Guitar Center Strikes The Right Chord
By George Anderson
Guitar Center is a $1.51 billion business with 152 stores. Dan Courtenay, owner of Dan’s Chelsea Guitars a single-store independent in Manhattan calls it, “the Wal-Mart of the music world.”
As Guitar Center has grown, it has faced some of the same challenges of Wal-Mart and others, namely, “how to win the goodwill of the community that small businesses enjoy while at the same time taking advantage of the national organization’s deep pockets and economies of scale.”
According to a piece in The Wall Street Journal, the nation’s largest retailer of musical instruments has maintained a connection with its customer base of artists by developing a “series of contests that start out with musicians competing in their hometown stores for the privilege of eventually performing nationally before a panel of well-known judges — among them, Marilyn Manson’s guitarist and the drummer from Red Hot Chili Peppers.”
The contests run by the company, Guitarmageddon, Drum Off and Spin Off, work says Kyle Rogers, head of strategic partnerships and promotions development for Guitar Center, because: “Everyone has the dream of making a record.”
Winners have the opportunity to play before large audiences and they also are featured in press releases, mailings and on the company’s Web site.
Guitar Center also focuses on events such as battle-of-the-bands contests to maintain its role in local music scenes. According to the Journal, Guitar Center teamed up with Levi’s and Fader music magazine to sponsor a house in Austin, Tex. where local musicians could go and jam. The retailer handed out Guitar Center buyer’s guides and VIP cards to participants and the audience to drive store traffic.
Moderator’s Comment: What is it that makes Guitar Center successful? Are there lessons for other growing retailers than can be learned from Guitar Center?
We like it because it’s the closest thing we can get to a toy store. Where else can we go to play so many great guitars, as badly as we do, and nobody tells
us to stop. –
George Anderson – Moderator
On a recent Saturday, I took a trio of teenage boys to the Tucson Guitar Center and came away mostly impressed. On the plus side was the sheer size of the inventory on display. Separate rooms for acoustic guitars, drums, DJ gear and electronics open off of the main showroom, which was packed with amps and electric axes ready for trial.
There were plenty of sales staff on hand – and a very personable greeter at the front door (whose main job, I suspect was to deter shoplifters and check in instruments brought in for repairs). It was a fun place to hang out for an hour, and several dozen visitors were doing just that.
On the minus side of the ledger, the place couldn’t manage to locate parts for a simple electric guitar repair (a pair of tiny set screws that should cost less than a dollar). An inquiry about drum sets (for an aspiring young player) was met by a sales pitch for high-end equipment that was clearly situationally inappropriate.
Overall impression: GC may be the biggest fish in its pond, but it’s not winning due to superior execution.
One takeaway for other retailers is obvious – innovative community events work! While letting customers perform for the chance to do so nationally obviously works only for music-type stores, there are plenty of other community events that work for a variety of stores. I remember a retailer telling me they held barbecues in their parking lots, partly for the fun it provided for their shoppers, and partly so Wal-Mart shoppers across the street would be enticed by the aroma. Another idea that’s all purpose is a carnival for kids – let the parents shop while the kids are amused.
Guitar Center good or bad?
Is having a MI superstore that has taken over a good thing? To the local MI dealer it is a 2 edged sword. On one hand, GC has very good advertising but on the other hand, they can out price the local MI store. The consumer has a supermarket of MI products to look at and play with. Suppliers have to decide sometimes to either support GC and get large sales with smaller profits or support the local MI dealer and have smaller sales but a better GP. Tough choice.
Suppliers want to get their products out to as many consumers as possible but take the risk that if they get their product into the GC chain that it gets lost among other “me too” products. They also need to keep training the salespeople because you can go into a GC one day and a few weeks later that salesperson is no longer there. At the local MI dealer they seem to retain their sales staff and also these salespeople have more knowledge of the products they sell.
Remember GC does not carry ALL MI products available but they do have a very good range of products.
The company has at least 3 great advantages: (1) sales are 4 times the #2 firm (Sam Ash) (2) suppliers have minimal bargaining power and (3) marketing is reasonably innovative. The retail musical instrument business is very fragmented (many small suppliers and small retailers), so being a chain of any size can be very helpful. When you don’t have strong competition, you can get sloppy. That’s the great danger for Guitar Center. They have to challenge themselves, since it’s unlikely they will be seriously challenged by others.
Guitar Center is successful because they have low prices and make their money on high volume.
They are unsuccessful, however, when it comes to a good customer experience. They generally have an unknowledgable staff and high turnover rates, making it a challenge to build relationships with customers. In addition, check-out is time-consuming, and often perceived as invasive, as customers are asked for their name, address and phone number on every purchase — even small ticket items like strings or picks. The customer then has to wait while the often inexperienced clerk enters this information into a byzantine computer system. If the customer refuses to provide his personal information, he still has to wait while the clerk enters an alternative code into the system.
Guitar Center is often compared to Wal-Mart because of their low price-high volume model and the fact that they put small music stores out of business in every community they move into.
In the interest of full disclosure I was the manager of the original Guitar Center store in Los angels in the 1960s and early 1970s. I have been an interested observer of their growth and obvious success since those early days. One of the things that has made the company so successful has been their commitment to innovative marketing with lots of special events for the communities they have stores.
While some may compare the company to Wal-Mart, I believe it is a poor comparison. Wal-Mart is in the business of selling the cheapest commodity-type merchandise to millions of people. The Guitar Center is in the business of selling high-quality musical instruments and equipment to both amateur and professional musicians at a price that is acceptable to the musician and provides a profit for the company.
For the unknowing, the key to buying at the Guitar Center is understanding how to haggle with the salesperson. It is a unique business model in an industry that generally still relies on a negotiated sale. With their marketing and buying strengths the company has been very successful. At the same time, they need to work on customer service and the experience they provide customers other than professional musicians. As the dominant company in an industry that is populated with small companies they have many strengths, but also some weaknesses that should be fixed.