Originally Posted by ocdrums
I think this is happening because the stores are forced to buy product before they can sell it. My understanding is that the manufacturers used to front the product to the store and get paid after the store sold the product. That way the shops could have a nice large selection without having to invest a lot of money. Now that they have to pay for everything on the floor first they have been forced to lower their inventory.
Stores have always had to buy the gear first. Retail stores are usually given terms (usually 30 days) before they have to pay for it, to give the stores a chance to sell said item before paying for it. This is standard business practice, in almost every retail environment.
That hasn't changed over time. If anything, it's gotten better. I remember when DW was such a small company, they didn't give terms, and only sold C.O.D. (cash on demand). In the late 80's this made it difficult for any store to stock a DW kit.
However, if a retailer gets into financial trouble and can not pay the bills, manufactures and whole salers can stop selling on terms and require upfront payments. Although that is no different than an individual who has their credit cards taken away because they keep missing their payments and has to pay for items at a store in cash.
As we've moved through this recession, I am sure many stores missed payments and had their credit revoked. On the opposite end, Fender (who owns KMS that owns Gibraltar, Latin Percussion, Toca and much of Gretsch) had their IPO pulled because they are owned millions on merchandise shipped to stores that they have yet to be paid for (oddly enough, Guitar Center being the main culprit).