Seven Lessons from How Private Equity Wrecked Guitar Center

[rp]

http://www.nakedcapitalism.com/2016/02/ ... enter.html

I think I had posted an article by this guy last year. In case anyone's is interested here's a GC update. Valid if wordy expose' but the blog comments are more insightful.

[Phil_S]

Makes me want to visit my local GC when I'm out and about today. Now that I'm "mature," and grey and bald and wear glasses, I'm pretty much invisible when I walk into a store like that. They'll let me mill around for hours without bothering me. Alas, I don't have time to drop by.

[Bob S]

Years since I was at a GC. Last time I wanted some new strings for my gold top. Some teenage kid tried to insist I buy "period correct" over priced cheese wire...
Picked what I wanted & the snot nosed kid followed me to the check out to make sure I didn't steal them, making sure I knew he was following me.
Left them at the check out & walked out.
Will never spend there again.

[xtian]

Mixed feelings! I have been very anti-big-box for the past decade or more, because of wife's independent book store, which closed last year after 13 years, driven out of business, in part, by Amazon.

And my friend's independent musical instruments store was affected greatly by GC's new store, and he closed also.

I thought I'd see if I could steal myself some business from GC by posting flyers for amp repair. Turns out, all employees are super nice, and we've developed a good working relationship. They registered me as a Repair Station so they can send their used gear to me. And they refer anyone asking for a repair to me, which leads to a hand full of repairs each month.

So, I hate big box chains, but love my local big box store. Ouch, my head.

[Phil_S]

Years since I was at a GC. Last time I wanted some new strings for my gold top. Some teenage kid tried to insist I buy "period correct" over priced cheese wire...
Picked what I wanted & the snot nosed kid followed me to the check out to make sure I didn't steal them, making sure I knew he was following me.
Left them at the check out & walked out.
Will never spend there again.

LOL, I can still remember this particular story like it was yesterday. I want to say maybe 10 years ago I went into GC for something or other and I was talking to some kid who wasn't old enough to shave about guitar cables. I mentioned something about Neutrik plugs, but I said "new trick" because I didn't know it was a German company and everyone says "noy trick." (I know enough from a semester of college German how to say things.) He went about schooling me the wrong way. It left a bad taste. It is a main reason why I don't go there. There's no one in charge because there is no owner on the premises.

If I need to go into a guitar store, we have a not so Mom and Pop local music store that has everything. It's the size of a small supermarket. He used to have two stores next to each other on the same street separated by a parking lot. He closed one of them down and consolidated a few years ago. It's still a decent store. They have young kids working there, it's just that the owner manages by walking around.

[Bob Simpson]

My local mom & pop shut down 3/4 of his store, moved what was left ( mostly for the local salsa bands anyway ) into the remaining 1/4 space, and leased the 3/4 to a "medical grow" enterprise. He makes more that way, I guess, per square foot...

Bob Simpson

[Leo_Gnardo]

I mentioned something about Neutrik plugs, but I said "new trick" because I didn't know it was a German company and everyone says "noy trick." (I know enough from a semester of college German how to say things.) He went about schooling me the wrong way.

When my crustomers mention "new trick" I don't bother correcting 'em. I thought they were Swiss but I see "Liechtenstein" now on the speaker plugs. Not much industry in Liechtenstein, it's only 61 sq mi, about the size of an average northeast US county. It's on my bucket list of places to see. Better keep my eyes open, if I blink I'll miss it. And they speak German there, sort of. (Schwytzerdeutsch.) So noy-trick is proper but who cares.

leased the 3/4 to a "medical grow" enterprise. He makes more that way, I guess, per square foot...

Wonder if he collects the rent in green cash or green goods. It's all good, long as he's happy!

[cbass]

Years since I was at a GC. Last time I wanted some new strings for my gold top. Some teenage kid tried to insist I buy "period correct" over priced cheese wire...
Picked what I wanted & the snot nosed kid followed me to the check out to make sure I didn't steal them, making sure I knew he was following me.
Left them at the check out & walked out.
Will never spend there again.

I don't know? If a rough lookin character like you came in my store I'd have 911 on standby

[Gibsonman63]

Same story here. When I was researching digital mixers, I went to the local GC to see if they could demo a couple boards. I soon found out that I knew more about it from skimming through the manuals on line than the people that work there.

The last straw for me was dropping in for strings (GHS Custom lights) and picks (Fender Jazz). They had neither, but offered to order them for me. Since then I have ordered my consumables on line.

Oh yeah, and the coupons. I kept getting coupons for a percentage off, but when you read the small print, they exclude any brand you have ever heard of.

To me one of the best guitar shopping experiences is the guitar show in Dallas and Arlington. There are tons of mom and pop shops along with some of the big guys. Two fixes a year is really all I need now.

[Phil_S]

[ I see "Liechtenstein" now on the speaker plugs. Not much industry in Liechtenstein, it's only 61 sq mi, about the size of an average northeast US county. It's on my bucket list of places to see. Better keep my eyes open, if I blink I'll miss it. And they speak German there, sort of. (Schwytzerdeutsch.)

I must have blinked. I looked it up. Indeed, they are based in Liechtenstein, not to be confused with the German municipality of Lichtenstein, Baden-Württemberg!

BTW, so it also goes for the microphones, "noy mon" (Neumann.)

[stretch2011]

I don't shop at GC since they ripped me off.

I bought a sm58 mic from them. A year or so later I took it back in pristine condition because I needed some guitar gear that I was planning on buying from there anyways. I let it go for $45 like a dumba** for store credit. I bought what I needed, came up to $45. When I looked at the receipt after I left it cost less than $30. Needless to say they lost a customer. And now I add up the cost of everything BEFORE I checkout.

[sunnydaze]

Guitar Center is probably not too far from bankruptcy. Very likely will impact Gibson and Fender. Gibson more than Fender because Gibson's dealer requirements are out of reach for many of the smaller mom and pop shops around the country. Consequently, Gibson has a high concentration of risk with the big box distributors, and in particular Guitar Center. Gibson is also highly leveraged (huge bond issues) - not a good combination.

Would hate to see Guitar Center drag down Gibson and Fender. Not sure how much exposure PRS has, hope their CFO's are doing their job and safeguarding their companies.....

Thanks
Mike

[Reeltarded]

You are speaking as if agreements are static. They are not.

Gibson is in peril way more than Fender (which oddly is in more debt than selling tshirts and key fobs can get you out of) because the value of Gibson guitars for the next hundred years has been capped in their oberpriced market saturation. People aren't buying the yearly schtick of having to upgrade to the more correct $6,000 1959 Les Paul Standard Super Duper Historic Perfectionist.

It's so much deeper with Gibson. When Mars went out of business it took them years to dispose of thousands of multi thousand dollar guitars.

Enter GC. GC sells crap that isn't the catalog guitar, but instead it's similar it's cheaper to produce and they have had Gibson on that chain since they helped them eat all that Mars production.

Gibson has purchased the old Tower store in HW and they are creating a direct showroom. It's not a good idea but it's all Henry can think of.

I hate GC. I hate Henry. I hate GIbson. Fennder assembles imported kits.

Guitars are worth about nothing. Why so expensive when the market is in deep saturation and people can't even sell used stuff?

It's over.



I am a completest, so it's nice for me.

[sunnydaze]

I know the agreements aren't static, especially when the PE guys are involved. But eventually the lenders (banks and bondholders) reach their limits. May not be bankruptcy - could be an acquisition.

Plenty of wealthy Chinese funds are itching to get the funds out of China - buying a well known US brand is always an attractive deal for these guys.

Sad, very sad.

Mike

[Reeltarded]

There is no equity. It's dancing backwards. It's a zero hole. You can't put enough zeros in it to cross.

Mars had 50 5800 dollar guitars making a stylish les paul dot right in the middle of their display in teh westside store. I told the saleschild I had never seen so many identical sunbursts. They all seemed identical with marginal tops. He told me.. "This is nothing! You should see the warehouse!". There was an eastside store that also had the same display.

We were the only people in the super walmart sized music store on a friday afternoon..

This thing we are talking about started there. This is the spin down of a whole industry lost to poor oversight and awful business practices.

Chinese money is going to buy, but not GC. It's going to buy Fender and Gibson. They can brand their own stores.