 Considering how many things are going on in the world today—as well as our industry—there probably could have been 100 important questions we could have asked executives for this year’s version of our Talking Heads feature. But, for space purposes, we narrowed it down to two questions. Here is what we asked this year:
1. What are you doing to ensure that when the economy comes out of this malaise that your company will come out on top in your category?
2. Do you think the current number of MI independent dealers will rise, fall, or stay the same in the near future? Please explain your answer.
Without further delay, let’s dig right into the answers, shall we?
Question #1:
“eMedia is currently developing several new products and establishing new distribution partnerships to build our catalog. We are also updating our flagship products with new features and content. Instead of downsizing, we are growing our product line to ensure future growth. When the economy turns around we will have a larger share of the music software and music instruction market. We are also working closer with dealers and trying to tailor promotions and merchandising programs to their needs.”—Dave Kurtiak, eMedia
“Hohner Inc. is marketing more aggressively than ever and we’re really focusing on building our brands. The state of the economy forces us to ‘raise the bar’ on the quality of our promotional efforts and to be more critical of our own planning. The margin of error is smaller than ever as we really need to get the biggest bang for each marketing buck spent. When the overall business climate improves, we hope to be well positioned for additional growth.”—Scott Emmerman, Hohner
“Audix is now going into its 25th year, so we have experienced several up and down markets. The current economy is more dramatic than anything we have seen, primarily because it is global in nature and affects every part of the supply chain. Like most companies who are stable, conservative, and well-managed, we are trying not to overreact. We have not in any way had to downsize, and in fact we have hired some new people recently who would not have normally been available. We are reaching out to our MI dealers more emphatically to show our support. We are getting more creative as far as stocking levels, pricing, and tools to help sell through. We have recently expanded our Web site to be a more valuable resource for dealers, contractors, and end users. During these uncertain times, retailers are forced into looking at the brands that they want to support. We are pleased that many independent dealers look at Audix as the kind of company they want to do business with, and when the smoke finally clears and the economy turns as it always does, Audix will be among the top in our category.”—Cliff Castle, Audix
“The answer is contained in what we are not doing. We are not radically pulling back on activities. We are not panicking by slashing R&D. We are not retreating from consumer promotions and other marketing events to increase our products’ awareness and consumer desirability. What we are doing, is re-evaluating our legacy activities to reconfirm the value they bring to customers. If money is being spent where the value to our customers cannot be identified and in most cases quantified, we are re-evaluating the expenditures. However, rather than ‘saving’ the money, we are seeking ways to invest it in ways that will provide greater value to our customers. We also look for promotions that will increase dealer traffic in their stores.”
—David Via, D’Addario
“Since we sell our Greg Bennett brand only to independent music stores, our programs and promotions must be tailored and scaled to a diverse group of retailers. We are pushing our Music Educator Program to help dealers promote our brand and the minimum 50 percent MAP margin through their teachers and studios. In addition, we have new product and sales training videos on our Web site for store owners to use with new employees – and yes, I know it may not look so rosy today, but we will see head counts grow at quality independent stores in the future. I ask dealers if they are working with local schools, civic groups, churches, summer camps, clubs, radio stations, local guitar heroes, and anywhere groups of people congregate. There are cheap opportunities to promote in every market.”
—John Hawkins, Samick Music Corp.
“I think the biggest thing we’ve done to help prepare for the eventual recovery of the economy has been to rethink our processes and intently listen to feedback on our products. Even before the economy took a nosedive, we had already started to streamline all of our processes across the board, basically rethink what we needed to do to get the job done most effectively at our high expectations. This rethinking has included all areas...manufacturing, marketing, research and development; basically all facets of our business, and like I said we started this early on so we have been ahead of the game. Another thing to note is when I say ‘streamline’ I mean exactly that, not skimping! By continually adapting our production processes we’re able to build the same quality product in a quicker and more effective manner, thus reducing overhead. As part of this we also refocused day to day expenditures, created better inventory control across the board, and generally looked at all the ways we’ve done things and see if there were simply better ways of doing it.” —Chris Catero, Krank Amps
“We are assured to come out on top when the economy comes out of this malaise, because we stayed on top or even picked up ground through it. During this downturn, we have worked to streamline our practices in shipping, receiving, and warehousing. While we were moving warehouses, we were working on expanding and updating our product mix. We passed the savings on to our dealers, and I believe we have more of our brands in stores at better prices than ever before. By the time the economy picks up again, we will have the best new items available, none of the old stock, and a faster and more efficient shipping system in place than we have ever had before.” —Troy Richardson, Tornavoz
“Obviously, the current state of the economy is affecting every corner of the world. But we’ve found that, historically, people look to music to help boost spirits during trying times. That said; we’re doing everything in our power to do what we’ve traditionally done, even better—which is, reaching out and continuing to bolster our connection with our consumers through our dealer network. By increasing that ‘connection’ via sales, marketing, advertising, public relations, and consumer relations efforts, we’re looking to drive consumers to their local Fender dealers in an effort to build interest in our brand portfolios, and ultimately help stimulate the MI economy as a whole. Some of these methods include: artist and clinician tours, in-store ‘test drives,’ rebate programs, and our ‘Fender Days’ events.”
—Andy Rossi, Fender
“Going back to grassroots marketing never fails. Now more than ever, it is imperative that companies use all of their resources and work smarter. Maintaining a presence on the web via Web sites, forums, MySpace, Facebook, YouTube, etc…is cost effective and it reaches the biggest audience. It has forced myself to be the most creative I have ever been.”—Jody Dankberg, U.S. Music Corp.
“In the current market situation, it’s more crucial than ever to come up with distinctive products that exactly meet the needs of customers, including the right price tag. The great price-performance ratio of computer-based music gear combined with a strong brand also makes us less susceptible to an overall market downturn. Complementing this with highly efficient organization and distribution not only allows us to prevail in such a challenging climate, but even to achieve strong counter-cyclical growth.” —Daniel Haver, Native Instruments
“MXL continues to keep a strong marketing/PR budget even in this economy. A lot of companies sacrifice marketing and PR in a slumping economy, which we believe is a mistake because when the economy comes back, and it always does, they’ll be running to catch up. MXL is also fortunate because we can control the manufacturing and quality engineering and can build the highest quality products for the best price possible.” —Jim Mona, MXL Microphones
“This period has been small business boot camp for us. Before the economic shenanigans, we put our focus on production streamlining and creating the highest-quality products possible. While we have not lost focus on those crucial things, we have been forced to look for spare change under the couch cushions. We have had the time to go through our expense reports, and find a lot of areas to cut costs, and offer better service to our dealers. Our lead times have decreased, and we are able to turn around most orders on the same day, instead of one week. We will come out of this with a leaner, meaner company, and we will be the go-to company for getting a high-quality product, quickly.”
—Nial McGaughey, Solid Cables
“When all is said and done, Chauvet will emerge as a much stronger company in terms of staffing, and as a much stronger lighting brand in terms of our ability to bring products fast to market and in terms of the market’s awareness and acceptance of our promise of value. We are fortunate enough that we still have the resources to continue investing in new technology and new product development, which should consolidate our image as an innovator in professional entertainment lighting. We are also running against the current trend of layoffs by actively seeking and hiring talent. At the same time, we’ve always operated as a lean company so there is little ‘fat’ to trim. We’ve sped up the removal of excess inventory in slower-moving or less current items with special offers and promotions. If anything, these challenging times have helped us get better at what we do best: increase efficiency and speed of adjustment to market fluctuations, and offer value.” —Berenice Chauvet, Chauvet
“Of course there are no guarantees that anything you do or don’t do will give you the edge as business improves. However, I believe the strategy we have put in place gives us the best opportunity to grab market share and grow our business. The basic concept is to be flush with inventory, have those hard-to-get SKU’s in stock and ship in a very timely fashion. Companies that do not have a certain model in stock risk the customer going from source to source until the product is secured. We have been very diligent about not only maintaining inventory levels of all high-velocity product, but still stocking the not-so-active models which is critical to any contractor/MI dealer when the need arises. An area that we have actually increased somewhat is our message through print ads and our Internet presence with banner ads. ”
—Buzz Goodwin, FDW Corp.
Question #2: Do you think the current number of MI independent dealers will rise, fall, or stay the same in the near future? Please explain your answer.
“Unfortunately I feel it will fall. Given the current trend of more consumers buying online, not only for MI products but in general, I think there will be a continued shift from brick and mortar retail to online. This will mean the closing of more retail stores. I think MI independent dealers that do grow their businesses will be those that continue to diversify and offer the products and services, repairs and lessons for example, that online dealer can not offer.”—Dave Kurtiak, eMedia
“Over the past few years, strong independent music dealers have survived in the face of many challenges. Every time someone counts them out, they seem to bounce back and new music stores continue to open, so I think that the number of stores will remain the same overall. There is no doubt that it takes a more sophisticated business approach to succeed in 2009 than it has in past years and some dealers aren’t willing, or have not been capable of changing with the times. These stores will not survive. The local music store has an advantage over many other retail businesses. Unlike almost every other business, music making can be part lifestyle, part hobby, part dream, and a part of the community. Cater to the local market, understand that you have to aggressively find ways to bring customers into your stores, and make wise business-based decisions and music stores can prosper even in these tough times.”—Scott Emmerman, Hohner
“I think the number of good independent dealers for the most part will stay fairly steady and could actually rise depending on the fate of the big box stores, which seem to have a bigger struggle with increasing overhead and inventory of older and generic lines. I’ve spoken to many independent dealers, who while they admittedly barely survived the past several months, are now seeing a decent increase in business by carving out a niche of having unique brands and better service. Many mom and pops have gone with lines that are hipper and more in tune with the buying public in their respective areas, and most of these lines they carry aren’t necessarily in big box stores. And even though the economy has been bad, the interest in playing music has really escalated, which bodes well for dealers as the economy continues to recover.”—Chris Catero, Krank Amps
“Obviously many businesses in many industries are being challenged to survive in this industry. Our industry is no different. However, music retailers have always shown great resiliency and by nature are entrepreneurial survivalists. So, when all is said and done, I don’t think we’ll see significant overall changes.”—David Via, D’Addario
“In the very near future, I believe the number of independents will stay the same, but will be on the rise a little while later. I believe a lot of people are seeing the holes left by the big box stores and taking advantage of the opportunity. Even in this down economy, I have never seen as many stores add repair people as I have in the past. Also, there are a lot of schools and academies that are adding some kind of retail to their business models. Right now is an excellent time for someone to start up, as I am sure most manufacturers are offering smaller buy- ins to keep their products moving. I see boutique and specialty shops growing quickly. Just used gear; just acoustic. These shops offer an environment for their customers that none of the chains will ever touch.”
—Troy Richardson, Tornavoz
“While many brands have pushed large minimums and force fed dealers, we do not. We believe the dealers that stick to brands that offer nominal margins and no protection from big box retail or Internet discounters are not the retailers that will be in business one, three, five years from now. Our dealer base has grown by over 30 independent dealers since January NAMM. We added over 100 dealers—and lost a few—during 2008. My crystal ball tells me there will be fewer dealers who do not educate their future customers and sit, just waiting for somebody to walk through the door. I like being a part of their world and their community, helping promote where we can. I call these dealers The Hustlers—and they will continue to grow and thrive.”—John Hawkins, Samick Music Corp.
“The current number of retailers will most likely fall over the near future. First of all, there is always attrition regardless of the economy, so it is natural that we will lose dealers. However, we have hit critical mass right now with the ratio of dealers to consumers. Add to this the vast amount of products flooding the market, the slowing economy, and the trend to buy online, and I do not believe there will be any new retailers coming on the scene to offset the attrition. The keys to future retailing lie in developing music education programs in the schools and the community. Manufacturers and retailers alike are going to have to learn to partner with music programs if we are to expand our industry.”—Cliff Castle, Audix
“I think the number of independent dealers may rise in the near future due to a new breed of younger guys opening their own shops and making a go at it. It’s a pretty exciting time even though the economy has been rough. As some dealers fail, they will open a market space for a new entrepreneur.”—Jody Dankberg, U.S. Music Corp.
“Initially, I believe that the current number of independent music dealers will fall in the short term, as down economies tend to ‘weed out’ weak businesses that are oftentimes out of touch with their customer bases. However, over time, as the economy stabilizes and begins to grow, so too will our industry. The dealers who will weather the storm are the ones who provide exceptional customer service and those who have built a solid relationship with—and perhaps more importantly, an understanding of—their customers. Dealers who are out of touch with their customers will have a much steeper hill to climb. However, once Wall Street stabilizes, there’s no doubt in my mind MI will once again continue on as a solid growth industry.”—Andy Rossi, Fender
“Interesting question. I do not think we will see any dramatic change regarding the number of independent stores in the short term. During the last 10 years that segment of the industry was challenged by the consolidation led by the MI power houses. Now with the slowdown caused by the economic climate, there seems to be a slight void in certain markets that a large box house is attempting to fill. Trying times have a way of thinning the herd and the independent dealers that dug in and put a stake in the ground will continue to do better than just survive. As far as new store fronts and entrepreneurs capitalizing on the moment, I believe that will not likely happen in the near future.”
—Buzz Goodwin, FDW Corp.
“Indie dealers will fall, but new ones will take their place. That’s what evolution is all about, and the market is not immune to change. The whole retail market was up in the air with eBay, online, and global competition before all of this started. The pieces still haven’t fallen back to Earth yet. The dealers who focus on providing high-quality service, and great goods at a fair price will always have opportunities. People with entrepreneurial spirit will be able to do even better.”
——Nial McGaughey, Solid Cables
“The number of MI chain stores in the U.S. is still on the rise and this requires independent retailers to maintain their unique value proposition in order to stay competitive. At the end of the day, dealers with a unique edge, superb customer service, and a thorough understanding of and passion for our industry will prevail, and this will assure that they remain an important aspect of manufacturers’ distribution networks.” —Daniel Haver, Native Instruments
“Dealers who buy into the fear and media doom and gloom will fall; those who do not fall victim to the fear will rise to the top. If you stay competitive, customers will come and MXL has a big focus on helping the independents stay competitive.” —Jim Mona, MXL Microphones
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