an interesting read about Guitar Center.....

Aeolian

Platinum Member
Just because a certain Bain executive was recently in the political area doesn't make discussions of their business practices political. It's pretty easy to see how they operate. KB Toys is a prime example of what GC is headed for. There used to be a KB Toys in every mall I knew of. Now they are no longer. And Bain isn't the only firm engaged in this practice, just the one that's doing it to Guitar Center.

There are two factors at work here. The race to the bottom for revenue. Meaning that when you walk into a GC you are confronted with piles of Squire starter prepacks while the few nice guitars are in a separate room behind glass. The sales volume is in those mom and dad buy junior his first rig deals. And after that the next rig up. Same with the entry level kits and ZBT prepacks in the drum room. There's little volume in selling to pros. Outside of touring pros with artist consideration direct purchases, most local working musicians don't make enough money to be constantly buying high end stuff. They're making do with the broken down gear they've been hauling in and out of clubs 5 nights a week for the last 10 years. Maybe each of them makes a big ticket purchase every 5 years. Not enough to support a storefront. There is the other end of the spectrum, the doctor/lawyer hobbyists who do buy really expensive stuff. But catering to that is a dangerous game. Trying to keep up with the flavor of the month. I know the owners of a couple of good size local independent shops. They might occasionally take a gamble on 1 or 2 pieces of something. But there's no way they can stock up on a good selection. Too much risk in having high value inventory sitting around getting nicked up and taking a year to turn around. And the boutique makers who build this stuff can't afford to consign it or wait for 6 month payment terms. And so it's back to the cheap Asian made starter sets that you can turn in a month and get on net 60-90 terms from a big conglomerate.

The second thing, which GC has on top of all this is the business practices of leveraged buyout firms like Bain. It's hard enough to run a broad spectrum retail outlet catering to a specialty market. But to have someone come along and saddle you with a ton of loan and interest debt just because they could, makes it orders of magnitude harder. This financial hijacking makes money for the hijackers. But leaves everyone else holding the bag. Employees without a job and musicians without a place to buy stuff. Unfortunately for us, it kind of has to fall in order to get better. The leveraged buyout guys have to leave with their booty before the ship can be righted. As long as they are there, they will keep bleeding it dry. Only when they decide that the corpse is useless and not worth the effort to wring more out of, can someone else come in and start some sort of recovery.

At least there are a few independents around. I don't know where a Sam Ash is in the Bay Area. Not within a hundred miles of me that I'm aware of.
 

B-squared

Silver Member
OK, enough Bain bashing. Whether one is in the business of distressed businesses or distressed real estate, there is no guarantee of success. You are also dealing with things that were distressed to begin with. You can buy a distressed property, and be in the right neighborhood at the right time, and your property still might not sell. Distressed businesses aren't guaranteed to succeed either. Overall, Bain's distressed businesses have succeeded more than they've failed. That's why they are still in business themselves.
 

Midnite Zephyr

Platinum Member
Having worked in the retail environment for 19 years....I feel the need.....haha.




Right there......This is what is putting the local stores out of business.





So, you bought the items that make the independent dealer the most profit.....at GC.
You'd be better off buying a drum kit at GC because they are practically giving them away....where the profit is at, is in all the items you get at GC!!!!

And, we wonder why the store (we can't bare to spend time in traffic driving too) is hurting? Haha.

D
You have a point there, Derek. I don't have a lot of purchases, but I should rethink the ones I do have. I did buy my seat at Pro Drum Shop last time I was there. Now that I think about it, there is a cool music store down the road called Squid's. I should think about going and spending my money there first.
 

bermuda

Drummerworld Pro Drummer - Administrator
Staff member
Now that I think about it, there is a cool music store down the road called Squid's. I should think about going and spending my money there first.
I just bought a cymbal at Squid Music about a month ago!

I always do my best to shop at (the remaining) independent stores for a few reasons, including choice of specialty brands, used gear at better prices, and unless it's way out of my way, I prefer to support the little guy so they can stay in business. I resent that GC - in its present configuration - could become my only choice.

That said, there are GC and Sam Ash stores within 10 minutes of my house, so in most cases, they're my first stops when I need something.

Bermuda
 

Midnite Zephyr

Platinum Member
I just bought a cymbal at Squid Music about a month ago!

I always do my best to shop at (the remaining) independent stores for a few reasons, including choice of specialty brands, used gear at better prices, and unless it's way out of my way, I prefer to support the little guy so they can stay in business. I resent that GC - in its present configuration - could become my only choice.

That said, there are GC and Sam Ash stores within 10 minutes of my house, so in most cases, they're my first stops when I need something.

Bermuda
Squid's is just right down the road (on the way to Sam Ash) from where I live. I was in a pinch a couple years ago and they were nice enough to buy an XS20 crash off me for $20. It would be sad to see stores like this go away.
 

?uesto

Silver Member
Maybe it can be chalked up to 'expectation bias'.

Or the special seasonings you guys use.

LOL
Well it's also drums, but I imagine it's just because we actually put a little effort into/know how to tune drums. Sometimes I'll go up to a kit in one of those stores, and the 10" tom is cranked (comes that way since a lot of cheaper kits are nested in the boxes), and the rest of the drums are so poorly tuned. Those are the types of people who's approach to tuning is "tighter" if it doesn't sound good.
 

flurbs

Member
From a small scale manufacturer's POV, we're at a loss what to do really. We fully embrace the real benefits of having our drums available for demonstration, but then in what environment, & what expertise of demonstration staff? Lastly, there's the margin aspirations of many stores. The average margin ask exceeds 60%, & 40% is the absolute minimum they'll consider. I realise there's costs to be born, but margins like that are crippling for a manufacturer like us.
I take it you mean markup %age, not profit margin %age? Anyone in the UK who thinks they can get to make that sort of margin on a big ticket item in the UK is in cloud cuckoo land, you shouldn't even be talking to them. Most shops who have any sort of clue as to what is going on out there have been crushed to a 20% margin on mainstream gear by competition. And yes, if your overheads are between 15% and 18% as most are in the UK, a 20% margin IS crushing. The motivation to choose non-mainstream brands to sell therefore HAS to be because it's possible to make a little more profit.

If I had a drumshop demonstrating your drums, I'd need a 25% margin (that's a 33.3% markup). Any less and it's not worth my while putting in the time, effort and energy. Any more would be an unreasonable expectation of both the customer and the manufacturer - at least, in the current climate anyway.

(Unless the high margin also includes the VAT they'd have to pay if Guru isn't VAT registered. If Guru isn't VAT registered but wants to sell through resellers then you'll have problems because the Treasury will be taking a double cut on your prices, you'll be paying VAT at source and not reclaiming it, then the reseller will have to pay the top line of VAT because they can't reclaim it if their invoice from you doesn't have VAT on it. Your only alternative would be to sell Guru kits to resellers as 2nd hand items, then they'd only pay out VAT on the profit margin, not on the gross price. Even then, they'd need to know what they were doing with their paperwork...)

Simon
 
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caddywumpus

Platinum Member
OK, enough Bain bashing. Whether one is in the business of distressed businesses or distressed real estate, there is no guarantee of success. You are also dealing with things that were distressed to begin with. You can buy a distressed property, and be in the right neighborhood at the right time, and your property still might not sell. Distressed businesses aren't guaranteed to succeed either. Overall, Bain's distressed businesses have succeeded more than they've failed. That's why they are still in business themselves.
Does the "B" in your user name stand for "Bain" by any chance?

It is a well-known fact that their business practices are far from what most people consider moral business ethics. Still, what they do IS legal, and a way to make a quick buck, despite all the businesses they crush. Sure, they do manage to purchase and run *some* successful businesses, but their "buy/borrow/bankrupt" method for the other businesses they purchase is infamous.

I have seen Guitar Center run two local music shops that I frequented out of business, and I'm sure there are others as well. I wouldn't be sad to see them go. Sometimes they have outrageous deals on used gear, like a 60s 22" Zildjian ride I got for $50 recently, but other than that, there's nothing there for me...
 

caddywumpus

Platinum Member
Also, Guitar Center has tons of small print you might be unaware of. For example, I went in there with a printout of a "low price" offered by an online competitor, and they said they couldn't offer the same price (something they advertise that they do in their ads...) because it's less than what they paid for it. So, according to their small print, they are able to offer cost + 5%.

When my wife and I bought our refridgerator from a local small business, they offered the same "guaranteed lowest price" offer. We brought in a newspaper clipping of the fridge we wanted, and they said that it was for less than they paid for the fridge themselves. But, because they advertised they would do it, even though it would cost them money, they would honor it. We decided to pay them cost for the fridge (so not to be jerks taking advantage of them), and have since bought a new microwave from them, and plan to buy there again. THEY have moral business ethics...
 

Toolate

Platinum Member
Show me one chain store that really benefitted a community over the long haul. Low prices for imported stuff. Good (really great) for a short while but then what?
 

edvia

Senior Member
At the risk of being political by describing what Bain does:

It's not real surprising that GC is drowning in debt-- maxing out their client companies' credit while it lasts seems to be a major way the Bain people make their money.
Here's a really interesting read on Bain Capital that Rolling Stone ran a few months ago before the elections. It doesn't reference GC at all, but it does give you a look into how Bain operates, and how they end up destroying far more companies than they "help". Pretty scary, if you ask me.

http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
 

bermuda

Drummerworld Pro Drummer - Administrator
Staff member
they said they couldn't offer the same price (something they advertise that they do in their ads...) because it's less than what they paid for it.
I'm not surprised that's how things are under Bain's rule and especially with the economic downturn, but it wasn't long ago that GC would absolutely sell below their cost just so another store wouldn't get the sale. Not on stuff like heads or sticks, but on kits, high-end guitars & amps, keyboards, etc. Sometimes it was more important to win than to make a profit.

Bermuda
 

Jookbox

Pioneer Member
6 years ago I worked for GC corporate for about 3 months. There are literally guys from the 1960s and 70s running the show and their egos haven't caught up to the Internet age (I worked on the website). It was probably one of the worst places I've ever worked. It was literally depressing, and I thought I was in some kinda time warp.
 

inneedofgrace

Platinum Member
I just bought a cymbal at Squid Music about a month ago!

I always do my best to shop at (the remaining) independent stores for a few reasons, including choice of specialty brands, used gear at better prices, and unless it's way out of my way, I prefer to support the little guy so they can stay in business. I resent that GC - in its present configuration - could become my only choice.

That said, there are GC and Sam Ash stores within 10 minutes of my house, so in most cases, they're my first stops when I need something.

Bermuda
I have a Sam Ash and a GC about 15 minutes from my house, and they are both in the same strip shopping center! That allows me to easily comparison shop. GC seems to have better quantity and variation in stock. Sam Ash seems to have better service and sales help. The staff at GC are constantly turning over. I just get friendly with the guy behind the counter and a month later he's been replaced.

There is a small music store in the local mall, but as someone else said, it relies mostly on lessons. While they have some guitars and sheet music, they have very few drum-related items.

I am also a model railroad hobbyist. The local hobby stores have gone the way of the dodo bird. Just 10 years ago there were several hobby shops in my area. And many malls had a store called Allied Hobby. Now virtually everything is purchased over the internet or at large train shows held across the country.

Same can be said about what Home Depot/Lowes has done to the local hardware stores.
 

B-squared

Silver Member
Does the "B" in your user name stand for "Bain" by any chance?

It is a well-known fact.....
Neither of these is true. The first is a cheap shot and the second is patently false. Dealing in distressed businesses is not pretty. That's why they're distressed.

This is a side issue anyway. I am not a cheerleader for Bain, nor am I a cheerleader for GC. I don't care much for GC. I was pointing out that politics is off limits in this forum and this was getting close to being out of bounds.
 

B-squared

Silver Member
" Following the company's second bankruptcy in five years, the chain was liquidated beginning in December 2008. "

1st sentence, 2nd paragraph, KB Toys Wiki.

Look, I'm out. I don't care enough to debate this. I just want to talk about drums, and not politics while I'm on this forum.
 

BacteriumFendYoke

Platinum Member
Second bankruptcy in five years in 2008, sure.

Bain bought KB eight years before, in 2000. It went bankrupt under Bain as a result of enormous debts incurred during the takeover. Bankruptcy can be avoided in three years if a company is well-managed.

Thanks.
 
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