CEO Mike Pratt resigns and is replaced by Darrell Webb, a retired executive whose most recent experience is as CEO of JoAnn Fabrics and the Sports Authority, two companies that also answer to private equity.
December 2014: Guitar Center fires Gene Joly, longtime executive and current president of the Musician’s Friend unit, two days before Christmas.
January 2015: Citing a bloated cost structure that keeps the company from achieving historical profitability, new CEO Darrell Webb fires 42 corporate executives, including the last remnant of Mike Pratt’s team, as well as 28 regional managers. Music Trades reports that the company is down to $10 million in available cash after Christmas.
The constant, smarmy mantra of impenetrability and infallibility has finally been dispelled. Their new executives have, at long last, ceased the comedy routine about how Guitar Center’s stores are always profitable no matter how many times Standard & Poor’s declares them technically in default, or that a billion dollar of debt is totally normal and wonderful and manageable. In a recent email, Webb explains the firings with the dry rationale of needing to be profitable, and foreshadowed that the company will “continue to seek efficiencies.” We seem to be hearing much less about that $3 billion in future revenue and much more about the jobs yet to be cut.
After all the noise, we are entering the final phase.
This is the end, my friends
Nobody can manage this situation, much less lead the organization out of chaos. All reports indicate that Darrell Webb is not there to save a thing – he reportedly has less knowledge of the music business than the Canadian who was just warming his chair. You would think that if Ares Management was serious about saving this company, they would choose a younger, more innovative executive able to lead Guitar Center into a disruptive future, but instead they hired a man who wouldn’t know a Marshall Plexi from a nuclear submarine. I submit that Webb is the perfect choice for his likely mission: to lead the company into an orderly bankruptcy. Should the company achieve Chapter 11 reorganization instead of the final, fatal Chapter 7 liquidation, it must be on good terms with vendors and bondholders. They can lie to employees all they want, but accounts must be in order if there is to be value salvaged from this doomed structure. Thus, the new CEO has been chosen based on a cold-blooded ability to shuffle the books for private equity financiers, not for his ability to lead a musical instrument organization into a disruptive future.
I have already read analyses of Webb’s recruitment as a way for Ares to get somebody more capable of achieving “their” vision. This is a mass hallucination that stems from the old PR team’s attempt to recast the financial failure of 2014 as the addition of a smart, valuable partner with expertise in retail based on that company’s recent takeover of Neiman Marcus alongside their partners, the Canada Pension Plan Investment Board. Commenters in the musical instrument industry seem to understand little about Ares Management, a very large, serious firm that has, since taking equity in Guitar Center, gone public and engaged in a strategy that would put it more in the category of the JP MorganChases and GoldmanSachs of the world. There has not been a single public comment from an Ares employee since 2014 about the future vision for Guitar Center and I suspect that one does not exist. Go look through Ares’ quarterly reports and press releases and search for the word “guitar.” Perhaps that will provide a perspective on the relative importance of this transaction to a company with a much larger financial play in the works.
This is pure speculation, but given the size of their investment I imagine they see Guitar Center as a deal they made back in the mid-2000s before the crisis, one that Bain screwed up. They probably took the equity as the best way to perhaps get something instead of pennies on the dollar. These days, they’re more busy reopening factories in Europe along with national partners. They have better things to worry about than this sad scene, but this is a conclusion that will be very uncomfortable for members of the musical instrument industry who will not want to feel quite so unimportant.
The fact is, the die is cast. In a couple of weeks, Guitar Center will need to report its Christmas performance to its bondholders. If things do not look good, its bonds will be ripped apart like Radio Shack’s. Moreover, if I had to guess, the $10 million in Guitar Center’s coffers will not be enough to make the payment to their bondholders due in April 2015. In advance of that, they will need to seek protection under Chapter 11 of the bankruptcy code. Maybe they have another ultra-complex trick to bring out of the private equity playbook, but this whole thing is a waste of time. None of this sells guitars or inspires kids to be better musicians in a world where laptops play the tunes. We’re all analyzing the most mundane details of the terminal symptoms of this sickness that has seized American business culture in the past twenty years. Perhaps we need to heal that disease before we can back to fun things such as playing guitar and running profitable companies.
Here’s what this really means: it’s the end of big box retail, an irrational addiction to growth, and the scourge of unregulated structured finance. For a few years, unwise urban planning and unregulated banks created a new bubble in the American suburbs. People bought homes they could not afford and turned their houses into lines of credit. This swindle eventually brought the economy to its knees and has taken most a decade to regain some state of uneasy equilibrium. Still, it was particularly stimulating to a certain type of retail that also depended on constant growth and financial trickery. The objective truth is that the growth of the last decade was financed by banking fraud, and that financial trickery of this sort only fools people in the short-term. Eventually, you must have a product people demand, sold by competent people who care about the business, financed in a way that makes sense.
This unforgiving reality will work great for local stores and entrepreneurs with a classic, cautious approach to business management. For a while, suspending our disbelief in reality allowed standard-issue corporate financiers to run a pump-and-dump scheme on all kinds of retail, selling risky ventures to “dumb money” and reaping the rewards for a select few. We are all wiser now, and the market conditions simply will not support that behavior.
This is not a moral judgment, merely an assessment of market engineering. Small and smart will carry the future while big, dumb, complex, and dishonest will bite the dust.
These conclusions were my instincts before I conducted research into the example of Guitar Center. I was reasonably sure then, and I am entirely convinced now. The only remaining question is where the industry will go from here. Go ask the good people at Behringer for a preview. Representatives from their company have informed me that since they parted ways with Guitar Center they discovered a network of smaller, more focused retailers who were more than excited to form a stronger relationship with their company, and in turn delight customers even more. This resulted in the company’s greatest annual revenue in history, both in the United States and throughout the world. Behringer seems to think that a world without a single, corporate, banker-driven industry hegemon is not only possible, it’s preferable.
That’s a bright future, if you choose to share that vision. But whether you believe in it or not, this scenario is unavoidable. Guitar Center is finished. Now the musical instrument industry can get back to business.
So that’s a “Maybe” on the stock then?
Are you sure?
Dam, thanks for the thoughtful, incredibly detailed analisys. Wont be sad to see them go. Curious as to what happens to all of the smaller entities they own and operate?
While i love this article, my only pet peeve “The Times Square Guitar Center debut was accompanied by a 36-second video from the grand opening described as “a new gateway to hell,” featuring fifteen metal guitarists and three drummers playing nonsense simultaneously. It received 500,000 views in the first 48 hours.” I am a semi-professional musician. When i enter any musical store with this nature I completely expect noise like this. Other than this, i found this article not only backed up with evidence for the hypothesis, but informative and extremely insightful on the state of Guitar Center. This must explain the bad quality of the selection, attitude of employees, lack of selection, and over priced equipment. The only time i have bought something from them is when it was a really good deal, such as my Warwick. It is too often the lack of knowledge shows from the employees.
Agree with all the anti-corporate and anti-homogeneos sentiment in this article. Very insightful but still kind of a bummer. Of all the disgusting mall slime chains out there, Guitar Center has been the most beneficial to me by far… Sure it’s a bummer to see a madsive wall of mass produced Telecasters sitting unloved on a wall waiting for some talentless lawyer to yank it into his shitty suburban basement shrine to Foghat, and yes, no sane human will miss the disgusting cacophony of the weekly Guitar Center satanic noodle orgy that has supplanted church for all weed appreciating men ages 10-60 every Sunday noon to 6. But when you amp explodes in Mobile at a night gig and you have to be on stage in Tampa 24 hours later, knowing a working Fender twin is waiting at 12 potential stops along the way and that it can be returned in 30 days has been an absolute lifesaving dream and I would personally pay Guitar Center $200 per year just to stay open for the comfort of knowing that failsafe would not dissapear. Advanced corporatism really is very close to communism in this way and seriously, anyone who can devise a national gear-share operation that even approaches Guitar Center’s contribution to the touring musician’s peice of mind can have my dues up front! Please don’t die GC!
I feel ya. The lefty in me loves to see yet another corporate overlord destroyed, but dammit, sometimes, you just need a pack of strings, a new 9-volt power adapter, and a roll of gaffer tape 20 minutes before showtime. :-/
And all that WOULD have been possible if GC didn’t put those small businesses out back in the 90’s and early 2000’s. Believe me, if there was a market big enough for a GC, there USED to be a market for at least 2-3 other music stores with in a 15-20 mile radius of one.
Guitar Center didn’t close our local music stores. WE DID. The market base. The customers.
Everyone who decided that our loyalty has a price tag.
I used to work in a locally owned shop in the 90s, and several times each week had to hear about how it was cheaper at GC/MF. I was constantly giving away any profit margin or else the customer was going to go to GC/MF, yadda yadda yadda….
BTW, that shop is still alive and well. The owner was savvy enough to pare down his business model into more of a specified niche than what GC’s broad-based offering. This has also been the formula for success for many retailers that have weathered the storm, as well as a new crop of ones that have opened up in recent years (see Vic’s Drum Shop http://www.vicsdrumshop.com/
I used to go to my local music shop. They were always out of the strings I used. Always. So i started going to guitar center. They always had them. It’s that simple.
It is kinda douchey though to abuse their return policy just so you can rent gear for free while yours is being repaired. They take a financial hit for that.
A lot of problems in the music industry, musicians are responsible for a good portion of them.
The return abuse is sickening and there’s nothing they can do about it. Working in retail shows that there’s a lot of jackasses out there. Customers can be so abusive, it’s unreal.
You should have seen it in retail electronics. Weekend before the superbowl, ton’s of huge TV’s out the door. The weekend after, all come back.
Douchy Smouchy… Maybe if you live in-town and if you aren’t dependant on gigs to pay your child support. I’d gladly pay them a rental fee but that’s not part of their business model. The return policy is. When you tour for a living, you see the return policy as a hit they need to take to support touring musicians who are promoting live music and pro-level accomplishments so that the local folks who spend their day-job money there have folks to look up to and aspire to and keeps them buying…. Take that away and you just have a big, ugly corporate turd with very little merit or contribution to culture. If that were the case, yeah, it should just die.
Love it – your shit attitude gets challenged and out comes the entitlement. How quick we go from “I’d pay them $200 a year to abuse their return policy” to “it’s a big, ugly corporate turd with very little merit or contribution to culture”. Let me guess, another musician fighting the man, right? Not selling out for your art? Is that why you’re still struggling in a van?
I’ve done the touring thing. Thankfully my career took off and I do very well as a musician. No need to live on ramen and abuse return policies for me. If your career hasn’t headed where you wanted it to be, maybe it’s your attitude that kept you back.
After 25 years in the biz full time so far, I’ve said it before and I’ll say it again – generally musicians are everything that’s wrong in music.
Wow, you’re an angry Elf! Umm… Actually I did start off by saying I agreed with all the anti-corporate sentiment didn’t I? Yes I did. I then sited the return policy as the one major saving grace so… No, my attitude actually did not change at all. I just said that without the courtesy they extend to proffessionals, they would be mere corporate shit but with it, they are awesome, those are perfectly synchronous viewpoint covered symetrically across both my previous posts… You somehow need to paint me as a hypocrite because you are a self-professed musician that hates musicians, hates musicians and apparently cares more deeply for Guitar Center than it’s own CEO’s who set the return policies. Unhappy with my career? Jeez, why would you go there? Is it your contention that no musician could possibly be happy with their career while simultaneously taking advantage of good deals at Guitar Center? Is that really the standard by which you judge your own career success? You think “well I didn’t have to rely on Guitar Center today, therefore my career must be kicking ass!” Really? Or it also kinda sounds like you might be saying that if a band doesn’t carry 2 backup amps on every tour, it means they can’t afford them and if they can’t afford them, they must be unhappy losers… That doesn’t sound like like the opinion of a person who has really done much touring at all. Nor for that matter does someone who uses the expression “done the touring thing”.
Personally I judge my own success by how many people I feel I’ve reached with my heart, throat and fingers not by how Guitar Centers margins look at the end of a quarter.. How you could possibly suggest out of the blue that I am (or anyone else is) unhappy in my career based on my relationship to Guitar Center is quite insane. Now, I don’t know you but if you say “Musicians are what’s wrong with the music buisiness” that tells me several things #1: You don’t like musicians #2: You don’t like the music business. #3: You really don’t even like music or at least, your passion for music is not rich or deep enough for you to get past the quirks that come with the creative minds of musicians and the industry that supports them. #4: When used in this context, it shows that you see Guitar Center as an important and altruistic part of the music business whose corporate contributions to art, music and
culture are somehow greater than the creative minds who use their wares….. Look man, it doesn’t take Sigmund Freud to see you are clearly projecting! I love my career! Got 2 weeks in Switzerland and Italy coming up this month, playing French Quarter Fest and main stage at Jazz Fest in Nola this year, 12 weeks throughout Europe over the summer, all October 2015 in Australia with hundreds of New Orleans, Florida and regional shows laced in between and you’re telling me I’m unhappy or an underachiever because I return amps at Guitar Center from time-to-time and only in emergency situations where fans and promoters are relying on me to provide the joy they contracted me for? Gimme a break!!
You are the the one who would prefer to, without provocation, step in on behalf of Guitar Center and call a musician a douche for basically no reason… As if Guitar Center needs your help… If you care so much, go apply for a job and see if they hire you for a position where you are allowed to affect corporate policy. Or at least write them a letter telling them how concerned you are that they are being taken advantage of by touring musicians. They won’t care Abruzzo. And I don’t think you really care either. I think you’re an angry man who is very unhappy with his music career who jumps at the first chance he can to call anyone he can a douche and a hypocrite because it makes you feel important on some level… You are not… I Googled your name, you are nobody and nobody cares about your opinions. Not even those you seek to defend. You are not the “White Knight” of Guitar Center. I imagine you’ll probably Google my name to see who the hell I am and I expect you’ll try to attack me by saying you don’t like my playing, or my hair, or some other shallow, trumped up criticism and allow me to say in advance…. Save your petty, player-hater BS… You say you have a 25 year career but we both know that’s either a lie, or and exaggeration that at a minimum, disqualifies you from this discussion… Nothing comes up on you Abruzzo.. Nothing related to Music, or Guitars or the music business at least. In fact, this very thread has just put you in a higher profile position than it has ever been as far as Google is concerned and most likey only because I am involved. I don’t know what crappy local cover band you’ve been playing in for the last 25 years or what basement studio you’ve been hacking out demos in but unless you’ve been writing Lady Ga Ga song under a Name De Plume, don’t inflate your achievements as if you’ve got a lucrative, happy and fulfilling career in the music business… If you did, you would not have had time or the motivation to jump in and call me a Douche in the first place.. Happy people with happy careers simply don’t do that. They have neither the time nor the care.
First of all Paul Abruzzo…No my attitude did not change. I started off by saying I agreed with the anti-corporate sentiment of this article and that the return policy was GC’s main saving grace in terms of offering something back to the professional musician community. Take that away, and you have just a shit corporation that puts mom and pops out of business.
Now about you… Dude you a liar flat-out. I doubt very highly that you are a professional musician or a musician at all. I am one and I wear the badge which is how I know you are full of it and I’ll detail how I know that…..
No one who has toured professionally would use the expression “Done the touring thing”. At best you did 2 weeks per year with a classic rock band in your 20’s. This is not how we speak.
I am not struggling in a van, but I say that not to defend myself. I say it to point out what a completely layman’s assumption you just made. You don’t know me and to assume that I’m struggling and to assume you know what vehicle I travel in is a leap only a poseur would make. You’re saying that because you think that only someone who isn’t successful would use CG in this way but the truth is, tons of pros do this simply because it is awesome. In fact, I learned the method from Al DiMeola who guess what….Travels in a van. A very fancy van but a van nonetheless.
You are a musician who hates musicians and hates the music business? Gimme a break! Trust me, it would be IMPOSSIBLE for anybody to survive in the business if they felt as you did about these things. This is such a tell-all that you are lying! You can’t hate the music business and hate musicians and show up to work with that hate in your heart and still be able to function at a glorious, payable level.
You’ve now taken a public stand to take sides with a corporate megalith above humans who play music? That’s against your self interest! that is… if you were really a pro….. Everyone knows this business is too small and reputations far too fragile to risk pissing potentially important people off on purpose! Even if a professional thought the way you do, 25 years of career wisdom would have taught you that mouthing off about it could put you on someone’s shit-list and would NEVER be worth opening your mouth just to defend Guitar Center… I mouth off at you because I know in my bones, as sure as I know my face that you are NOT a successful professional musician, and you’ll never have any affect on my career.
If all this were not enough to expose your lies…. Google yourself Paul Abruzzo.. There’s nothing… In fact if you type in “Paul Abruzzo guitar” this very thread is the third link that comes up presumably because you are bantering with me… so….You’re welcome, apparently I am giving your career the biggest boost it has had in 25 years. The higher 2 threads have to omit the word “Guitar” to get the result…. I also tried “Paul Abruzzo music”… Nothing…. Also Youtube….. Nothing… You don’t exist in the music business dude… I don’t know what crappy suburban cover band you’ve been hacking away in for the last 25 years but considering apparently no one has bothered pointing a camera at you or reviewed anything you’ve done, I find it impossible to believe that you are anybody worth listening to, musically or otherwise.
I expect you’ll google me now. Allow me to spare you any hackneyed critique you might feel a compulsion toward… I don’t care if you like my playing, or me, or me or my attitude… I’m going t Switzerland and Italy next week for 2 weeks of ski season gigs, busy 5 nights a week in New Orleans, playing main stage at Jazzfest this year, 12 weeks in Europe this summer and all October in Australia. Far as I can tell, you’ll be sitting in a basement being an angry, failed musician who lies about his career and shits on professionals just to feel some slow, squirmy adrenaline drip… Have fun with that…
I love that most everywhere I go, a Guitar Center can be found. I often wonder why each facility doesnt offer a Guitar Center shirt with the city on it, much kike Hard Rock. We’d all collect them, and it woyld draw customers to more locstions.
God bless the chai’n for this convenience.
Ive seen the downward spiral you speak of in the works since about 2007.
Ive probably purchased 85 of the 110 guitars in my household, and easily 50 from Guitar Centers in AZ and CA since 2004. Additionally, dozens of drums, keyboards, Ukes, and hand instruments. I can’t count the picks, strings, sheet music, drum sticks, mics, amps, cables, capos, snarks and knick knacks, but everyone knows who I am when I walk through the door.
Managers have gone down the toilet. Most employees only care about networking on behalf of their band. Stock is boring. Some stores are too dark to see what I want to buy, or discover something new.
No one politely asks parents to keep after kids touching 50 instruments with sticky fingers, instead it’s a major weekend replacement for Chuck E Cheeses to let them run around for an hour.
There’s nothing affordable for a teen working part time to buy with hard earned money, it’s become out of reach.
Bathrooms are filthy.
The customer is not always right and has to deal with ego and know-it-alls who don’t.
We buy “because it’s there” but when we have time go to small stores in strange towns to find hosputality, uniqueness, and a feeling of appreciation for our business.
Staying open til midnight on Saturday could be HUGE, Friday too, but no…employees in bands can’t be available, bigger truth can’t drag their asses in the next day or they would open hours earlier.
I know you can’t please everyone, but prices are not valid if you dont at least have strong customer service.
Sad for this reality, and hoping musicians with a dream take the plunge and open mic stores we can enjoy.
can I come over and jam? 🙂
Maybe 112 with one on hold and another I’m eyeing.
Great article Eric. You had me completely; up until the Behringer part…
Yeah, having worked in this industry, I have to say that last part about Behringer was misleading at best. At least choose a company with a bit more, shall we say, “ingenuity” for your example!
It was a great article, in general, though I wish you’d go into more of the consequences on the industry as a whole – the “big box mentality” has done so much damage to independent stores, and GC’s ridiculous corporate policies such a number on medium-size manufacturers, that their collapse may have much more dire consequences than the numbers may be able to show…
yeah, i skimmed through the article, but this has much further reaching effects than just GC & Musicians Friend as a whole…the entire manufacturing base of all these companies that have bought into their need for supply will have to go through a large contraction period as well…it will be interesting to see how the big dogs (fender, gibson, taylor, martin) adjust….i’m sure they’ve seen this coming in the last couple years, right?
I beleive this is why Fender is going to direct sales. I could be wrong, but I think they have seen it coming for a while now.
This is one of the dumbest things I’ve ever read.
Also Behringer makes garbage gear and everybody in the industry knows it.
Umm.. yeah, well.. that was until they bought Midas and put out the X-32. I still agree with you that it’s a shame I’ll never be able to unread that.
Agree with Kirk here. Uli has finally begun to change his ways, demanding better QC from his Chinese partners, and investing huge into R&D with the Midas team the primary recipient. The new wireless mixing systems look to be massive game-changers in an industry (live audio) that has largely grown stale.
And this is coming from someone who has despised this company for decades.
so nobody understands that Uli listened to those jackasses for a short time and then realized he had better things to do? Behringer is NOT sold in GC any more…
“….which characterized the late 1990s and early 2000s nearly destroyed the U.S. dollar and left us with martial law.”
Ummm, ok….. 🙂
Maybe it’s not crucial to the thesis (though I somehow feel it might be), but I found it odd that there was no discussion of how GC’s pre-Bain acquisitions of Musician’s Friend, Music & Arts, and a handful of other random companies just prior to the Bain buyout factor into all of this.
Yea, that made me go “eh?” also…
Let’s not forget the massive rise of Sweetwater over the past decade. They provide better customer service over the phone than I ever received at a Guitar Center, and are more knowledgeable about all the gear I’ve been interested in.
Sweetwater is hands-down the best at what they do. I’ve never encountered a customer service group as top-notch as theirs.
Sweetwater is hands-down the worst at what they do. I’ve never encountered a customer service group as bottom-rung as theirs
I wonder if I can get Musicians Friend to cut me a check for this?
Yes, buy over the phone.
Who in the world wants to play a guitar before they buy it?
Sweetwater has traditionally been more known for studio/recording equipment than guitars. They’ve adapted extremely well and when it comes to guitars and basses, for certain models you can actually pick out a specific instrument, each of which has numerous high-resolution photographs from every angle imaginable. (see http://www.sweetwater.com/store/detail/StratAMR3SB2 for an example).
As far as internet instrument shops go, Sweetwater is miles above the rest in terms of customer service and website experience.
Oh yes, that Sweetwater music store has the best music ever. All of their music stuff is the best. Sweetwater always will be the best. I know this because I ordered the best ever guitar from them and their website was the best ever and when my guitar arrived via the best shipping ever it was the best ever and their customer service is the best of the best that ever was or even better than the best and always will be the best because Sweetwater is the best. Ever.
“Massive rise of Sweetwater”? How much does Sweetwater pay you twits for these “testimonials”?
Umm … they don’t pay me, dude. But you already knew that. The point is that there is a music instrument retailer (and Guitar Center competitor) that is growing at a time when Guitar Center isn’t, and they have a different business model than Guitar Center (i.e., centralized sales and fulfillment, which works because of the great customer service).
It’s inevitable that this specialty big box company will file. I do think they’ll keep their online business going though. In the end it is better for the mom and pop shops and ultimately good for manufacturers who because of Guitar Center have lost some value on their products because of the discounting (GC strong arming for a better price) . This is why Apple has unilateral pricing. The brand is protected.
Another point I would like to add is that Gibson would be hit hard if Guitar Center fails but maybe their quality will go back up.
Guitar Center isnt going anywhere. The gist of this article surfaces every time something happens in GC corporate. They’ve been ‘about to go down’ for 20 years now. Blah Blah Blah. And if they did go down, Mom-n-Pop can finally get $999 for that mexi tele that bad ol’ GC had at $699. win win.
Well, while I agree with the article, I do think GC WILL survive on some level, maybe just as an online-only retailer. The very name is itself too valuable and recognizable a commodity for someone not to license.
Being an employee at a “mom and pop” I have to say your comment about the $999 for a mexi is quite off. We have all of our prices at or below most of the big guys, Sweetwater, GC, Samash, Musicians Friend,AM, etc etc sometimes we even beat the pants off of Amazon. We’ve been doing that for twenty two years and going quite strong. Granted our niche is the high end acoustic market which none of those stores even touch, but even on our lower leveled guitars we don’t gouge the prices, so please don’t lump all stores into your thought process, that is just insulting.
Most mom and pops are forced to set their prices slightly below the big boxes to remain relevant. Once the big boxes die off, they won’t have their hands forced and they can play whatever cards they choose. Often times that hand is a full list price. Not saying every mom and pop will go there – yours may not – but often times those tiny stores are asking list price and with no competition driving the market down, they’ll go back to their old ways.
old ways?! That sounds so sinister….haha You obviously work for GC. Before big boxed stores you would do deals with mom and pops. Hell even GC did deals but then they strong armed the market and put many local stores out of business with their “Total World Domination” crap ….Homogenizing and monopolizing is terrible for the consumer and the manufacturer no matter who you stand behind.
I’ll have to disagree completely with going back to “old ways”, this isn’t the 1980’s anymore. The internet has more power than Guitar Center. The other umpteen other GC style corporations still will have the prices set to where they are now. If you’re not competitive you’re not open for long. In our town there is another place that is a consignment shop that tries to pull off list pricing but the game changed a long time ago for that to work. Before there were guitar centers in our area there were Mars Music and SamAsh and yet we’re still here giving some of the best deals around. All of the times I’ve been to GC I’ve been able to pull some O.K. deals there but nothing like what we’re able to do with our network of independent dealers. Oh and we’re not “forced” into putting our prices anywhere besides MAP, we’re not out to make a million bucks, we’re out to get people to play! Most stores such as ours run off of our large base of students for income, not retail. So it’s just a bonus to sell a guitar to someone. So it is our choice to use MAP pricing instead of what anyone else is using (which 99% of people use MAP now).
You forgot to mention that Fender is changing their pricing. No more List Price…
It’s rare that I shop GC. When I do, it’s mostly for their Used Gear section. I don’t care for their exclusively mass produced, Asian/Indonesian made product lines. I especially don’t care for their unwillingness to budge or deal on their instrument pricing. I buy a new guitar just about every year. I bring that business to a locally owned and locally run shop (Bizarre Guitar) that sells boutique type and specialty guitars. They sell 80% of their guitars online but still feature a large and lavish show room. They have no problems letting me rummage through their stock to find that one keeper. They also have no problem being competitive with online and Ebay pricing. Just try that at GC.
I think Sam Ash is waiting and ready to be the next big music chain.
They ain’t exactly small potatoes…
Really well put… Can’t help but loving it I m afraid… Back to the small private owned and well maintained business. Back to gear made in the US. I think it goes beyond just the music industry and for a quick moment I realize that this could actually become “The future” for the US economy.
I worked the first year or so at the buffalo ny store when they opened around the year 2000. We were staffed with alot of local guys that knew their stuff pretty damn good and knew how to deal with the local musicians and competitive stores. But they’re all gone now and guitar center has been considered pretty uncool for a long time now. Staffed now with what basically are cashiers that you may find at Walmart or home depot. They should have treated the original staff better. Turns out guitar center was a corporate giant that needed us more than we needed them.
My reaction to this article is mixed. I suspect Eric Garland believes himself to be sincere in his writing and is convinced of the rightness of his points. He has indeed made some important observations about Guitar Center Inc.’s fiscal and operational position. Clearly, GCI has some serious vulnerabilities, several
of which he points out. However, as an industry observer and analyst, Eric Garland is an absolute light weight.
The overall sense I got from the article is that first, it is a ego piece that puts the “great visionary insider” Eric Garland center stage. His questionable analysis and conclusion tries to convince the reader that 2+2=5. He virtually states that his opinion was formed even before he began his inquiry into GCI, “Small and smart will carry the future while big, dumb, complex, and dishonest will bite the dust.”
Well, guess what? The guys in the white hats don’t always win… in business, in world affairs or even in personal relationships. Sure, GCI is highly leveraged and is carrying big debt. Sure, they’ve made some recent internal operational changes and personnel cuts. And sure, their merchandising and general customer experience is not leading the industry.
I’d bet lots of people could add to Garland’s list at least a dozen major issues facing GCI that were not discussed. But, for Garland to suggest that GCI’s demise is inevitable and just around the corner is naïve nonsense — if not outright self-serving bluster. I have no idea of GCI’s future and neither does Eric Garland.
During my days as a CEO, I had a sign on my desk that read, “He who lives by the crystal ball eventually eats broken glass.” Projecting forward in time an outcome that is based upon a few conveniently selected data points is nothing more than strategic masturbation. Sadly, Garland’s analysis is a mile wide and an inch deep.
GCI is huge. This collaboration of online and brick & mortal retail outlets accounts for more than half of the music gear sold in this country. GCI’s industry influence is massive… if they eat onions for lunch, even giant companies like Yamaha get gas. Is GCI’s current position sustainable? Probably not. Is GCI likely to make
the necessary corrective moves? We’ll all be watching from the sidelines to see. Bottom line: Take this article with several pounds of salt.
They’ve been refinanced to the hilt. They’re at junk bond on top of junk bond status. The numbers don’t lie. I predict some serious summer going-out-of business sales.
Ms. Andross, where does this comment fit on the following hierarchy of argument refutation? I’m thinking middle to the bottom.
P.S. Your LinkedIn does not list a CEO position. Your IP address says you’re in Bend, Oregon, so I’m assuming this is you. If not, my apologies to this Kennita Andross – and I’m interested as to where you were a Chief Executive Officer. (https://www.linkedin.com/pub/kennita-andross/13/371/24b)
Interesting that all the obvious GC shills are conveniently grouped together, by virtue of the later ones being posted as replies to the first, rather than as unique entries. I’m sure that doesn’t signify anything.
Excellent points – very observant. Mr. Garland has been dying for GC to fail so he can point to his previous articles and validate himself. Look, the company increased corporate spending by $100m last year and it screwed up the EBITDA. Webb came in, saw the fat, re-trimmed it and we should see a solid 2015 from GC. Nov and Dec numbers were pretty good from what I’ve heard, so a few quick changes upon Webb’s appearance already brought instant results.
There are some major changes in infrastructure coming – logistics, marketing, etc – as well as consolidation of some job descriptions that were so spread out it was a bit absurd. Districts and Regions have been expanded to be more inline with current retail leadership trends so a few leaders were let go as the number of districts and regions was reduced. It doesn’t always have to scream ‘the end’ when a company makes some big moves. Truth is, a $2bn company was still being run by musicians with no skill sets to be in their high pay grade positions. Some people were let go and others will come on board with the education and experience to do those jobs necessary to run a major retail business. It’s a good thing. The trick will really be balancing running a major retail operation with keeping their customer base satisfied.
Man ashamed to use the name his parents gave him in an online discussion arrives with freshly designed corporate talking points and clairvoyance about the emotional state of the author: news at 11.
At least the Guitar Center goons are bothering to use untraceable email accounts this time instead of sitting on their corporate servers like back in December of 2013; God those guys were stupid. And still, hilariously, none of this is making this company a success. The latest group of mercenaries are simply forced to come up with more elaborate, easily-debunked explanations at a faster pace as the wheels come off the Fun Bus.
You guys are why bankers can’t run a real business – you exchange cowardice and cockiness for actual skill and integrity. Just like dealing used equipment at Guitar Center – it’s a crappy trade.
The writer seems to have no knowledge that Guitar Center is one of the few retailers who can offer such a wide variety of brands. Very few small music stores can buy franchises for Gibson, Martin, Fender, Taylor, Yamaha. Korg, and on and on. Guitar Center has been bringing the full range of musical instruments to communities all across the country which otherwise would only be available in a few big cities. No doubt GC has invested in too many large stores. The current model is toward smaller stores with music lessons and repair facilities on premises and a general use inventory. Specialty items like hi end custom shop guitars can be ordered online and shipped to store, but not stocked in all 250 stores. Guitar Center does need to overcome their bigger is better mentality but, in the long run, offers a much better retail experience to musicians in towns all across the country.
Actually the locally owned music store down the street in my town sells all those brands, plus Hammond, Rickenbacker, Roland, and others.
My local mom and pop has Gibson, Fender, Martin, Rickenbacker, etc and seems to be doing pretty well. Shop in my hometown actually managed to build their way into a Gibson dealership (among others). Town had been without a Gibson dealer for years because their quotas had become unmanageable in our market, but they made it work.
Honestly, as a player, I never liked GC for a couple reasons. First, their selection was actually pretty poor for my needs. Almost entirely low end stuff. Second, most of it was abused in some way. That stuff got thrashed hard by 14 year olds. And last, alot of the stuff should have been tagged factory seconds. I’ve seen multiple guitars at GC with massive defects, and these are in the 1000 buck and up range.
Why would I go to GC when I can go to a good sized mom and pop where the prices are close to competitive, there is a good selection of decent stuff, and there is a pride in the work evident (guitars are well set up and in tune).
“The writer seems to have no knowledge that Guitar Center is one of the few retailers who can offer such a wide variety of brands”
And yet, their in-store brand selection is minimal.
showing how greed is self imploding and cannibalistic mixed with stupidity! Merika Fuck Yea!!! all hail the paper with dead prezzies while they’re hot but in the end chewing off your own arm…..small example of the road we are currently on nationally and globally
The simple fact is, back in the day if you were a musician and walked into Guitar Center with cash, you could cut a deal and you would leave the store without the money, and with the piece of gear you wanted, or at the very least something very close to it. Once Bain Capital took over that philosophy changed to “It costs what it costs!” That might be fine for Mom and Dad making a one time purchase of a guitar for Junior, but for the working musician slugging it out in the dive bars of our great land, making chump change and loading $6,000.00 worth of gear into a $500.00 car and driving a hundred miles to play a $75.00 gig, it doesn’t work. By the time a guy had to play thirty or forty gigs to pay for his it costs what it cost guitar, he’s going to be keeping old equipment longer, and be making fewer purchases. It wasn’t Mom and Dad buying an import guitar for Juniors birthday that made Guitar Center what it used to be, it was the working musicians who would come back time and again to upgrade their equipment and add to their arsenal of instruments. These guys don’t make a lot of money, and at the end of the day they have to eat and pay bills like everyone else. Just the same these are the people who were the backbone of Guitar Center’s success. When Bain Capital took over they never even considered that. It costs what it costs alright, but now who’s turn is it to pay the piper? It seems to me the bottom line is this: Suppose you sell a bar musician and only make $150.00 on the deal. All you have to do is order another one and virtually the same guitar is hanging on the wall again. Meanwhile you have earned the loyalty of a guy who is always going to need to be making equipment purchases, strings picks, replacement speakers, amplifiers, up grades for the P.A. system, and a myriad of other crap. It’s just the nature of the beast. If you’re going to play out, there’s always going to be something you have to replace or upgrade. There was a time when I’d drive 75 miles to go to Guitar Center because I knew they had my back. Once Bain Capital took away the ability to wheel and deal with my favorite sales guy, they took away any motivation I had to be the loyal customer I was for over 25 years. I’m not alone in this, most of the working musicians I know feel the same way about Guitar Center, Once they kicked the working musician to the curb, they set the stage for what’s happening to them now, and pretty much became an industry joke! That’s my 2 cents worth, I could be wrong, I always am.
The bargaining days started to end in the late 90s because, frankly, they were sick of haggling over prices. Bain didn’t get involved until 2007.
The retail term for people that want to wheel and deal is “grinders.” Everyone hates grinders. Almost as much as people that tech you for an hour then buy nothing.
Actually I was still getting great deals there until Bain Capital took over. As far as being a “grinder” as you call it, on an average year I’d make 3-4 major purchases there. They didn’t seem to hate that a Hell of a lot! Not to mention the fact that I was always in there getting the replacement stuff that I needed.
It’s not what I call hagglers, it’s what I learned to call them from working at GC. That’s what they call their customers that grind them down on their prices.
If you really think about what you are doing, since they are commissioned sales people that only get paid on gross profit, not gross sales, you taking money out of their pockets. GC headquarters sets pricing based on fair market value and tells the stores to sell it for that much. The markup on a guitar can be as much as 25% where as a keyboard can be as little as 5%.
The employee is getting paid minimum wage in what’s called draw vs. commission. They have to pay off their wages before making commission, which is a small percentage of the gross profit (GP). When you grind the price, that comes out of the GP and out of the salesman’s commisssion. You’re basically saying FU. If they offer a discount that’s their cross to bear, but you shouldn’t ask for it.
You don’t get to haggle anymore, cool, you shouldn’t because its rude. Do you haggle over your food at a restaurant, when you rent a hotel room, or on airfare?
The fact that you buy something does make you special, it makes you a consumer, just like all the other customers that walk through the door.
I was a GC employee right after the crash of ’08 when I was scrambling for work. It’s not so much the grinding that annoyed me as the time wasted while I was forced to get “approval” from an assistant manager to make a deal. Often we were forced to grovel as to why the customer “deserved” a 5% discount — whereas the following week the same person could walk in with a 15% coupon that required no intervention whatsover.
Coupons were the “bain” of our existence, since they not only instantly eroded GP (THE primary source of income for salespeople) but we had little or no discretion over how they were used, making many low-margin coupon sales profit-less for us (and GC). And despite what most customers assume, GC salespeople are NOT paid to be there. If you are not in the act of literally ringing up a sale, your (always minimum) wage will be faded against (subtracted from) commission you made selling something.
If you believe GC employees are pushy or aggressive salespeople, here’s why: Because they don’t make money telling you about gear, or doing compulsory pre-shift huddles, off-the-sales-floor training, or even the roughly 1 hour of free product merchandising and custodial services demanded after each and every shift. They will not be paid for ANY of that time. They make a living making a sale.
Its amazing how little that place has changed.
For what its worth, the two years I spent selling there turned me into an unstoppable sales person. Later when I worked at CompUSA and PC Club I destroyed the other salespeople.
The Christmas rush ruined the holiday for me forever. It was like an Eyes Wide Shut orgy of sales; something you can’t unsee and leaves you feeling disgusted. That’s when I decided I had to get out of GC.
Luckily I’m out of retail now, hopefully forever. Customers have no idea how truly hateable they are.
Sales guys are caught in the middle for sure. I’m good friends with the guys I’ve been doing business with for years and quite frankly they all hated the changes made by Bain.. Just the same, if you hated your customers all that much, they probably loved you more than their own mothers, huh?
All sales people are professional liars, just like actors. The good one’s are better at it. But the stupid game that we have to play, wiping customer’s backsides, trying to make them feel like they aren’t the 100th person you’ve talked to that day, gets really old.
People that don’t work in retail don’t get it. All the smiles you get and the “How can I help you” is 100% BS. It’s all training and sales tactics.
I wasn’t a great salesman at GC because there were bigger slimeballs than me there. In other places I cleaned up because I had learned how to shake every nickle out of people’s pockets and not care. That’s what retail is.
That IS sad. They should at least be making an hourly wage. How someone treats their employees is always going to be a direct reflection of how they treat their customers as well.
And when I walk out the door without buying anything it makes me like all the other people who do the same, which is what got Guitar Center in this mess to begin with. I’m sorry I can’t afford to send your kids to college, single-highhandedly, but then again, I don’t owe you that…..or my business. I suppose it’s criminal of me, but I’d like to be able to afford a hamburger on the way home from the gig. It’s not solely their fault. Every time Gibson makes some stupid change to the Les Paul, they rais the price a thousand or close to two thousand. $4,900 for the 2015 Standard flame-top? Really? Al they did is screw it up. Those Robot tuners are a joke. The Les Paul logo looks like they handed a 5 year old a crayon and tole him to forge Les’ signature. They made the neck wider because they were having a problem getting the 1st E string to stay on the fret board without falling off to the side of the binding. Simply cutting the nut and the bridge pieces properly would have fixed the problem. Hell, it worked for Norlin! I suppose it would be fine not to pay a penny over list, but try eeking a penny extra out of a bar owner when you go to play a gig these days. I suppose if you do something else for a living, like if you’re a doctor, lawyer or an Indian chief, it’s no problem that it costs what it costr, but how much equipment does Doc buy over the course of a lifetime? I hit the night shift in 1965, I started doing business with Guitar Center in the mid ’70s. I’ve lost count of how many Gibsons, Fenders, amps, and how much PA and recording gear I’ve bought from them since then. Since Bain capital took over…..not so much. It’s JUST like that! Not a penny over list doesn’t work for me, and I don’t mind taking my business somewhere else. Another thing, customers stopped being special to Guitar Center a long time ago. That’s why for the most part the guy you’re doing business with was asking people “Do you want fries with that?” a week ago. There’s no point in asking a technical question, all they can tell you is how much it costs..
Used to find out their ask, divide it in half add 10%, offer that and most times walk out the door with it. Now it’s a joke, to only go to when it’s out of town gig time and I need it now, on a Sat. night after 4pm.
Do you try that with other things? The price is the price, and the prices these days are very competitive with online prices.
Its partly GCs fault for indulging if not encouraging this behavior, but they’ve been trying for a very long time to break their customers of this truly annoying habit.
Very insightful but a little dramatic; “Compound interest on debt is the strongest force in the universe”
That’s a quote from Albert Einstein, by the way – not to mention the basic principle behind finance. But sure, it’s poetic license. 🙂
I worked as sales guy for a brand new store in Tallahassee back in the mid 2000’s. This was a “grand opening” so they hired way too many sales guys just so they could have more hands to stock all the shelves and print out price tags. (I’d also witnessed the store manager go to all the local music stores with a blank check asking how much it would cost to buy out their inventory, and essentially kill the competition [all of them refused])
After the first month, guitar center fired half the new store’s staff, but I was spared. After working there for $5.15 and hour for 6 day work weeks, and not earning any commission, I started to wonder what I’d gotten myself into. Commissions were paid over draw, so you had to sell enough stuff to meet your hourly wage, and whatever was left over after, you got paid on. What they failed to tell us, was that you only get paid on “Gip” or “gross profit” so if you cut a deal with somebody and gave them a discount, it 100% came out of your pocket and not GC’s. The same was true for the special “Crazy” sales they would have. Instead of providing commission payouts for the total sales, you only got the “Gip/Gross Profit” which was significantly lower during these sales, through no fault of your own.
After 3 months of not fading (ie, surpassing my draw with gross profit sold) I moved into a more profitable department, Guitars (I was in Drums initially), and I had a great month, selling over $30,000 worth of guitars. Most of these sales took place with a lot of wheeling and dealing (discounts) as well as a labor day sales, all of which impacted my “GP” or gross profit. When I walked into the operations managers office to pick up my first commission check (since this was the first time I “faded”) I was hoping to see a check for a couple of thousand bucks. When opened the letter handed to me, it was a check for $85.32. I quit that day. What a horrible experience. Hope they go out of business sooner than later.
I had the same experience after going through their 2 week training classes and got top scores (I never really saw myself as a “sales person”) but after around that same amount of time (3 months) I got the same treatment as the long time store managers and leads claimed every customer that came into the store, I felt they just hired 4 new sales guys to do the restocking and floor work. I was told they were letting me go cause my sales were to low and I know for a fact that two others had not sold the amount I had sold so it must have been I stepped on one of the older sales guys toes by making good deals with “his” customer. I hate the sales way of doing business in GC, at least I know if I want a better deal go see another sales guy. Good riddens GC !
Yes, this happened to my associates. Such a bad business model. Good riddance indeed!
I remember all of those terms so well. It’s amazing who little that place changes.
Retail everywhere is BS. GC at least had a model that made you think a commission check was just around the corner, where as other retail stores go through effort to remind you that you are a replaceable cog.
After 15 years I was finally able to get out of the swirling toilet that is retail, but I still have nightmares about it. People just don’t know how terrible it is. When they complain about customer service I would like to see them do that job for just a year without contemplating homicide once.
Selling 30,000 in a month is not a great month. That is only 1500 a day in gross sales, the average guitar sale is about 300 if you don’t know anything about guitars, so you sold 5 guitars a day. Wow. Great month. A great month is about 70,000 and makes for a good paycheck. I sold that much in my twenties in a small music store. I call BS.
Not really sure what your point is. I worked at Guitar Center and got screwed out of my commissions, hence my post, which is relevant to the discussion around this article. $2.83 daily payout for $1500 in daily sales, as you put it. I’d make more in tips waiting on table of 2 at pizza hut. Please go back to your troll house.
Eko, meet “Math”
If $30,000 in sales per month = $85.32, then $70,000 in sales = $199.08
So add that to the base rate of pay and you’ll be dragging down an extra $1.25 per each hour of work.
That really WOULD makes a “good paycheck” for someone, well, assuming that they’re working in Punjab Province as a help desk operator.
Rock on, Eko!
In the 2000’s guitar center paid on the 10, 15th and 25th of the month. The 10th was from the last two weeks hourly of the previous month, the 15th was from the previous months commission and the 25th was from the 1st two weeks hourly of that month. Your 2 hourly checks from the previous month were subtracted from your commission from the previous month that is paid on the 15th of the next month. You left out the other 2 checks you received for that month. You did not get 2.83 daily payout. I worked for them in the 2000’s. You either did not understand how you were getting paid or are being dishonest.
Heck, I used to work at a (Now defunct) Ritz Camera on commission. You could make 150 bucks on 1 sale if you managed to move the 5 year extended warranty. 85 bucks on 30k is absurd
“This resulted in the company’s greatest annual revenue in history …”
Not nitpick too much on a very informative article … But behringer, in the last year, rolled out a product line that is, by far – this is not a contest able opinion- it’s most popular and successful ever. The series of x32 digital mixers, at $800-$4000 a pop, would have generated record setting income for behringer, regardless of the powers of the finance and market influences you are analyzing here.
Perhaps, but I think the point is that a world without Guitar Center does not mean immediate bankruptcy. They are not the only game in town.
Sure. Like I said, the article is very informative. But you suggest that behringers profits are a direct result of their partnership with the network of smaller, more focused retailers. While this makes a good case for your overall point, which I think is a good one, this piece of evidence is not as you say. Behringers profits would have been record setting if they had been signed to an exclusive distributorship contract with guitar center, based on the popularity of that one line of products.
Again, I don’t mean to nit pick an otherwise insightful piece. But that one statement is just glaringly wrong.
try to buy an X32 at GC. Those guys were trying to ensnare Eli apparently and failed. After what happened with Sam Ash you’d think GC would sail into the sunset selling X32’s like hotcakes. Nope.
This makes complete sense, especially when you see a company like Fender starting to go towards direct sales. Guitar Center is the only type of store that can meet Fender’s dealer requirements. A lot of Mom & Pop places don’t move the volume. So, Fender has probably seen this coming, hence their new strategy. It will all be very interesting how this shakes out. I’d rather shop at a local place, but guitar center does give certain freedoms to it’s potential customers. Every try asking a local place to pull down the “show piece” instrument for a little noodling? Watch how fast you get kicked out. There are some good things with GC, but the bad is showing right now.
GC is the figurative Titanic. Thought to be too big to sink. GC is not untouchable. Especially in the hands of people that only see dollars, and not the original mission statement of the company.
My question is when does the liquidation sale start?
One already happened in the fall…
Submitted without further comment.
And the bright folks that set this liquidation sale up didn’t have the strategic wisdom to demand that the liquidation house NOT include mention of the MF brand, which only contributed to the additional weakening of an already threatened brand…
People draw conclusions by seeing this sort of thing….
All that was required was a simple non-disclosure clause in the liquidation contract…
Management failure on that one…
Another insightful comment from José “Scott Tesar from GC Corporate” Cuervo.
Grácias por todo, José!
Can someone post a TL;DR of this? Why are they closing? I’d like to know without having to read all of thus crap.
I’m only typing this because you can’t read and will ask another stupid question.
What’s a TL;DR?
Too Long; Didn’t Read
Too long; Didn’t read. A short synopsis basically. I really don’t have the time or patience to read through this novel of an article.
Too much debt, not enough income – 300 stores are expensive, and sales are going online.
That instantly goes in my top 10 list of “generous replies to idiots.”
Frankly, if it can’t be boiled down to this, I didn’t understand well enough to be writing.
Too much debt. Not enough profit. The end.
Thanks. That’s all the article really had to say, I didn’t feel like reading a novel though.
I’m not surprised. Every time I’ve been in a Guitar Center, there’s nothing but young 20 somethings looking at all the gear that can’t afford a dozen picks. Meanwhile, there’s 2-3 young salespeople trying to help them while these kids with no money play the instruments. Then as soon as some young, hot looking cutie walks in, every salesman is drooling over her wanting to help her with something. I saw this first hand as I walked around for over 35 minutes and not a single salesperson asked if I needed help. I had a pocket full of case and was ready to buy. I finally walked out. Poor management.
As a 42 year old man with a bit of disposable income I have gone into a guitar center a few times. I was never acknowledged by a staff member, I wandered around for a bit, looked at a few things and walked out. When I walked into the store I was looking for a Schecter Artist Series guitar that retails for about $1000. I wanted to look at it/play it before committing a grand to it, their website said they had one in the store.
I ended up buying it from the local guy for about $100 more than GC, and I had to wait 2 weeks to get it. But at least the local shop greeted me when I walked in, talked about guitars, and said “I don’t cary their guitars but can probably get you one.”
If there was good management at these stores, they would hire experienced musicians who are older and more interested in helping customers than trying to hook up with cutie pies that walk through the door.
Often HR hampers the hiring process. Maximum starting wages being so low, it’s often hard to hire good employees in box retail.
And good management at HQ would place more of a premium on formal business education, and less on store experience…
I believe the new management will…
I believe that formal business education tells you to put a premium on not using pseudonyms in comments sections, but identifying yourself as Scott Tesar from Guitar Center’s Musicians Friend division.
Don’t you love formality? I do!
Whenever I go to GC I’m actually bothered by the salesmen because they never know anything and are just interested in selling, so I rather do my own research and I know everything about what I want to buy anyways before I go. Never noticed if sometimes I wasn’t approached by a salesman actually, but there surely have been times when I just went in to check stuff around and even play the instruments and I wasn’t approached by the sales people there, but why would you take it as such an offense?
There is a very sad intersection of tragedy here. On one hand its disgusting how one part of our economy has commoditized everything. No one’s dreams or hard work amount to a hill of beans if it doesn’t look good on someone’s earnings sheets. Guitars are a luxury, they are art, they shouldn’t be approached the same way as cooper or oil. The same goes for houses. They aren’t baseball cards or comic books to be traded around, they are places that people need to live in.
On the other hand you have a very complex dynamic between a squeezed middle class with a taste for things it can’t really afford but doesn’t want to go without, so they squeeze the prices so low that they simply aren’t profitable. It’s happened to books, music, movies, home electronics, computer parts, and now its happening to MI stores. Eventually all retail except immediate necessities will end up online and anything that is digital will be stolen and put on a torrent site. Quantity will win over quality.
I’m not ready to write GC’s epitaph yet. There are an endless number of companies that have come out of Chap 11 to be viable entities. MI shops still need to exist because, despite the author’s assertion, real music requires real instruments. Pop may not, but that’s only pop. Music has diversified so broadly that pop is just the visible tip of a massive iceberg, while the rest is too complex to garner attention from myopic entertainment media outlets.
Part of the “can’t really afford” problem is the big houses people keep feeling obliged to buy, partly to “keep up with the Joneses” and partly because someone in the ’90s told them a big house would be a good way to save for retirement.
The other part is that we’re trying to live the way we could afford to live if we just had the same distribution of wealth we had when Jimmy Carter was President.
I give the author high marks for his attention to the minutia of what may possibly serve as the final straw for GC but he of course fails to mention the economic climate under which it has been forced to operate and of course GC is not alone. The obvious conclusion is that obamunism has not only failed miserably by not dealing with the causes of the collapse of 2008 but it doubled down on them and now the reality of that is upon as.
QE will not save us and in fact has only staved off imminent disaster and GC like many others businesses will become the victims not because of Bain Capital, which is a wink and a nod effectively saying, “see Romney, GOP, Capitalism…bad” as the author of course makes absolutely no mention of the economic disaster of these last 6 years.
In recent news the headlines make it clear, historic highs of workers not in the workforce while the great deception states it as 5.6% unemployment which is obama inc misinformation. Corporate collapses, consolidation and or layoffs. IBM just announced a large round of layoffs today. Bankruptcies abound and the taxpayer was forced by obama inc to literally hand these failed solar companies hundreds of millions if not billions before they went bust.
Meanwhile his cronies have reaped the windfall while bankrupting the country.
GC could be saved but you have to first save the primary driver of its business, its customer who actually buy the product and they would be the real legit and hard working taxpaying american consumer.
So this overwrought analysis although appears to be well presented, fails in dramatic fashion for not mentioning the obvious, the destruction of what actually has caused this downslide not for just GC but for many businesses across the country, the economic disaster that obama inc and the democrat party hath delivered. In fact the data states that 60k plus businesses have gone under since obama inc came to town. Its not over yet.
Meanwhile their priorities (Obama/Dems) is Amnesty for Illegals, not calling Islamic Terrorists Islamic Terrorists and of course importing/granting more H1B workers (about 5 million plus since 2009) in order to usher in the golden age of obamunist Marxism by erasing our borders and breaking the workforce for legal americans in order to diminish and bankrupt them soon to be followed by more taxation, regulation and a totalitarian state to enforce it all.
GC just happens to be the right victim at the right time.
As you can see Eric was working hard for Obamunism and his article in the DailyKos, an organization who did and still carries the water for obamanists, was timely.
It was posted in early October, a month ahead of the 2012 election to which Mitt Romney ala Bain Capital, was a candidate in the election.
Soon Eric will expound on the wonders of Obamunism as the evidence to the contrary slaps you in the face.
“obamunism”, really? #fail.
obamunism and fail in the same sentence, not a better way to illustrate.
I noticed you did not refute my point, you just attacked the use of a euphemism which is spot on lol!
Please elaborate as to how I am mistaken? When you are done, head on back to the DailyKos or Huffpo for more indoctrination.
“So this overwrought analysis although appears to be well presented,
fails in dramatic fashion for not mentioning the obvious, the
destruction of what actually has caused this downslide not for just GC
but for many businesses across the country, the economic disaster that
obama inc and the democrat party hath delivered”
So why is the Dow Jones up and unemployment and the yearly deficit down?
Nope Sean, he called me out. It was really for Benghazi!!!!!111
DAMMIT – I’m busted. This is all for Obamunism.
I was so close to getting away with it, too!!!!
Paul, oh yeah, i forgot that economic nirvana of 2008 with the DJIA at 6800, one million layoffs per month the previous 8 months prior to Nov. 2008….18 straight months of NEGATIVE GDP….the western banking system about to collapse with the Lehman shock, 401ks in the gutter….oh thats right…obamunism ruined that Republican prosperity with his stupid policies which tripled the DJIA, restored all lost 401k money, created more jobs in 4 years than bush did in 8….kept inflation and interest rates low.
Gosh what a failure Obama has been…..
Tell me Paul, do all you wingnuts get together and sniff glue all day? Why else are you dipshitz so delusional?
I will grant you some of his failings i.e. not a big enough stimulus, not executing Cheney for war crimes, not going after Wall street and not pushing for more tax increases on the rich, but he has this thing called the tea party people and white racists like you to contend with.
Why dont you detail exactly how Republican policies led to the collapse?
Please elaborate before you rush off to attend dear leaders nightly address.
Listem dipschitt, if you blame everything post 2008 on obummer because he has been in charge yet you excuse wingnuts who were in charge from 2000 to 2008 when the economy melted, then I would say you are a moronic hypocrite.
Ok I’ll bite, how about off the books trillion dollar wars, huge deficits created by tax cuts to the wealthy which did not produce additional tax revenue, lax regulation over capital….I could go on but I am done wasting time on dipschit loons on the right who almost destroyed finance capital globally because of their adoration of the totally debunked supply side voodoo.
And finally your party was such a phuck up that you let a jungle bunny beat your best white folk twice. What does that tell you about YOUR party?
Please list those numerous Democrat heroes of yours that proudly stood up and said that we should stay the hell out of the middle east.
We are talking Syria civil war….not the entire middle east. those opposed to arming the rebels (ISIS) Boxer, Reid, De Fazio, McDermott, barbara lee, Walz, Hillary etc.
If that moron Mitt was President, we would be dealing with ISIS as the sovereign of Jordan because we would have helped them a year ago oust Assad.
Obama stopped another wingnut middle east disaster from happening.
the fact you can even ask this question reveals you are even stupider than you read on paper. insane.
Boiler plate nonsense. This nation is not on a winning path and you know it. GC is a microcosm of the reality of business and regulation in America now. NO, Obama had and has nothing to do with GC direclty, but the trickle is real and it is affecting companies with overburdened regulations, ACA, min wage wars, etc. THAT is his product.
Did you read the article? It sounds like GC stepped in it when they decided to chase big profits by pushing around pieces of paper. It has nothing to do with regulations or ACA. Obama or the regulatory system didn’t tell them to issue an IPO, go private with a stupid debt deal, restructure with more debt games, or open up a retail store in Times Square.
The problem is that management theory in the USA these days is not about running stable, sustainable businesses by keeping the customers happy and rewarding good employees. It’s about chasing unsustainable growth by going into dubious financial agreements, firing good employees, and cutting so many corners on product quality that people will be forced to keep buying the same junk over and over.
At this point in our history, optimism about America’s financial future is cowardice.
Then move to Russia or China since you are a hater.
If you stepped in shit you’d blame it on Obama
If obama and the resulting obamunism turns everything to shit, that would be the logical conclusion. Shout up to mommy from the basement, its time to change your sheets.
Paul, I’m pretty sure GC’s problems don’t have anything to do with President Obama and that’s coming from someone who’s not his fan.
Maybe you missed it, Obama and the Democrat Party economic policy is what is killing this economy and logically compounding GC problems plain and simple. I never disagreed with the author on what he outlined, the takeover, piling on of debt etc.
I only pointed out how he failed to mention the obvious, a steep economic decline and you can logically conclude this is surely a factor in the chains imminent demise, if true as stated. If the economy was good as it was pre 2008 collapse not caused by GOP but rather Democrat party economics via medlling in the credit and mortgage markets to promote their socialism, GC would have a chance to weather the difficulty. These democrats were of course aided by a few RINOS but in large measure, the 2008 collapse is a direct result of progressive economic policy.
When dolts blame the GOP, I just point them to many youtube videos where GOP lawmakers were holding hearings about the instability of fannie and freddie etc.
That was fornaught since the Dems and their few RINO enablers fought the reform and so the system crashed under the weight of it all. Here we are down the road and what did obamunism do, it doubled down on that philosophy, more spending and debt.
Don’t assume its just GC, you dont know of the heatlh of their competitors because they are privately held and if you have an honest bone you can see the downturn is widespread, cuts through all sectors of the economy but especially where consumer spending is the primary driver of the business.
And…….cut to Sweetwater announcing their 3rd fantastically large expansion in the last 5 years.
But the economy is NOT being killed, it’s finally recovering somewhat. To the extent there are problems, they’re right-wing Republican problems–for example, all the re-created wealth going to the so-called “job creators” at the top, leaving the rest of us with McJobs and concentrating wealth even more. You don’t even realize that Obama is really a moderate Republican at heart.
Uncle Jim, you’re not suppose to be on the computer without taking your pills first. I’m telling Aunt Margie to rein you in.
As the manager of a “mom and pop” store, as well as the owner of music school, I have to say that this is good news for people like me. I was so appalled when I saw that GC was offering music classes. It literally scared me, because I have been into GC, and can’t imagine what kind of teacher would actually work there. The big box stores can do so much more harm than good, and they do it in the name of profitability. It’s pretty disgusting. So many of us small business owners get into the business because of our passion for music, profitability is nice, but it’s nowhere near my driving force. I guess I can’t comment for everyone, but it just drives me crazy when big companies want to offer education because the profit margin is good, without ever giving a thought to what affect they have on the students they are impacting. Not to mention how many stores have had to close because they aren’t able to compete with the pricing, and the hype, that is offered up by the GC gods. Seriously, though, while I hope that the investors are able to recoup some of their losses over this, I am happy to see the end of the place.
Interesting take on the subject. They will very possibly have to restructure to some degree. We all know they very recently “restructured” a number of senior management out the door – it would certainly follow that there must be some major money problems, and as such, some reloading of product, people, and debt will be forthcoming. I would argue the premise that Bain destroyed Guitar Center while ignoring the fact that Guitar Center destroyed the Mom-N-Pop shops that ruled into the early 80’s. They methodically scratched one after another off of their list – undercutting any and all small music stores until the literally were starved out of the business. Here in MN (and I imagine other big markets) they even starved MARS music out of the business by taking losses on sales long enough to gain enough market share to drive away the competition. I guess it’s more of a Karma situation than anything else.
This same piece (albeit without the recent updates) has been going around for many years now. The last time it circulated heavily was back in 2008. At the time it was predicted that, because of the housing debacle and state of the American economy, “it will be just a matter of months before GC goes under” and that GC’s demise would likely take Fender with it, since Fender has many millions in leveraged assets within GC showrooms and warehouses…much of which was not yet paid for. The last piece also predicted that guitar sales as a whole would tank because America was going into a long and deep recession….and that when it recovered, boutique instruments….and boutique retailers…would take over the industry.
I am not a big fan of GC. I don’t care much for their product lines (comprised mostly of generic, mass-produced, Asian/Indonesian made instruments) and they do not bargain on their retail prices. About the only thing I go in there for are new strings, the occasional replacement patch cable and perhaps a through the Used Gear section. I do appreciate that GC is there….and provides healthy competition.
I buy a new guitar on average about once a year. I am both a player and a collector. I typically bring my business to a locally owned, independent shop that I have done business with for 30 years. They always get it right.
As it turns out, online sales….and not boutique retailers….are where the money is nowadays. GC has positioned itself very well to compete here. Not only do they sell new instruments online, but they sell their used gear online as well. They will transfer their gear to virtually any other GC retail outlet…and there is almost always a GC nearby….no matter where you are. You can order something…..have it shipped to your local GC and then inspect it upon it’s arrival, before opting to close the deal and take it home. Guitarists are a fickle bunch….choosing an instrument is often a deeply personal experience for them….and GC does a decent job of trying to appease that touchy-feely instinct guitarists have. I’m not a big fan of the company…but even I can see the power they wield in the marketplace. I don’t think that they’re going away any time soon.
Interesting blog post, Eric! Being a non-business type I am looking at this post because I found it via one music instrument manufacturers social media channel.
Its sad to see a well known brand go in this direction. But its also very very predictable that emptying a company for values will leave it without cash eventually.
Being Danish I had to laugh over the term “Payment In Kind” especially when its abbreviated. If one looks up this abbreviation using google translate one will get yet another word for what actually happened to Guitar Center and its investors.
Another thing is that while music are made on laptops and tablets these days a lot of extra gear such as audio interfaces, studio monitors and controllers of various types and are actually required for many a musician. Then add the whole growth of the eurorack modular synthesizer market and the resurrection of the analog synthesizers in the last more than ten years. There is a reason why the music instrument market is so large: people need the right tools!
Anyway, hope the music industry will recover from this market change once it happens.
To Eric Garland: What do you think will happen to GC’s school band rental and music lesson unit: Music & Arts?
Music and Arts will purchase Sears using loans denominated in Thai baht. You heard it here first!
I asked a serious question. Your answer appears less so.
Music & Arts seems like the a profitable business in that they sell time (lessons) and rentals (recurring revenue on the same unit ). I assumed that Music & Arts was propping up GC’s business.
Everybody, I admit it – this is all about Benghazi. There, I said it. Guitar Center was the only thing keeping Obama from making America into East Sharialand, and it all goes back to Benghazi and the IRS.
I’m glad we had this talk. Carry on!
Interesting discussions here. What I haven’t seen here, and what I believe to be a primary driver of the big box mentality is the role of the consumers themselves.
I am a former owner of one of those boutique music stores, specializing in guitars and related products. I originally opened my store with a romantic (foolish) notion that I could run a small store and make it feel like the small town store I basically grew up in where the owner sold product, but his fundamental drive was to foster enthusiasm for music. When a 14 year old kid showed up in his store dreaming of owning one the guitars hanging on the wall, he was as attentive to that kid as he was to the middle age guy with cash to spend. This was the fundamental premise of my ‘business model’.
We focused on used gear, buying as reasonably as we could while providing a margin on which to run a business. We took great care in making sure that every instrument hanging on our wall played well, was clean, set-up properly, and was suitable for its purposes.
Initially our model was working well, we grew respectably and were able to generate a reputation as a place a player could go to purchase their first guitar, or their 100th. We offered free 4 week guitar lessons to any and all comers whether they bought their guitar from me or not. While it was true that the greatest benefit of working for yourself was that you complete freedom to pick which 16 hours of the day you would work, it was satisfying work.
Shortly after I opened my store Guitar Center opened a box in our town. They were everything most musicians think they are – full line stores with generally good selections of products, occasionally knowledgeable sales people, and stores with a “cooler than you” vibe that some people were drawn to.
What surprised me the most (and I should have not been surprised – an indicator of my acumen in assessing my competitive environment) was the reaction of many of my previously steady customers who would drive 30 minutes across town to save 25 cents on a pack of strings because GC was ‘cheaper than you’. Equally baffling were the customers who would purchase a guitar at GC then bring it my shop because it didn’t play well. Initially we would set them up for free thinking they would see the error of their ways, and recognize that there is a difference between price and value.
Ultimately I elected to get out of the business. Initially I blamed the evil empire that GC was, but the truth is they simply out spent, out marketed, and generally just kicked my butt. But they were able to do so because of the choices that consumers (my customers) made. While it’s certainly true that they had dramatic and substantial impact on small local stores, it was the consumer’s choices that financed that mayhem. Nothing new here – I challenge you to find a local hardware store in any tertiary market in the country.
It should be mentioned here somewhere that the greatest casualty in all of this will not be Ares Capital and friends, it will surely be the folks who work at the GC’s, and the other mom and pop stores who initially were attracted to the business by a love of music and the ability to express oneself by playing an instrument. God knows we didn’t do it to get rich.
Well congratulations on your honesty! Retail is a cutthroat business, and yes, people make odd decisions – I was in retail and sold the exact product some of my competitors sold – yet some people would not buy my product, even though it was dollars cheaper – because it was not “on sale.”
I remember being 14 and seeing that $1200 Guild Blonde-on-Blonde Jumbo acoustic hanging in my local music shop. I would go and visit at least 2 or 3 times a month just to hear the warm, pure notes ring from its exquisite body. I can still smell it and feel the silky wires beneath my fingers. I would look up now and then to find the owner smiling at me. ‘Work hard and someday that will be yours’ he said. I would oh so carefully hang it back up, say thank you and leave, making a vow to own it one day.
The years passed and somewhere along the way I stopped going to that store. I imagine it was about the time I discovered girls and thus forfeited any previously ‘free’ time. I would think of it from time to time and promise to go visit that store again, but it never happened.
The store is gone now. The owner who smiled at me with tolerance and encouragement is lost to time, but the memory of someone who cared about music, and cared about me remains. Guild only made that guitar in that one year, and in limited numbers. I have never been able to find it again.
After working for this company for almost 5 years I have watched many great coworkers come and go, mostly because this company fails to recognize and support its staff. In the past year I have seen this same company repeatedly tell its staff not to unionize or even talk with organizers because the company knows best how to serve us. Well, since Mike Pratt has left the company our new CEO Darrel Webb has sent correspondence to managers talking about making $6 million cuts in labor. Meanwhile he commutes to work from Oregon to the company’s headquarters in California via their private jet. Sounds like the company knows how to best serve themselves.
I have played a large role in forming a union at our store 334 Central Chicago. Since union organizing began at Guitar Center, the company has given employees raises, advanced scheduling, and expanded discount rights. Now the company is going back on Phase 3, eliminating discount rights, and cutting hours for employees. Just a week ago, the union at 334 met with executives at the company and legally protected our discounting rights. That’s just one example how being in a union has improved our jobs. If you think Guitar Center will give you higher wages and better benefits than a union contract you should ask yourself, well then why is Guitar Center spending Millions of dollars (that could go to the workers) every year to make sure the employees don’t unionize? Because we’ll make less money with a union contract? It doesn’t make sense.
Moving forward, I propose that each store have employees call the union and at the very least get information on how to organize to help protect your rights and get what you deserve. Truth is for any unionized worker is that no matter who the CEO or owner of the company is, a contract made with worker input is the best way to maintain and improve our working conditions.
Management will probably tell you that I’m disgruntled or they’ll make up stories about how its not going well here in Chicago. Truth is, I love this company and since unionizing we’ve never had this kind of solidarity and respect for one another. We all deserve better. Back each other up and look out for each other. We all deserve better.
There’s nothing to be afraid of. We can do this together. Be on the right side of history.
Proud Union Shop. #334
Central Chicago, IL
Here are the name of our organizers:
We’ve also received support from these bands and artists:
War on Women
Bone Thugs and Harmony
The Wood Brothers
Any many many more…..
I used to work at 334 back in 2010-11 and I LOVE that store and it’s employees. I remember when the union talk started, seeing Brian Webb post about how 334 was one of the stores really insistent on unionizing, and I couldn’t be more proud to have worked there. Much love!
I worked with Eric when we were attempting to Unionize the MF/GC call Centers. He is an amazing guy, and stood by me when I was wrongfully terminated mysteriously about the time that folks started taking the union movement seriously. Management was able to kill the union movement at the call centers, but the movement will not die out. Good luck to you.
No loss, IMHO. They put or attempted to put many small businesses out of business. Maybe now the big name products will go crawling on their knees to the “mom & pop” stores who not only paved the way for GC, but survived in spite of them.
It had already began over a year ago and likely to see more of that happening. It’s also likely that some of them will be shown the door.
Take a good look at the brands that GC does not carry to see wisely managed companies that were skittish of the scam. Behringer is cited here, but there are somoe others, especially boutique Bass guitars and amps, that are not now nor have ever been seen in a GC store or in Musician’s Friend for that matter.
The question is, when do they liquidate??
“The trend is your friend”…having been a leader in the MI biz for over 40 years, we have recently transisioned our store to a younger owner who has his finger on the boutique guitar / amp / pedal market and internet shoppers. The macro trend is that rock music as we knew it is dead. It has been replaced by EDM which is a one man operation using computers to play pre-recorded music made mostly by others using synthesizers. These folks do not frequent music retail operations. I am qualified to comment on this as Gand Music & Sound was the first Apple dealer in MI, the first Moog synth dealer, and the first Lynn drum machine dealer amongst a long list of cutting edge tech revolutions (going all the way back to Alembic guitars and DiMarzio pick ups). We are the folks that destroyed the old guard; we built the Pro Tools rigs and pushed out the analog studios. We have continued our concert production rental biz as mega events will continue to be a big draw to kids of all ages. “The king is dead. Long live the king.”
And yet something we call “country” (maybe rock in disguise) continues to flourish. Rock has been dead for most of its history, apparently.
As this article is proof of, some one is always willing to decry that something is dead.. Atari did it with video gaming, Disco and other musics did it to Rock.. IBM and clone users have been insisting Apple is dead for the past 25 years. Country is something I’ve never been into, but your (maybe rock in disguise) comment is on the nose. Lately, I’ve heard more and more Country music that seems to be verging on rock music. I tend to ignore such nay sayers. Just as often as not, they are full of it.
I strongly disagree with this as someone who has worked at a GC, played guitar his whole life, and DJ’d/made electronic music for 5+. Couple things : 1) The macro tend of rock being dead only applies to radio. “EDM” (not so much house and techno as it has existed for 20+ years, but “EDM”, the hyper popular commercial version) has already peaked and is already waning in popularity. This fundamental change has been made. Typically, in electronic music, this change happens from europe –> new york/miami–> rest of country. EDM is on its way out the door, and while other genres will supplant it, those electronic genres are much more focused on performance aspects, songwriting/musicianship and not so much showmanship and just “big drops”. This means that the fans of those genres are very interested in seeing midi controllers, samplers, drum machines, and turntables in person. EDM is hair metal, nothing more nothing less. Moving further, from 2010 onwards (I’d call the peak of EDM 2009-2011) there’s been a huge spike and resurgence in kids playing guitar and starting bands. It might not be as visible because rock is DEAD on the radio, but from my own anecdotal experiences, the explosion of simple and teen-appealing genres like pop punk, and just the number of young bands around, you can tell the pendulum has swung towards playing guitar.
did you read the article?
…and yet you can’t spell the name of Roger Linn’s most iconic product correctly.
dam smelling checker sorre bout dat- i due no how 2 pro nouns moog tho
My understanding was always that it was pronounced “moag”–m-owe-g.
I would be interesting to see what happened if they all go as that would mean a great many instruments would be dumped on the market. Would the Fenders and the Gibson’s be taken back by the companies so that their prices don’t drop because of a flooded market? If I were to guess I would say it will file chapter 11 close a great many of its stores and move to mainly an online store front. It is what the clone business men will want to do. Overhead costs will drop( no stores insurance for the stores electricity so forth ),not paying all those pesky employees will save more money. The new leader will then pull it out of chat 11, the stock holders will praise him, give him lots more money,,,,,
This makes no sense. I mean, yeah Guitar Center might go bankrupt, but where do you get that it’s the end of big box retail? Wal-Mart will never go under. Period.
Big box retail has been in easily-observable decline for at least a decade.
While Wal-Mart might seem like an unstoppable behemoth now, but some smart cookie once upon a time said “never say never”.
GC’s biggest mistake, especially in this past year, was banking on people to run these stores. There is not enough work ethic in America to save them, and even less with musical ability. Retail is hard work. The general public is Internet “educated” and harder to please.
If you want your employees to work hard and take care of a store, you need to treat them right. Retailers like guitar center barely even pay their employees at all, but expect them to constantly bend over backwards. I’ve hired and fired many people, and I can tell you that their are plenty of people who are willing to work as hard as you like, as long as you treat them with dignity and respect.
I can’t speak from experience with them as an employee or manager, but I am talking about America as a whole. There is no work ethic to speak of anymore. Even if GC were the ideal employer, there are not enough musically minded , self motivated, hard working employees to save them. Every business suffers from a lack of good help in any given field. But when I read that GC was not going to be liquidating or closing any stores, but were going the other direction and expanding with recording studios & such, I knew that they were doomed. Death by “work force trauma” to the bank.
No work ethic in America? Then why has productivity increased 400% since the 1950’s, and continue to increase? I think you’ve got average workers confused with the incompetence of a generation of management who had everything taken care of for them, so they never had to work and figure out which ideas will succeed and which ones will fail.
I am not cut out for this petty name calling & blame game.
Nobody has any money. That is the problem.
Good night Detroit!
Oops, did I step on someone’s corporate toes? Good. I bet you’re the same type of person that I regularly destroyed in debates in my Econ classes. Funny how NO ONE called you any names, and that’s all you can come back with. THAT is why business is so messed up, the people at the top clearly have no clue what they’re doing, and you appear to fit that description perfectly.
Well obviously you have learned more from prison than I have by working in the real world for the past 37 years. My apologies and best wishes on parole.
What a concept!….A country where you are free to succeed “and” fail……Naw!….impossible!
as The late- great actor-comedian, “Robin Williams” once said..
“REALITY, WHAT A CONCEPT”!…(rest in peace, robin)
“It’s like it’s always right now.” Boyhood
I’ve read a few of these and concur, although I don’t have your expertise in finance I do know how to read a P&L sheet. There is no way GC can continue and the sooner they responsibly shut down the better for everyone. I am mostly curious how the domino effect is going to happen. 1) What’s going to happen to GC’s sibling companies like Musician’s Friend and Music 123, 2) How this will effect other big box retailers like Sam Ash and large online stores like AMS/Zzounds and Sweetwater, 3) the effects on independent dealers.
Wow man, you have been following this company for over a year! That’s a long time you must know everything about them. This article comes out once a year for the last 10 years man. Its adorable.
If GC goes bankrupt, how many suppliers will it take down with it? Manufacturers have given GC a credit line to purchase instruments. How many can absorb the type off write off GC defaulting on them would create?
A critical point. A lot of folks have distanced themselves from GC already. But it could be that there will be new opportunities for vendors in a favorable cash position. https://www.linkedin.com/pulse/why-guitar-center-circling-bowl-charles-rathmann?trk=prof-post
“Big dumb and complex” will not “bite the dust.” Big and dumb is our sad future. Think Wal-Mart. Costco. NAFTA. TTIP…… Your summary is simply a projection of your bias, and using one example (GC) to justify that bias. The world’s wealth, my friend, is becoming more consolidated into fewer and fewer hands. The world worships at the altar of big and dumb socioeconomics while being sold a lifestyle of increasing debt and fake dreams. We’re moving headlong towards an international plutocracy, with big, dumb leaders on the payroll of big, dumb wealth interests.
So let’s do something about it. Let’s get involved in political parties and, through them, put up candidates for public office who will do what’s needed to change this. Membership in political parties is open to anyone. If you’ve got a better solution, we’re ready to hear it. But “oh, well” is part of the problem.
GC started out with the goal of “taking out” the independent dealers. I remember I was working at Rondo Music at the time.
Back then a salesperson at a music store was a good paying career.
They then succeeded in reducing the quality and innovation in the MI industry with their race to the bottom I know I was developing products for Peavey at the time and the only way for a manufacturer to stay in the MI game was to reduce quality and send to China.
They then destroyed some great companies like Alesis because they didn’t pay their bills.
Now it appears as though the hedge funds have finally run out of patience with the financial shell game.
I do feel bad for those who got laid off however my feeling regarding the corporate entity GC are that for 20 years they have done massive harm to an industry that I have dedicated most of my adult life to and I will celebrate their eventual demise.
Wasn’t that music store, that Wayne, Cassandra, and Garth, went to (in the movie “Wayne’s World”) a “Guitar Center”???
uh, “martial law”???
Yes, “martial law”. Eric is correct. You were a day away from having no funds in your bank account, no cash in any ATM and no available credit. All hell was about to break loose and martial law would have been quickly enacted.
Or so The Big Money under George W. Bush says.
To everybody who questioned this: I said “*nearly* destroyed the U.S. dollar and left us with martial law.” My office was one block from the U.S. Treasury and I both predicted and tracked the crisis of 2008. The banks in the US and UK claimed to their national governments that if they did not receive a blank check to reimburse losses from mortgage-backed securities and the $1.1 quadrillion (1,100 trillion) in derivatives, the world currency systems would melt and there would be martial law.
Key word: Nearly. They got their losses covered by taxpayers AND their bonuses that year, and left the financial sector as sociopathic as ever.
Guitar Center is but a tiny symptom of an enormous problem.
Incredibly intelligent, well written article.
I own a retail store (sports retail), I’m also a working drummer and shop at Guitar Center. My observation is that their inventory software is outdated. Inventory Management for a company of this size is critical. Don’t know why that haven’t invested in a state of the art POS system.
They do have a POS system.
Key phrase being “state of the art”
Sorry, I was just having a little fun with the double entendre of the acronym P.O.S.
*whoosh* Straight over my head. I’m an idiot. 🙂
There isn’t much state of the art in terms of systems…
In fact, that will be one of the key opportunities for the new management team…upgrading & rationalizing key back office management systems….
Hey Jose Cuervo – your name is Scott Tesar and you work for Guitar Center corporate in the Musicians Friend division.
GC has a key opportunity to do public relations correctly, as opposed to the last four times my articles went viral.
I can’t wait for the liquidation of their inventory. If it never happens, I blame you for feeding me lies and false hopes to own a 10-Top PRS Custom 24 via a private asset auction for $1200 by spinning standard business restructuring into a financial doomsday!
I was thinking the same thing about a certain Les Paul Classic….
You probably could have had that at the MF inventory liquidation sale that was held online within the last 6-8 weeks…except I think the PRS went for $900 – it wasn’t a 10 top, though…
They were blowing out blocks of 5 PRS SE’s for $500 a pop, though….
Someone wasn’t minding the inventory buildup, evidently….
Hey Jose Cuervo – your name is Scott Tesar and you work for Guitar Center corporate in the Musicians Friend division.
No pseudonyms around here. Please identify yourself like a professional proud of his accomplishments.
How come GC says this story is not true?
Gosh, I have no idea!
Heard the same from nameless Bay Area, CA employee last night, the company had excellent profit last year as well.
But it is true. The days of ‘making the numbers work’ have ended. When you pay out more than you take in that’s bad! The idea that they can pull out of this dive is over. They can’t borrow anymore money to keep “the vision” they claim they have alive.
Funny thing is M4sh411, I’ve actually attended negotiations and these “positive” changes you’re taking about, the company has refused to talk about with the union. Furthermore if the company want to make these “positive” changes why not put them into a contract. The company doesn’t put anything in writing. Look at phase 3, they’re already taking it away. Because of the way the company has been acting, we the union have filed unfair labor practices for bad faith bargaining, look that up if you don’t know what those are. The company is also spending upwards of $800 an hour to hire there Jackson Lewis lawyer, and to fly out and feed corporate members when they catch wind of a store unionizing. So when you ask where does this million dollar amount come from, there it is. Furthermore when you say the union has only made phone calls, flyers, and ads…how about the new commission structure that is scheduled for March 1st? We proposed a base plus commission payment structure over a year ago and now the company is finally making it happen. I feel bad for you because I know the company fired 43 of your management friends so rather than commenting on this important issue maybe you should go back to your job of sandbagging your employees and let we the guitar center workers union continue to work to make positive changes on behalf of all guitar center employees.
One more thing: Amazon- no reason why they can’t sell everything that GC sells now. They have superior sales software, own the cloud, and have top notch price comparison features plus the best shipping system. I’ve actually gotten delivery’s from them on a Sunday. I know many country musicians shop there……
“Amazon” does carry what GC sells. It is up to the smaller individual companies to offer those products on Amazon. When you see something on Amazon PRIME – it means a business sent product to one of Amazon’s warehouses and the Amazon will handle listing, shipping and customer service. Amazon itself does not buy/manufacture anything except their own products like the kindle or fire tv.
They sell my book, which they buy from Rizzoli and sell. Eventually all music manufactuers (as well as everyone else) will sell to them, let them warehouse and ship and collect the $.
You’re right. They are a bookstore.
I have an idea why. I am not going to buy a guitar without playing it. Nobody should. Every neck feels different, every instrument has a different sound….
But that’s just me.
That’s what we thought when folks started selling guitars online. Gand Music was one of the first stores with a website. We did work on the Darpanet which was the foreuner to the Internet as we know it. It was developed for the military and later adopted by universities. We worked with Apple to send music and MIDI data over the ‘net in the “Info Super Highway” days. Anyhow- I was WRONG. Lots and lots of folks buy guitars on line without ever playing em. Makes no sense right? Since when did the habits of consumers make sense…?
Rememeber-Amazon is not responsible for dealers selling fake or B stock items as NEW. That Les Paul ypu got a great deal on from an Amazon store MAY be fake! Plus, more companies will not honor warranties from Amazon or Ebay
Amazon isn’t responsible, the sellers are. And it would be very unlikely to get a fake guitar on there, most dealers are authorized dealers and Gibson has really cracked down on anyone importing counterfeits. And the manufacturer has to honor a warranty no matter where it’s sold from. Stop talking out your ass.
For me, I need to hold a guitar and see how the neck feels in my hands, so I will never buy a guitar without playing it. But that’s just me.
GC can be defined in two words: BAD KARMA……their philosophy, greed and just plain bad business acumen have been their spiral downward for years. Their philosophy is much like Wal-Mart….come into a market….sell at ridiculously low prices to drive out their local competition thus having a monopolistic position. Also, when they first went public, hundreds of millions of dollars went into the pockets of the owners instead of growing the company. I had a personal bad experience with GC as they had ripped off a trademark I was using and one of their corporate attorneys out of Chicago told me they would tie me up in court for years and break me as they had “more money than God”. Their salespeople are a joke as few have any sort of knowledge of what they are selling. Add all these up and you have a recipe for disaster. Yes there will be a trickle down affect in the M.I. as hundreds of millions of dollars are owed to Fender, Gibson, etc, These companies have been “forced” to keep supplying GC to slow the bleeding!
A former employee of mine mentioned your article and asked me to read it. I think this is a very interesting and important topic, and so I will break from my norm, and share my thoughts online, realizing of course that neither you nor anyone else needs my opinions.
I found your article to be reasonably interesting, and somewhat close to the reality of what is facing Guitar Center and similar companies. However, I would suggest that there is a much more detailed analysis of this situation to be performed, and a clearer more definitive understanding of the true root causes of such issues within Organizations. I believe that there is merit and value to your piece, but it doesn’t truly identify and delineate the challenges faced across an enterprise like Guitar Center, that operates in so many verticals.
With a rush to publish, it is often far too easy to draw simple rapid conclusions that only serve to weaken what has the potential to be a truly enlightening prose. Simple factual errors give way to a lessened validation of your statements, and therefore lessen the impact of what you are writing. A simple example of this would be that Guitar Center did not have 28 regional managers to let go. At last count they only employed about 6-7 total regional managers, some of whom were indeed let go recently.
Since you clearly have a passion to speak about this company and the subject matter, don’t do a half measure piece. Spend more time doing the research, reach out to more of those people that have recently left the company, and then publish an article worthy of your time.
As a former (of my own accord) Director at the company, I have a strong affinity for it, as it would be impossible to not care about something your spent so much time working on. More importantly though, I value the people that make up the company, the customers, and industry partners far more. One can imagine that a great many people will have a fear for what their future holds, and that is why I personally believe that communicating the most factually accurate and balanced assessment is imperative.
I am sure that there are many informed voices that would be more than willing to help you write that assessment.
Of course, this is just an opinion and not a statement of fact, too often do those two get conflated these days.
One final thought, I really enjoy shopping at a couple of box box retailers ( Costco and Target), and I don’t for a minute believe that they are in any way about to enter financial and operational oblivion.
So kind of a former director of Guitar Center to grace us with his presence without hiding behind anonymous online avatars or false identities – that’s what really breaks from the norm regarding the company in question.
You are indeed correct that, when quoting Darrell Webb’s email to employees regarding who got fired, I shorthanded 42 top executives and 28 regional managers, where I should have put in long hand: “28 field management positions (Regional VPs, District Managers, Field Operations Managers and Field Training Managers).” This error had been brought to my attention, but I couldn’t log into the backend of my website to fix it because the viral traffic – 200,000 visitors in 48 hours – has maxxed out a corporate blade VPS server. Consider this my official correction.
As to your weak-wristed critique of the depth of my analysis, I’ll remind you that this affair started when Mike Pratt, then CEO, told me to do my research. That is the genesis of this very article! Isn’t that fun?
Should we discuss this further, in excruciating detail? Since you apparently still represent Guitar Center in the public space, could we perhaps book some time on cable TV to debate the matter publicly? Who else could we invite? The head of the union? Is Gene Joly under non-disclosure still? High-yield bond experts familiar with the covenants of the Senior Secured debt that bond traders are dumping a million bucks per day? Who should we invite to our Knowledge Party?
By all means, Richard, let us cast the cleansing light of transparency on the shadowy ignorance surrounding the matter! Can we discuss whether the reported decrease in EBITDA will bring GC back down to the ratio of earnings to interest of 0.6 – exactly where it was before the restructuring? How many more months can the company last if that remains the EBITDA?
GASP! You don’t suppose it got worse over Christmas, do you? Is that maybe why they fired so many people? I’m just not sure! We can all find out together in the spirit of academic rigor!
Thank you so much for spending time with me today.
Yours most sincerely,
Well somebody just lost all credibility with that response.
Eric, i too am a bassist in a previous career, so I won’t hold that against you, someone has to be I suppose.
Let me address your points and then allow someone else to take the floor. As I said, I never comment online, as frankly (and thankfully) I have plenty of better ways to spend my time, and I don’t see the ROI. Thus I likely won’t be checking your particular forum again, but you are most welcome to contact me directly.
1. My name is Richard. Mr Ash is my dad or granddad. Be kind and please don’t make me feel older than I already do.
2. Why would anyone make a comment if they were not willing to put their name to it? Oh yes, online forum…got it….
3. Glad you put that correction in.
4. I was not aware that is how this started, but that is interesting. I’m glad you took the initiative to do more work on it. Perhaps you can repeat said process?
5. Let me state again…FORMER Director. I in no way shape or form represent Guitar Center. Don’t get overly excited and jump to the wrong conclusions. I chose to leave the company a while back and I have no intimate knowledge of the thoughts and motivations of the current management team.
6. If there is space on TV for my opinions then I think that perhaps we have too many TV channels.
7. I would imagine the head of a workers union would enjoy the publicity of a TV debate.
8. I wouldn’t know about the status or existence of Gene Joly’s NDA, nor should I.
9. There are hundreds of investment experts that would happily share their thoughts I am sure. This isn’t exactly rocket science though.
10. If you want to know financial data, ask the company. If they choose not to share it with you, then as a private enterprise they have that right, just like you or I. Of course, the financials of a corporation are infinitely more interesting than that of a simple private citizen.
11. Again, I wouldn’t know about their holiday financial performance as I don’t work there and it isn’t my business or right to know. Large layoffs certainly can be a result of poor financial performance, this isn’t any great revelation. The interesting part is what causes poor performance. My opinion in this specific case, is it isn’t exactly the way you have it described.
I honestly want to congratulate you on the traffic on your article, that is a great achievement. A key reason for my first comments was that I believe this is an important topic to many good people, and one that deserves to be fully understood both within and outside of this particular company and industry. Imagine if you were able to reach 200k people with an article that really moves people. Wouldn’t that be something amazing?
Sincerely, best of luck with this and your future endeavors.
Maestro! Superb article. In typical American business fashion, they miked it dry. Kinda like Warner & Swasey. Really a whole lot like Warner & Swasey and a bunch of American Machine Tool Companies.
Does anyone remember “Mars Music” ? It was a place similar to the Guitar Center. I believe they went bankrupt 10 years or so ago. I’m surprised Guitar Center has been in business as long they have, Amazon and Ebay stores kind of put an end to driving around to musical instrument emporiums. And,, all the instruction one need to learn how to play and use instruments, sound effect pedals and other such “things” are readily available on Youtube. One does not really need private instruction, with all the in depth videos and online tutorials available, if you have a computer. That is one of the many reasons I enjoy owning and using my machine, more than one “teacher”. Sad to see a big place like Guitar Center go, but, times change…always. Other than online “stores”, I do, kind of, wonder what might take it’s place…will Wal-Mart/K=Mart and other such places pick up where GC has left off ?
I remember mars music and also musicians planet.. (they might be tje same thing, I don’t know. I have seen a lot of music and guitar shops go oit of business, but I never thought guitar center would be in trouble…
Mars Music had pretty much the same thing happen in regards to rapid, un-maintainable expansion past demand. Ironically, they closed down for putting too many up next door to Guitar Centers…
Yeah — I remmeber Mars too. Never frequented the stores though.
You point out the challenge that YouTube presents to smaller stores that rely heavily on lessons. But in truth, I don’t see that going away. I have played for 40 years. I like the stuff on YouTube as much as the next guy, but I still tend to have a teacher. YouTube can’t look at what you are doing and offer suggestions. YouTube is not social, and we learn at the end of the day from people. Just like we buy guitars from people. GC forgot that when they eliminated commissioned sales and abandoned their sales process. Sales and learning are both social activities.
With their arrogant attitude and their lack of respect for other players in the business (makers, not competitors) I’ll gladly sit back and watch the ship go to the bottom…
They also shove competitors out of business…
Live from contract negotiations in Chicago; the company admittedly has no idea what the new pay structure will be on March 1st which is in just three weeks! Typical of a company that has had zero long term plans for anything they’ve ever proposed.
If they go down, do I still owe the balance on my Gear card?
Yes. They are the ones declaring bankruptcy, not you.
Somebody will buy your debt for pennies on the dollar, and then chase you for the full amount. Still, you might be able to negotiate a lower figure with them when you finally receive a demand
And what about the impact of the Fenders (Squier), Gibsons (Epiphone), et al of the world flooding the market with $100 Chinese junk guitars? Did that hasten the demise of Guitar Center or prolong its life?
This is the only source I’ve seen on this subject with a simple Google search. I’m calling BS
Well, it’s not BS that they’ve had two CEOs in the last 18 months, or that the newest one recently fired 43 corporate executives and 28 field manager/reps and other employees. It’s not BS that GC’s bonds are rated as “distressed” by the credit agencies.
“Guitar Center, a retailer of music products in the US, faces an uphill battle as comparable same-store sales are down and
the company struggles to compete with online providers. A bond offering in March is part of a broad recapitalization effort. On Nov. 19, ahead of an earnings call, the company’s CEO resigned and a new CEO was appointed.
The aforementioned bonds inched up, but the distressed securities level lands the company on LCD’s Watchlist.”
NOT B.S- I’m in the business. If you Google ‘GUITAR CENTER DEBT’ you will find much proof.
Maybe research a little more extensively than a simple Google search next time genius.
Eric Garland- steel shorts man! Can’t believe (yes I can) how many hornets you’ve stirred up. Just shows how many out-of-work guitar players there are with nothing better to do than comment. facebook is so jealous!!!
Sad but true, Gary.
OK, when do you see NewBay Publishing, who have aggregated most of the audio and video trade magazines, hitting the wall?
Ty Ford – I know you’re too smart to offer up a specious argument like that, so it must be tongue in cheek irony, right?
And “Franco” re: your argument that because a Google search shows only Eric Garland as the source (so far) about this story and is thus a purveyor of BS – facts are facts man and someone will always be first to break a story and run with it.
Btw – what’s with all the Bain / Ares / GC love and attempts to disparage Eric Garland around here? And not only here – Guitar Center stooges invaded my Facebook page today to try and do spin control at my place – they removed their comments after I identified them as Guitar Center execs.
Proudly signed with my own name – Michael Joly (no relation to Gene), Michael Joly Engineering / OktavaMod
Hi Michael, just want to say I love the work you’ve done on some mics I own (even though you don’t know me). I also posted the story on my FB page and most of the comments are filled with anti GC vitriol.
Here’s something for you to think about, number one, I shopped for a couple things in GC before and ended up buying the same product that they had on the shelf for much less online. It was nice being able to see it in person, but I always checked to make sure I was getting a good deal. Call me cheap but that’s what our world is coming to. People go to the local dealerships to see what car they like and then go home and browse the web to see who is going to give them the best price. This is what these specialty product stores have to come to realize. It’s only going to get tougher for them. We live in an age of technology that has taken over the modern sales person. You can now figure out how to install your own hardwood floors just by watching a video on YouTube even if you’ve never seen hardwood floors installed before.
It’s an interesting analysis, Eric. I have spent 30 years (well technically 29 years an 11 months but who is counting?) working for music stores and manufacturers. I think your conclusion might be a little premature, although I agree with your basic premise.
Consider also that some other vulture capitalists might swoop in and buy it up at pennies on the dollar (hey, it might be Mark Begelman or even Richie Ash-not the one on this thread). I don’t think GC is going to GO AWAY but there might be an interesting shift.
The thing about the MI/Pro Audio business that continues to astound me is how companies not only survive but flourish against all odds.
Mr Chapman’s comments about “getting a good deal” below are telling. Is it a good deal because you got a low price? What if you need help? Today I will be helping someone who bought a product online that is not compatible with the computer he bought. Going to a dealer could have saved him a world of hurt…
It will be interesting to see how all this plays out.
A person I worked for 20 years ago told me his theory of the three plates. Back when I started, in the mid 80s, there were three plates of about the same size; you could stack them. One was called “manufacturers,” one was called “dealers,” and one was called “customers.” By 1992 the plates had begun to morph, mow the Manufacturers plate had grown, the Dealers plate had shrunk, and the Customers plate remained relatively the same. 20 years later, the Manufacturers plate has grown nearly exponentially, the dealers plate has shrunk substantially (a few years ago a rep in the deep south told me he had lost 20 to 30 dealers that year. Closed. Done.), and the customers plate has shrunken, as well.
We, as an indstry, have not replenished ourselves; we may all be headed for the dinosaur boneyard.
Thanks for the food for thought. I welcome your thoughts.
“Consider also that some other vulture capitalists might swoop in and buy it up at pennies on the dollar.”
That would be after a bankruptcy.
“I don’t think GC is going to GO AWAY but there might be an interesting shift.”
The brand will have value and could be sustained through new financing, but only after a reckoning has taken place. The company to emerge would no longer be the industry hegemon.
“We, as an industry, have not replenished ourselves; we may all be headed for the dinosaur boneyard.”
My future writing will cover all the fascinating new business model emerging on a smaller scale. The replenishment of new ideas is arriving, even if it does not mean that the size and growth curve will be maintained. That part doesn’t bother me, because I think that the only organism in nature to require growth 100% of the time is the cancer cell.
Well, cancer cells and private equity firms.
Hi Phil- at some point we have to admit that a large % of weekend warriors are basically Civil War re-enactors, dressing up in period costumes, re-hashing battles scenes that we have studied since high school. Once we have perfected our place in the army, we will get old and pass on. Unless kids have some reason to join in the fun, it will have to be subsidized like opera, classical, and jazz music.
Gary, man, your Civil War reenactor metaphor is absolutely brilliant.
I should know- I’m one of em. LOL
Hi Gary! (Hello to Joan, as well)
I agree with Eric that your metaphor is spot on. I just worked on a film that is kinda just that, in some ways (more about that later). I spent more than a few conversations at NAMM discussing how we can’t count on “that guitarist who can afford it now” to buy one more guitar this month.
I think (in the comment below) that Eric missed my point, which you picked up on. We have not done a good job in making the kids interested; sure they want to be ROCK STARS, not musicians, witness the rise of American Idol, etc. But one of the things I noticed in the 2000s, traveling around the US, is that the desire is not strong. When I started at Ward-Brodt, in 1985, I was 23. ALL I wanted to do was play guitar or mix bands (and, you know, date). I rarely see that nowadays. Back when I was in high school, all us dudes (and some of the gals) had our guitar heroes, Page, Clapton, Garcia, Van Halen, etc (apologies to any guitar heroes left out). I challenge any of you to name a guitar hero under the age of 30 these days.
Eric, I don’t think we need 100% growth but we need there to be some growth and interest.
Or maybe you’re just too old and looking at things from afar not knowing what the ground realities are. Im sure you still listen to your Van halen/Page/etc and still regard them as your heroes thinking noone in this generation can reach their level. Im not denying they werent great, but thats what every generation does and think. The truth is, music nowadays is at its highest peak than ever before in its creativity and evolution. Sure there are crappy, shame-in-the-name-of-music artists who get all the limelight, but we also have shining stars in almost every genre of music who are pushing the envelope to the next level. Some new age “guitar heroes” from the top of my head – Tosin Abasi, Mikeal Akerfeldt, Misha Mansoor, David Maxim Micic, Jakub Zytecki and lots more.
Blueg, i apreciate your response but you kinda missed my point. First off, Tosin is 32, Mikael is 40, Misha is 30, David *might* be under 30 but I couldn’t find a bio after a google search, and Jakub, who IS 20, has less than 100K hits on his you tube videos.
While they may be guitar heroes to YOU, they don’t have the impact that the aforementioned players did on the kids who were my age when I was 20.
I am ALWAYS looking for new talent (it’s my job) and ALWAYS looking for folks of influence. I would love it if, while standing in a music store, i saw/heard some kid walked in and said “I want that (guitar/pedal/amp) that Tosin Abasi uses.”
I would love to know how many TAM100 guitars Ibanez sells every year. (If you all don’t know, that’s the Tobin Abasi 8 string model; a quick search found one at 3999. and one with plainer appointments at 1299). How many Mikael Akerfeldt signautre guitars does PRS sell a year?
If David Maxim Micic and Jakub Zytecki are inspiring kids (not guys like me) to play/buy/take lessons, man all the better.
What I was saying, though, is the culture of today doesn’t drive the business like it used to. If you think I sound like I’m “too old” and am reflecting on my “glory days,” then I failed to get my point across clearly.. I WANT kids to jump up and down and get inspired to play music; it’s the only thing that will keep this business going.
There are a lot of musicians I know (both pro and “weekend warriors”) who are 8 to 10 years older than me. When I ask them (and I ALWAYS ask them) “why did you start playing music” 8 out of ten have said “I saw The Beatles on the Ed Sullivan show.
You may say to me, “what the heck does the number of guitars sold have to do with anything? Why should I care if Ibanez doesn’t sell any TAM100?” My answer to you is this, if we’re going to keep music stores (big box, “mail order,” or mom/pop/brick and mortar) going, we need to drive traffic there. Music gear and commerce is what this thread is about.
Thanks for taking the time to respond, Blueg, I appreciate the discourse
The most popular “young” rock guitar player these days is Dan Auerbach from the Black Keys. He’s 35. But he plays crappy Ebay guitars that came from the Sears catalog. BTW I have a Guild S200 Thunderbird, like one that Dan has been playing for a few years. Zal from the Lovin Spoonfull (who?) and Muddy Waters (who?) were the only guys that ever played em, back in the 1960’s. They were worth $500 till Dan started playing his. They magically shot up to 5 to $6,000. That’s not what GC is selling.
Showing my age, Lovin the Spoonful and Muddy (i had the pleasure of doing sound for Hubert Sumlin a few times over the years). I saw an S200 recently for way less than a grand; shoulda bought it, I guess
Age doesn’t matter, some of the rockstars you looked up to weren’t THAT young even back then. Brian Johnson was 32 when he recorded Back In Black.
The lack of rock bands today is a far more complex issue than that. It has a lot to do with the destruction of the music industry. There aren’t paths to success like there used to be, now it’s pretty much just Youtube or American Idol. It’s way harder than ever before to build a following by playing out, partially because people have less money to spend on entertainment than ever before. Of course it’s also not easy to write classic songs.
Even still, there are great bands coming out these days, look at The Black Keys, Tame Impala, The Darkness, the John Mayer Trio, Jet, System of a Down, Airbourne.
Sure. But they’re not the ones getting the Big Label Push. Don’t blame Van Halen listeners for that.
Meanwhile, yet another batch of fashionably shlubby Regular Guys with plaid shirts and haircuts (you damn hippie, you) with yet another batch of Ten Good Arena-Hardcore Songs About Things Sucking, is getting the Big Label Push. No wonder people think rock is dead.
I’m taking issue with the term, grinder, that Guitar Center employees use. I always get a discount because I make it clear that I can shop wherever I want, and everyone else will give me a discount. GC employees are taking offense at this? They discounted stuff below cost sometimes to put mom and pop retailers out of business. Now GC is the one crying fowl. That is about as hypocritical as it gets. I’ve been playing/buying guitars for 33 years. Why should I pay a premium for idiots to tell me what they think about gear? I bought a Visual Sound delay yesterday. GC did not have it in stock, but said they would order it. I said I would get it from Chicago Music Exchange because it would come faster, and I would not have to pay tax. The GC kid tried to chastise me about my civic duty to pay tax. When did GC become the moral compass of gear prices? This is hilarious. I bought a Wampler Paisley drive at GC last week, and the salesman told me that the management took away his discounting privileges. I said I would take it at a discount, or I would get it somewhere else. They sold it to me at a discount. They must think I’m stupid. But this is the business cycle. It’s not personal, it’s brutal. Nobody argues with me at Amazon. They don’t assign me derogatory terms because I demand a discount. They just step up and do business. It’s time for GC to go away. They don’t have anywhere near the gear they used to, and all the cool brands have left the building. All they are selling now is commodities.
You are looking at this from the perspective of a customer. I ask you this, does the manufacturer deserve to have a sales person represent their product honestly and have knowledge about features and benifits? Should that skill set (honest and knowledgeable sales staff) have a place in the retail space. If the answer is yes do these sales people deserve to be paid appropriately. In the retail world I suspect that you are proposing (the customer sets price and has I need for sales expertise) you will find that the prices go down rapidly and so does the quality and innovation.
Actually, I have a unique perspective. I sold guitars retail for 20 years, and was a sales rep for a guitar company for a short time as well. I left the business because manufacturers were not doing anything to protect the independent dealers. We had to actually pay our bills. And if we wanted a cool brand, it took tons of money and effort to acquire that brand. We could not take that brand to a different location if it was too close to a dealer that already was representing that brand. You say the manufacturer deserves to have a knowledgeable sales person represent their brand? What they deserve is a swift kick in the butt for letting it come to this in the first place. They made this bed with GC because of the initial growth to their business. It would not take a rocket scientist to figure out the eventual outcome. All of my friends who were very knowledgeable, and great players, and excellent people have left and been replaced by kids with a fraction of their experience and talent. The fact that there is actually less business now that GC has the lion’s share of the industry should tell you something. I’m good friends with a young man who works at a GC, and I try to help him out when I can. But the best thing for him would really be to get a job somewhere else. I just bought a DV Mark Maragold amp from him. I’m sure he got chewed out because I didn’t buy the protection plan. But maybe I should have just bought it online and saved him the headache. I’d already made the decision to buy it because of what I saw on the web. I don’t think innovation will suffer. I just think it will be expressed through different outlets. A person can find out anything they need to know about a product using the internet. If something is cool, it will sell.
As a product development manager at Peavey I bent over backwards protecting independants. The independants screwed themselves by chasing GC to the bottom with low priced crap and continuing to support manufacturers who dropped their pants for GC. As for the internet your right you can find out anything, for example I just found out that Elvis is alive and playing in Cleveland tonight.
I don’t think they had a choice. Customers wanted Fender, Gibson, Marshall, Taylor, Martin. It was an uphill battle to switch them to something else. I for one got tired of fighting it. It finally comes down to the fact that it’s not worth pulling your hair out fighting the name game, not for what working at a music store pays. I’ve never heard anybody blame independent retailers for doing their thing. That’s a very interesting take on this whole mess. I certainly don’t share that viewpoint. But you can blame me, and I’ll blame you. The end the result is the same. We both left the industry. And sure the internet has bad information. But most people can figure out what’s up.
I hope they were crying foul and not fowl, as birds have nothing to do with this
Some years ago, during the NAMM show, I took my wife to the amazing White House restaurant. We were seated in one of the small “bedrooms” (it’s a converted house) with 3 other tables. We sat next to the largest table.
Early into the dinner, we realized that the large table was going to be an “in-your-face” nuisance. They were talking really loud, and came off like a group of investment bankers caricatured in a movie. We couldn’t help but overhear the conversations. It was a group of Guitar Center execs. They had a guest at the table, who turns out was Uli Behringer. We asked to be moved, but the place was packed (as it always is during NAMM).
We found it impossible to shut out the noisy conversation, which got deeper and deeper into Guitar Center telling Uli how they were going to take over the music store world; how they wanted to branch into other countries; how they were planning to start opening smaller and mid-size stores in “mid-market” cities (against the mom and pop stores in those small towns).
It was one of the worst dining-out experiences of my life, and I will never forget it. I suppose all those GC execs are long gone, but what I remember most about that evening many years ago is that everything was reduced to money and market share. I heard no talk of music, or creativity, or joy, or community, or any of the better qualities we normally associate with a healthy human experience. Just money, power, market share, and world domination.
i am shocked to hear they were there with behringer as they stopped selling behringer gear and they have some kind of issue with both companyes
The first 3 words, “Some years ago”….. they didn’t stop selling Behringer “some years ago”. He is referring to when they had a relationship.
The sinister NWO cabal ruling the music industry plays dirty games against our lives.
Guitar Center just attempted to scam me! DO NOT BUY from them at this time. They marked a 199.99$ 7 string down to 149.99 until January 18th. They offered an option to purchase blemished for 135, but they sent everyone that bought new all the blemished guitars they had in stock. When I attempted to return the guitar, I flat out called them out on their practice. They put up a 45 minute fight, trying to say “the blemishes weren’t that bad, we could buff that out”. Once I told them I don’t want the guitar, they lied to me saying they couldn’t refund the giftcard as a company check. Luckily, I happened to have my friend with me who just got a refund in the form of a check 2 weeks ago. The store manager came over and looked it up in the system haha! I bet the guy I was dealing with felt like a complete idiot. At the 50 minute mark, I got my 160 back and got rid of the chipped and scratched guitar they chose to send me as “new”. Best of luck trying to deal with this incompetent company.
I just have a question about PE: in an interview, the CFO of Guitar Center says: ” At the end of the day, the debt holders don’t have ongoing cash flow necessary to pay off the debt. No LBO does. That doesn’t happen.”
OK..so if the debt holders can’t service the debt from cash flow where does the money to service it come from? Clearly the debt isn’t being written off by Bain.
By the way fantastic article. I’m a graduate of a business school where we are pretty supportive in general of PE. They say “It dislodges incompetent managers who are entrenched…or it unlocks value by optimizing the capital structure”. Maybe there’s some truth to it but from my experience the incompetent managers come in AFTER the LBO. Usually Investment Bank or McKinsey a-holes that don’t know the business but have a playbook handy.
If that Times Square store isn’t a pet project then I don’t know what one is.
Great question, and one that speaks to the core of Eric’s article – the precarious financials of GC.
Lots of folks have strong opinions about GC based on their customer experiences and express their sentiments here. But I for one would like to understand GC’s financial situation better.
Perhaps Eric could briefly summarize his main points for us again. I’m a small business guy and don’t really understand this high-flying, voodoo finance too well. And then I’ll have a quick answer for all the Guitar Center stooges that post to my Facebook page stuff like “Guitar Center is not going out of business”, “you lie”, “stop spreading rumors” …
Thanks for the article. Behind the scenes, I wonder how much market analysis GC has done on trending buying habits of musical equipment. There was a day that I had to go into GC to buy keyboards, stands, mixers, wires, speakers for making music. I had to go there to buy turntables, needles and dj mixers. Today, I download Logic directly from Apple, plugins directly from Native Instruments. A laptop is today’s modern instrument for a large percentage of people that used to frequent GC. On the dj front, my software is directly from Serato or Traktor sites. Sure, I need some physical gear too, but got that stuff on craigslist or eBay. Yes, you can’t download a guitar, drums or any traditional instruments. But few bands make it today. The truly successful artists are dis, electronic-based or vocal talent. Regardless of all the money fixing GC has done to position itself, the customers aren’t there to make their payback promises a reality. Now, it just seems like a game of digits behind closed doors without a full analysis of today’s true market.
As a very small music store owner and performer for many years I have watched this company from both sides of the fence. 1 as a musician and 2 as a mom and pop business owner. Even had worked a guitar center for a whopping 11 days. I left that job in the late 1990s because it’s leadership didn’t care about the customer. We were not hired for our knowledge of product and preferred we treat the customer like cattle. Get them in the gate, take their money , get them out. I was actually told this by the manager. This ended my relationship with anything GC. And GC isn’t their only brand name as some of you well know. But many. Look it up.
I have been talking about their business model for years which is disaster for everyone. This “it’s good for the customer” slogan that has been ingrained in the online amazon shopping addicted public mind hasn’t been good for anyone. You can’t sell product constantly for less and constantly make higher profits. In attempting to do so you end up with what we have now, out sourcing. From jobs, now to product. The world is playing this game. Behringer played this game. Moved operations to China and equipment failure rates climbed. Products that used to be solid and long lasting became unstable and now have a shelf life of around 5 years. As both a seller and a consumer this is why the used market has become so appealing now. All this cheapening of product and labor costs lead to one big thing. Fewer decent paying jobs, which means we can’t afford to spend as much over all. The minute we started devaluing products by discounting them to rediculous prices was when we decided to sink our economic ship. For guitar center it meant zero profit, fewer less knowledgable employees, frustrated customers, and lower quality products. Fender, Taylor, Gibson, and the like have snubbed the small dealers over the years by whoring themselves out to GC with exclusives. It’s damage is about to be tested with Fender who is now heading for only on line sales. A bomb dropped at NAMM this year. Fender parts are already being pulled from vendors. These companies like Behringer and Fender won’t be met with open arms at a store such as mine. And until prices and product return to profitable, stores will not be able to hire. I am the owner and employee. Would I love to hire somebody? Sure I would. But I can’t. And if people aren’t making a livable wage, they won’t spend and won’t be able hire. That won’t happen until small business’s like me can turn a higher livable and sustainable profit. Online sales over all have killed many businesses. Have destroyed our tax structure and brought us higher local taxes. It’s way past time to turn this ship around. Hopefully GC will go down like it should have years ago. And hopefully no large chain will take its place further poisoning the pond. What would happen is the resurgence in small mom and pop retail stores and the rebuilding of more solid and sustainable business. Rather than the big box failure we have currently. Look what the greed of a few has given us. Walmart and GC are the prime examples. The fall of these businesses would also help bring innovation back. Something Fender & Gibson haven’t done for decades.
Well spoken, Kris…and I do wish you well with your own business. At least one musician remains selling his passions. Here in the Valley, I ran across at least one other who was selling fish and supplies instead. I know, it’s probably just me, but it rather broke my heart. I guess it’s always been a tough field for profiting…And unlike the heros of the wealthy/lazy business types, the music industry never used to be an AMWAY-TYPE field…where the soap wears out and constantly gets resold!
There will always be musical instruments available if there is a demand for them. The distribution model will change/evolve, prices will fluctuate, but life goes on.
Such as the case with Guitar Center they are changing with the times. Difficult choices made and they are evolving and life will go on for them.
I have worked in music instrument retail for over 20 yrs now on the East Coast. I’ve seen the damamge Guitar Center has done to not only the smaller independent stores, but the vendors as well. It’s a delicate situation. The vendors need them for the exposure and to (of course) sell product. (yes, all stores PAY for the gear on the floor). However, they hold the vendors “hostage” for deeper discounts. The discounts only hurt the smaller dealers as product availablity becomes poor and discounts given to GC are ‘made up for’ by charging smaller dealers higher prices. Where this bit GC in the ass whas when it came to payment. GC has to borrow money to make minimum payments on the credit lines to their vendors. Once you add the interest rate the discount on the product is then offset. So, who pays the difference?? the sales people do with low pay. Then don’t forget advertising! GC pays A LOT of $$ in ads.
But here is the bottom line…..
GC banked on a 10-20 year “plan” and investors bought into it. The plan failed. Now I see vendors pull out of GC and cut the losses. At some point GC will sink. It’s the greatest smoke and mirrors act in retail. Ever!
* I also want to add that GC banked on having their ‘private label’ (i.e. Harbinger, Sterling Audio) products be the cornerstone of profits. That too failed.
This just in from a GC employee (posted to my FB page):
Andrew Byrom (author of the comment to follow): “Eric failed to realize Gc is no longer in debt. It’s debt was payed off when Bain sold us to ares management and also payed off the debt. Gc is no longer in debt nor ran under Bain capital. We’re opening new stores this year, all of our current stores are profitable and have not yet closed a single store”.
“Also, I am the walrus, koo-koo ka-chew! Oops, I’m also fired.”
Andrew sounds like the new CEO!
I was just told today that bankruptcy will be filed on the 12th.
Well, that apparently didn’t happen.
Yup. So much for “inside” info! I will say that GC is the master of delaying the inevitable. I still agree 100% with Eric’s assessment, though.
It will not.
Today is the 14nth dummy
Again, proof that GC employess know NOTHING!
Yeah, it appears that GC employee is still high from drinking the old Kool Aid served up by GC’s CFO Tim Martin back in August 2014 before the shit really started to hit the fan:
“They (Ares) want to know how can we build the stores faster, how can we retrofit them faster. They’re pushing me for faster, not slower” Martin said of Ares. (source: “Bucking trend, Guitar Center plans big expansion, overhaul of store fleet” – Forune Magazine, Online: July 8, 2014)
But what’s really laughable? GC / Ares strategy to re-tool the chain into, get this – an organization that provides services! They’re ramping up their in-house recording studios. That’s gonna be a big profit center 😉 Oh, maybe they don’t plan on making money by selling recording studio services, but rather “education services” – how to use the gear they want to sell.
Quoting again from the Fortune article above: “But turning a guitar store into a full-service business is the prescription Guitar Center is betting on to save the day and make an eventual IPO within five years a possibility, with the full backing of its new owners, Ares”.
Talk about reading something that makes you spit out your coffee and guffaw!
Guitar Center will hire anyone. They are untrained in sales and untrained in product. The turn over rate is among the highest in retail. The idea that GC can become the 7-11 of music stores is insane. Opening more stores in dead markets is intended to make GC look like it’s growing when instead it’s more like maxing out your credit card with no intention of paying it off.
Interesting, at the GC where I shop, EVERY single employee there is capable of picking up most of the instruments and playing them. Several are musicians in their own rights with recording studios and backgrounds in teaching music. The Music Mentor series at our GC is not just an introductory session, but something they actively encourage customers to return to every week, and they build something into each lesson, from the first timer who is taking the lesson to determine if a guitar is something they want to acquire to the person who has been coming for three or four months.
Maybe some GC stores are filled with staff without knowledge, but the one I go to ? It’s filled with musicians who are eager to share their joy and knowledge. If GC crumbles, which I hope it does not, I do hope that our store will open under new management as a private music store — it would be a loss to our community were we to lose this place….which is always busy.
I agree, GC is great in my area. Always knowledgeable people and if the pick sales guy doesn’t know about guitars he gets the right guy. Guitar Center is going through an over hall from what I understand and there were past issue but they are going to get it in order and are again now making a profit and plan to grow in the next 5 years.
GC Studios is the lessons program Michael….not recording studios.
From the Forbes article I cited: “Some 55 locations have recording studios now, and that number will hit 85 by year-end. “
*Shrug*….I have been in several. “GC Studios” is lessons.
Whether they are “music (lesson) studios” or “recording studios” (as reported by Forbes) neither service is going to sustain Guitar Center. This is just their new “service strategy” PR spin (made visible by some store renovation and consruction being accomplished via debt).
I don’t really have an opinion on that since I have no information to base it on. With that said, I don’t care for the obvious axe you and others apparently have to grind. At the end of the day we are talking about people and the ill will is unsavory.
I think you’d be pretty hard pressed to substantiate I have an axe to grind. I specifically mentioned I find it heartbreaking that GC employees are going to be hurt by the hubris of GC / Bain / Ares. Oh, but I do stand my assertion those financiers and their methods are despicable.
GC is growing a huge lesson base in these stores. The lessons are a great new source of revenue for GC and they are paying the bills.
And of those 55 none are turning a profit. It costs money to run these “studios”. Lessons don’t pay the rent.
OH….I guess that’s why GC is $1.5 billion (with a B) in debt. If ‘all stores are profitable’ then why in the credit gutter? Why owe Fender, Gibson, Roland, etc.. so much money??
GC had approximately $1.6 billion in debt before the Ares deal. Ares’ equity swap only reduced GC’s debt by approximately $500 million, leaving it still over $1 billion in debt.
It’s “paid,” not “payed.”
Sheesh. Doesn’t anyone read and write English anymore?
Brilliant Eric! Thank you. And the next crisis will be the survival of Gibson and Fender, both leveraged and expansion drunk. The sad legacy of GC’s scorched earth market strategy has left music retail a smoldering ruin in many ways. In just as many ways, it has impacted music creation, too. Perhaps, to your point, the mom-and-pop “vintage guitar” shops will now have the sunlight to grow richer eco-systems and people will be able to explore instruments and find true community in the McCabe’s sense. And music will find new roots to flourish, too.
With ya Roy
I made a Xmas purchase of a keyboard for a friend. I’m glad it got through before they close their doors…
Never liked ..gc..full of useless hipsters who knew nothing about music…kinda like those guys who mix on a computer and call themselves musicians lol…there are some real djs out there…but not many….and that’s why most music totally sucks now…no real musicians anymore….spend all that time making perfect shit and no real music….I’m glad to see that mom and pop stores will get a chance now…the market has changed just like the music industry..the machine is broken…and nobody wants to fix things anymore…until it’s too far gone
You know, once you get past the hubris of GC / Bain & Ares there’s a heartbreaking story … those bastards intend to take this pile of shit public again and are pumping their employees and bondholders full of BS about becoming a full-service organization with renovated stores, new stores … this is all just another IPO wet-dream that, if it succeeds, will make a small handful of hateful pricks really wealthy – all on the backs of unsuspecting and underpaid “sales associates” who are supposed to sell underpriced gear and services while putting local independent stores out of business. And if they make it that far, the newly-minted IPO kings will watch the whole house of cards collapse as they walk away. This is not about music. Its about mammon.
I hope it’s small and local that benefits, concerned that it could just as likely be internet retail, mostly amazon and ebay. Will brick and mortar even exist in a decade?
With Apple Loops, who needs musical instruments anyway. So much trouble to learn to play, when I can just Google/Youtube what I need to know. Music teachers are a real PITA and make you listen to boring music like Miles Davis or Bach, making me learn some stupid scales and theory. And when would I have time for Twitter and Facebook and hanging out in chatrooms. Besides, DJ’s make the music **and** the money nowadays and I can just Torrent download those apps for free!
You may be correct, and please, eat a bag of dicks.
I was being sarcastic Eric…Composer/ $100K in studio gear.
Goddamn it, Lone Ranger, do you realize the number of non-sarcastic 19-year olds that say this? You fooled me into sincerity – goddamn it!
My favorite retort to the last time I over-reacted to a sarcastic remark was, “Take it easy, Francis,” which was appropriate.
Ha…you left out the word ‘entitled’/19 yo… And being in LA, destination for fame & fortune…! Best…
Most appropriate if-in fact-this should end up as an obit. for G/C. It should be written by someone who loves music. CHuck the greedy pigs who confuse market science with invasive presence!!!
Loops for Sony ACID are way cooler than Apple.
But yeah — I dig the sarcasm and the sad truth behind it.
Shot-out to Acid’s original company Sonic Foundry. Great people and products.
Soon, the latest scab Guitar Center execs will try to challenge my authority.
The funny joke is – I’m not attempting to obtain credibility or authority. You can believe it or not, if you have skin in the game. Otherwise, please ignore the crap out of me!
If I’m wrong, awesome! Point it out!
If you just arrived from a buttons-and-sequins shop, I’ll bet you have trouble with this challenge.
El Gringo Loco
Bain is to GC as Harmon is to its acquisitions a/k/a being “Harmonized”
This is awesome – I guess Darrell Webb is sending out a response to employees. Somebody leaked a copy to me.
Guitar Center is the Musical equivalent of Best Buy, same problems. I use Guitar Center the exact same way I use Best Buy. I go there, look and play with actual items, then go home, get on the internet and buy for less and without paying sales tax. Every single time I have tried to work a deal on something over a few hundred dollars at Guitar Center and try to get them to be competitive with their pricing, they get rude about it and won’t deal. I was ready to buy a $2600 Les Paul there a few weeks ago but the additional 8.5% sales tax on top of their price just made it not a good financial decision. And of course, they would not budge on the price. So what did I do ? I got on eBay and bought a much nicer Les Paul for $3100 that Guitar Center would have sold for $4000.
Dear “A Person”…and I wonder how many would understand exactly what you are telling them? You see, THIS IS HOW G/C used to operate. For those who really loved music and were trying to make their starts in the business, you could walk in there, sample an instrument, talk with an incredibly knowledgeable (likely trying to make it with their own band) employee and then negotiate a bottom line/price where you walked away feeling like you gave them a bit of profit and you got a really good deal. We used to do it with reel-to-reel tape for the studio where we recorded. And then-suddenly-one day, I walk in and they have upgrades and a bit more fancy facings and lots of prices posted everywhere and they were about 30-40% more expensive than they had previously been? And I sat there strumming and was approached by an employee, but then ignored when he saw someone he knew better. As I walked out, I felt like I was leaving an old friend for the rest of my life. Now it appears I might just have done so? Just like “A Person” above, online sales are generally a better deal, sometimes even offer the most updates items and sometimes offer great savings on shipping while not charging sales tax…of course no reason to deal with amazon as I do not purposely avoid shopping locally. But I really do have a budget and things have gotten very expensive to live in L.A. these days. I will truly miss Guitar Center and some very good times…
To ‘A Person’ – The fact that you admit to using a store for info and then buying on-line is rather disgusting. Do you work for free?? Then why make other people do so. Look, I hate Best Buy. They call it the “Amazon showroom”. But, if your clear intentions are to buy on-line then don’t waste someone’s time. goon-line and buy your gear without tax. Pay the shipping. And when you have questions or problems call the phone number for the seller on Ebay and let them help you. Also, 99% of vendors will NOT honor warranties from Ebay sellers. ALSO, a lot of what you see on Ebay and Amazon from NON-AUTHORIZED DEALERS is counterfeit. Just check out sites like DHgate.com and you’ll see where these $75 Shure SM58’s come from. I work for a music instrument dealer. I can tell you that all music stores pay ABOUT the same for every item. Some less than GC. GC claims they get a “way better deal due to volume”. That can be true.
Let’s say GC buys a guitar for $2,000 that sells for $2,800. GC may be getting an extra 10% discount. OK, then they really pay $1,800. Now, factor in the interest rate for the money GC has to borrow to pay the $1,800. Also, take out about $30 for advertising and promo. Now that guitar is about $1,770 to GC before the 9% interest on the loan and $10 commission to the sales person. Anyone claiming that they bought this $1,770 guitar for $1,600 is crap. GC is stupid but not dumb. Would you sell a $10 bill for $8.00?? NO.
dealers like mine buy less than GC (we don’t have 300 stores like GC). BUT we pay cash for that same guitar at $1,800. So, we get a quick pay discount of say 3% which brings it to $1,746. We don’t pay advertising like GC. So now we can sell that guitar cheaper than GC.
The idea that GC is so big that customers get better deals is BS! Vendors today would rather sell 100 guitars to a small dealer and get paid in full in 30 days than 800 guitars to GC and get a few bucks a months over many years. And when you are $1.5 BILLION IN DEBT yo9u don’t feel good selling GC anything and thinking you’ll get your $$ back!
I hope you plan on sharing that damage control letter with us Eric. I can’t wait to see it.
Great article and comments. There’s a Guitar Center in town here but I usually try to buy local so I ordered a new amp from a guy in town that actually gave me a better price than GC. It finally showed after three and a half months and it wasn’t working right so was sent back and we were told 3-4 months for another. I gave up and ordered a used one from GC which arrived in excellent shape and looked new, still had the store tags on it. Great, but one channel wasn’t working. Had a look and a pre amp tube was mashed in wrong with bent pins. A new tube and it works fine. To another person it could have been a return or a service and they sent out a practically new amp that needed maybe 15 minutes and a $10 tube to fix for $400 off, plus paid $90 shipping. WTF? I guess when you’re in hock up to your eyeballs $500 is nothing.
GC definitely has it’s problems, and on new gear you can get 100% of it cheaper on the internet. But for used stuff GC is still a great place to deal. I found a Gibson Firebird Studio at a California GC location on their website that was listed for a great price. I paid sales tax, of course, but the shipping was only $22, so all in all I got a killer deal on a really hard to find guitar, that arrived to my front door in great shape. I found a bunch of great deals on used combos there too. There will always be some Chachis working at GC, but in my town I have buddies that work in a couple of the locations and about half the time you can find someone that doesn’t have their head up their butts. And for pro audio and cables it’s great having the selection available before practice or a gig. Come on GC! Get your act together!
most reputable musicians avoid GC like the plague and sell more choice gear to reputable local dealers in the area. While they do have nice gear at okay prices you’ll find much better stuff if you look at the mom & pop shop.
Not true at all. Many major musicians and musician supporters go to GC. They sell all the way from a pack of strings to a mega thousands of dollars guitars that are like art and sometimes signed by major musicians.
Actually, you can’t get 100% of it cheaper on the internet. Vendors have strict price restrictions on-line. Indat, a store can lose their dealership if they violate that. You best price comes from calling a store and working out a deal.
K.A. is correct…MAP (Minimum Advertised Price) pricing holds dealers to what they can advertise the product for. However, many manufacturers don’t hold dealers to this especially if it a large volume dealer. if the manufacturers did, then the price for Product A would be the same nationwide, which can be good and bad.
I have to say this piece is a complete waste of time. Save us the moral yack. Four simple facts: the company overlevered at the wrong point in history, it over expanded to claim “growth,” internet sales crushed profitability and the “business” of music remains stinky. There will be a massive store closure to more core markets and ares will try to sell to someone else. Life goes on. Boo boo.
I think the fact of the matter is there seems to be no future in chain store retail for musical instruments. Daddy’s Junky Music, a former significant New England competitor to GC, went down about two years ago when it couldn’t keep up with its loan payments. I originally thought it couldn’t keep up with GC because its customer relationship policies weren’t as good. After reading this article, I am beginning to think otherwise.
Sounds like there will be some good deals on guitars and amps coming up soon!
Most likely not. Even IF GC were to file for protection thay are still bound by the price agreements set by the vendors (i.e. Zildijian, Shure, Marshall, etc..) Any break in that agreement could result in further actions against GC. You will most likely see is product sold either back to the vendor or to other dealers. If GC hasn’t paid for the product in full they don’t own.
What makes you think that GC doesn’t pay its vendors in full within terms once it receives the inventory? I would think that Ares actually owns the inventory, at least to the extent that it has a priority security interest in it, perfected by a UCC-1 filing (although I haven’t actually done a search on it).
If GC paid it’s vendors they wouldn’t be such debt. I work with all of these vendors. They are owed a TON of $$ from GC. They owe Fender Guitars millions. GC doesn’t wown the stores, they don’t own all of the product either. Just like people who make car payments don’t own the car, the bank does. To add to your statement WHO BAD, GC made deals with some manufactures to buy a certian amout of product (as per their “we have you by the balls” discount. GC orders xx amount of ???? and they get an extra XXX discount.
The problem is simple….GC can’t hold up their end of the deal. Now you have suppliers holding onto excess gear as GC can’t (or won’t) pay for it. But that’s great because dealers like me can buy the excess great for a better discount and pay cash.
I used to work for MARS Music, another big-box music superstore that has been gone since 2003. Most of the major chains have a Net 30 account with their vendors and rarely pay within that anyway. Always in arrears. I remember a customer coming in place an order for a Yamaha drum and when I called Yamaha to place the order, they told me that Mars was on a credit hold due to lack of payment and that Yamaha was no longer accepting any orders until the past due was made current.
GC doesn’t pay in full K.A. I have a friend who works for their GCPRO division. He went to place an order with a huge P.A. company but was told the account was put on hold. He had to email someone at the corporate office to pay the bill so that new orders could be place. He told me this happens a lot.
Bring the mom and pop stores back I say….
What a terribly written piece. It reads like a senior thesis. Way too verbose and self important.
I thought it was great but then again, I like Beck.
Reads like a piece out of the HBR or the Economist to me. Sometimes you can’t boil economic reality down to the level of a typical Facebook post …
It was very well written! Unless rooney72 you work for Bain, or Ares, or GC.
Wow great article. It’s funny, I was telling my friend I thought this was happening a while back. I don’t understand much about the financial situation (thanks for clearing it up a bit). I just kept noticing that every time I went into a guitar center I would end up leaving without purchasing anything and trying to remind myself not to go there anymore. I would go to buy a 14″ coated Ambassador or Emperor drum head (Pretty much the most common drum heads that almost every drummer needs from time to time) and they wouldn’t have it in stock but would offer to order it for me. This is ridiculous of course as I can easily order it myself from any number of online retailers probably for less. I also noticed a lot of turn around in their employees. I would see new teenagers working there every time I went. And it always seemed to be getting worse. Less inventory, less knowledgeable staff, less convenience. I have to say I am excited about this. My favorite local drum store closed a while back. The guy there told me it was tough to compete. But maybe with one less huge competitor there will be room for the small shop again. So I can go there and talk to knowledgeable people that remember who I am and pick up sticks or heads or whatever cool stuff they have in stock at the time.
Unlike Best Buy or Target where you pretty much know what you want coming in the door and don’t need any help. Music stores sell gear that does require Q&A knowledge. If you are going to drop $4,000 on a digital console you want real help. Knowing the ins and outs of a A to D converter. GC is Ok at selling sticks, picks, heads, and cables. It’s the high dollar gear that they can’t support. But remember, these are $7.25 an hour “kids” with no training. GC would need to pay at least $60k-$80k a year to someone with serious audio skills. Something Gc would never have the money to do.
But, GC is supposed to be the hugely profitable franchise music instrument shop. If anyone has the money to hire experts it’s them. The only thing that may change that is the need to support massive corporate overhead such as paying a executives massive ceremonial salaries. You also wouldn’t need to pay them 60k to 60k. These are people who are simply supporting well documented equipment for mainly home enthusiasts. Simply having people who are full time, enthusiastic, and put through the occasional workshop would be good enough. That’s much more the 30-50k range.
Andrew – Are you serious or just on crack? I work in this industry and trust me, you won’t find the right people for less that $40k a year. Those who do have the expertise don’t work for GC, they work for stores that pay them well and thrive.
You’d be surprised. I own a music store outside of Louisville,KY. Been around for 50+ Years. Most of my guys have worked there for 30+ years. ..their knowledge and talents are nothing less than amazing. And I can tell you they don’t make nearly that. Or nearly what they should. But because we as a small family run business have to compete with companies like GC.. we can’t pay them as much. Not that I don’t want to…but we just can’t..we are trying to keep them jobs. Most do it because they love it. And that’s all they know. I love my employees. And maybe if this article holds merit and from my own insights it does…but Maybe we can get back to the way things use to be. Because if not. There won’t be anyone with music knowledge like my guys you can go to…or someone who remembers your name…what drum heads, sticks and strings you buy. And there won’t be anyone around to show you how to use it when you buy it from some 16 year old kid or online…. but hey what do I know?
Good story! I agree with Behringer, a smaller group of focused dealers is better for everyone. Being an ex GC Manager for 13 years I remember the “Good Ole Days”…..In the early years GC still held the same Mom and Pop store philosophy, then after they went public I saw the writing on the wall……. Farewell old friend……OLD FRIEND……
Good article; however I’m always suspicious of “insiders who wish to remain anonymous”. I watch both CNBC & Bloomberg religiously and NO ONE is anonymous when talking about companies and the issues similar to those faced by Guitar Center, so I’m concerned as to why these particular “sources” feel the need for anonymity. Usually means they don’t really know what they’re talking about, ergo, they “wish to remain anonymous”.
I’m just sayin’…
Also, any chance you’ll take on Apple due to their abject greed, fresh off the biggest profit in history, especially in light of their abuse of Chinese workers as well as abjectly obscene margins and markup of their iPhones/iPads? Or is such scorn and derision reserved for the other “evil, greedy corporations”?
Sounds like the obama mindset.
(’13Burrrn!!!) I can definitely confirm a number of things in this article however would only do so anonymously in fear of legal reprisals. Given how some people come across some information, will often dictate whether they will disclose their identity.
What of all those guitars? Have a bulk auction. This is common place today, once all government regulations were removed it gave business’ to become over extended or to barrow to much money.
An article came out yesterday that investors just pulled $11 million dollars.
Remember that’s out of a total of $940 million. Plus, it’s not “pulled” – it’s “traded to a secondary bondholder at a lower cost such that the first bondholder takes a loss of 17% in less than a year.”
The original debt remains on the books to be paid off in a timeframe of “never, no freaking way.”
There are a lot of details to master in this story, which is why it’s such a ludicrous match for SELLING STRINGS, PICKS, AND AMPLIFIERS.
Al least this new article is causing more of the doubters to wake up!
Can you provide a link to the article? Never mind. I found it.
“Guitar Center Corporate Is Apparently A Madhouse Right Now” See: http://geargods.net/white-collar-criminals/guitar-center-madhouse/
Former senior GC management here. Ahhh, it would be so much fun to join in. Even pointed anonymous comments would leave an unmistakable fingerprint. It’s not about being a coward, just common sense. The industry is simply too small. Unless I want a career as a pundit (I don’t), I have to clam up and lurk. BTW, I think the scrutiny is healthy. Good on ya.
Sad. I liked Mars Music too, but they went away as will GC. As a 54 year old that has played guitar for 40 years, I’ve purchased plenty of gear. Used to play out. Have purchased sound equipment and guitars there in the past. Several observations.
The sales help isn’t helpful. Unless you are a first time player, you probably already know what you want when you walk in the door. You pick it out and pay for it. And yes I have looked at a product there and purchased online. Sorry – it happens. My playing has migrated to making my own music or covering someone elses music. I create drum tracks in Sony Acid. My iPad is my amp through headphones. I create tracks, then transfer to a Roland digital board that I’ve had for a long time (from GC). This is a hobby.
Of my last four guitars, three came from Sweetwater and one was built from Carvin. At each of those junctures, I interacted with someone who knew a considerable amount about guitars, music, and recording. The hobbyist musician usually knows what they want and how to get it, and goes to GC for strings and supplies – or to handle live an instrument that I intend to buy later. Most of the strings on the guitars at GC I’ve played are corroded and the instruments haven’t been wiped down from the last player from prints. Some have dings already. Not a value.
Why would I go to GC to interact with someone that isn’t knowledgeable to buy an instrument that feels used?
It’s funny, that last bit about rusted strings and poorly maintained instruments was why I ended up writing about GC in the first place. When a local guitarist told me about the junk bond thing, it only made sense in the context of my many experiences at Guitar Center where the instruments were just, I dunno – tired. Management was clearly trading in semi- to full-professional musicians for younger, less experienced, cheaper sales people. And the brand selection was getting thin – I never was happening by something cool or interesting at GC like I had in prior years. The bond discussion is really a distraction from the larger issues of managerial failure at the level of what makes retail a success. In any retail environment, you have to have a big selection of equipment, always well maintained, and great people with whom to interact. If you don’t, you’re dead.
241,810 clearance items on GC’s website. Somebody wants to clean house. http://clearance.guitarcenter.com/?source=4WWRWXG9&kwid=e08db0479c8e4719bcf3b8041f96b7f0&gclid=CO6f9_y958MCFcdgfgodm7AAIA