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Fender Selling Guitars Direct to Customers - Good or Bad?


BG76

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A few days back I read an article about Fender selling guitars direct to their customers. This wasn't all that surprising because they started the American Design Series, which is kind of a Carvin model of making people believe their getting a custom made instrument instead of understanding their picking from stock options:

 

http://www.fender.com/american-design/

 

I think this will be a very positive step for FMIC. I don't really buy a lot of their newer guitars, but here are the pluses I see:

 

1- Increased Profit - Fender sells a guitar to GC or a dealer at a much lower cost. By selling the guitar themselves they can sell for MAP and make a lot more money. Especially since they already are paying to package and ship guitars to dealers. Expanding the shipping department and setting up a call center for customer service won't cost much - especially since FMIC outsources work to India, Mexico, etc....

 

2- Guaranteed Revenue - If GC goes under FMIC will lose a boatload of money. If they began selling direct they could minimize their dependence on their dealer network and limit the risk of not getting paid.

 

3- Control Pricing - If there were less places to buy Fender guitars they could easily control pricing. I would think it would be pretty easy to force the online retailers to obey and local dealerships could be reduced. There is always the used market, but making the guitars available in a limited way like this could increase profits.

 

4- Lower Costs for Consumer - In theory, they could probably lower costs to the consumer. I doubt they would actually do this, but MAP would be the sale price and like Carvin does (or used to do) they could make up a stupid MSRP that the guitar would sell for if it were available in a regular store.

 

5- Offer More Options - Car companies have been making a ton off this for years. Say you offered some "upgrades" to customers. You could start with a low price and reel them in:

 

Example - Fender USA Stratocatser $799 (MSRP $2000) then as you configure it:

 

Options - Special paint $125.00, Upgraded Pickups $150, Straplocks $25, Upgrade Gigbag to HSC $75, Special Ralph Machio Tone Control $50, Tusq Nut $35

 

Now it's $1259.00 - of course there will be shipping unless you use the coupon code and maybe a 5%-10% coupon now and again.

 

All in all I think it's a great way for Fender to eliminate competition and make more money. A smaller company probably couldn't do this on their scale but there are a lot of people already buying Fender products online from dealers (probably more sales then in local stores).

 

Any thoughts?

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Mostly beneifits Fender cause we really cant go to the factory to try out a guitar before purchase so I am thinking there will be more returns. I guess anything that requires less trips to guitar center is a win for us.Also cuts out price gouging middle men but stops impulse purchases too.

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I don't see it as them getting desperate, I see it as them taking advantage of the opportunities the internet offers them.

 

There was a time when people wanted to go into a store to buy a guitar. I think that the market share of people who just order from a website is large enough that doing this makes sense.

 

As for the lack of options in the example I posted that's how they started selling direct a while back. There was an announcement that they will be selling most of the stock guitars and basses online direct very soon - not the configurable things.

 

Say they sell an MSRP guitar to MF, etc... for half (wholesale) price. The dealer ships it as it was received from the factory and makes a profit. If they do this themselves they can.

A few months ago, Fender announced plans to sell customized guitars direct to the consumer through its website, calling it the “Fender Design Experience.” Now, word is out that Fender will be selling ALL of its branded products through the website.

That was the message Fender gave to key North American dealers earlier this month. However, interim CEO Scott Gilbertson said the company remained “committed to grow our business in partnerships with our dealers.”

Gilbertson is a Partner at TPG Growth, the private investment firm that controls FMIC and he was formerly COO of J. Crew and Senior VP for Under Armour Performance Apparel. He is currently on the board for Fender and The Vincraft Group, MarketTools and 3-Day Blinds. He is an observer to the boards of Adknowledge, Become, Inc. and Mammoth/Petbarn.

So, when will you be able to buy Fender products through the Fender website? No date was given, but check back here for updates.

 

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I have to agree with the above' date=' the lack of wood choices for necks and no hard tail or Floyd options.[/quote']

 

 

Their like Carvin. Carvin gives you the impression that it's custom to your specs but it really isn't. They give you a set of parameters and you build it within that. You don't get a option of pickups etc. You get the type of pickups they provide for you. It's the same with the Schecter custom shop.

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Their like Carvin. Carvin gives you the impression that it's custom to your specs but it really isn't. They give you a set of parameters and you build it within that. You don't get a option of pickups etc. You get the type of pickups they provide for you. It's the same with the Schecter custom shop.

 

 

with carvin though it's a pretty wide range of parameters. The body wood options give you all the standard choices and the top woods are pretty good too. The usual fretboard woods. You can get all kinds of bridges and hardware. Yeah of course they are only going to offer you carvin pickups. Just like fender or gibson or suhr....

 

It's certainly more options than the fender and gibson "custom shops" which aren't custom shops at all. Just factory produced guitars to closer 50's and 60's specs.

 

At this point I think nobody is naive about it all so it really doesn't matter.

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here's the Bitch though. Who will plop down the money for a guitar, sight unseen, or unplayed. Carven get's a way with it, since that's how it's always been with them. Fender, whose models vary constantly..... who knows what you will end up with?

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Have to see how it rolls. If they cut out the middle man then the prices should drop. Its like self checkout at a store. They should give you a discount to self checkout. They don't. Then companies want you to change with paperless billing and don't give a discount incentive. Just have to see.

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I've been expecting this for a while.

 

I think once they take all of the risks into account we're going to be left with:

 

- Most smaller brick and mortar retailers shedding them like a snake skin because they won't be able to compete

- Fender partnering with a smaller collection of huge online distributors and providing commercial sweeteners to compensate for them competing directly

- Fender keeping their direct sale prices the same or higher than their distributors (see above) and never discounting

- Restricting the online sales to the USA, because they can still control the retail channels in other countries

- Potentially higher quality because the "duds" that have been passed over within the GC empire won't build up over time

 

Have no illusions that this will in any way be better or more cost-effective for Joe Public. You know these guys don't roll like that.

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here's the Bitch though. Who will plop down the money for a guitar' date=' sight unseen, or unplayed. Carven get's a way with it, since that's how it's always been with them. Fender, whose models vary constantly..... who knows what you will end up with?[/quote']

 

My experience has been that consistency is not the easiest thing to attain with musical instruments, particularly those instruments made of wood such as guitars. Not only are there variances pertaining to cosmetics and playability, there are also variances pertaining to tone. All one has to do is play through some guitars of the same type (even model type) in a retail environment such as GC to see that some are just better than others. Not that I haven't rolled the dice on Ebay once or twice, won and lost, but eventually learned my lesson. Paying full price new on mail order, too big a gamble for me.

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Fender needed to do something for a long time to battle all the counterfeits being sold, but its likely too little too late. This might help a bit. It can also help with resale if you're the only owner and save the receipt. If they come out with unique models, it may make them more valuable if every retailer isn't selling them.

 

 

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1- I can pretty much guarantee you the price will not drop. FMIC is about making money - not making good guitars. It's very sad, but true. They do make some nice things (USA Vintage series, USA Artist models, etc...) but the majority of it is imported low end junk.

2- There are hundreds of thousands of people who will buy a guitar without seeing it. AMS, Musicians Friend, Sweetwater, etc... are proof of this. When you're buying a mass produced CNC guitar like a Fender the people who claim to find one with "mojo" usually are playing the one with the best setup.

3- Fender offers more options then Carvin as it is. Look at how many Fender Stratocasters are available (last time I counted it was well over 50) and look at how many price points, color, hardware, wood, electronics, etc... options there are.

4- The Fender Custom Shop used to be a true custom shop. In fact, their slogan used to be If You Can Dream it We Can Build It. Gibson's Custom division has never operated that way.

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"some are just better than others." This is so ineffably true. Annoyed when people talk about models as if they are all assembled the same, the parts identical. No, 'mojo' is not about set up, it's about pieces of wood, about someone soldering better one day then another, or even in the case of CNC guitars, QC people doing their job or not, before or after lunch.

 

FMIC selling direct is ... what? An acknowledgement that the current retail model doesn't work. Which means either they are too tied to GC and GC's debt problems, or else they think this sales channel offers better margins, or both.

 

What is the return policy, if you order a MIM CP with some nicer appointments, and it can't justify it's price?

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It's very, very difficult to manage and maintain a good dealer relationship if you are also selling direct. If not very well thought through and implemented their routes to market will become a real mess. As will their sales book.

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It's very' date=' very difficult to manage and maintain a good dealer relationship if you are also selling direct. If not very well thought through and implemented their routes to market will become a real mess. As will their sales book.[/quote']

 

I kind of agree with you, though not wholly. I am not privy to Fender's sales breakdown, but I would love to see the following numbers:

 

1- Percentage of new FMIC products sold online

2- Percentage of new FMIC products sold online through GC/MF/M123

3- Percentage of new FMIC sold in traditional stores

4- Percentage of new FMIC sold in non GC related stores

 

Guitar Center (including its other companies) is probably the biggest reseller of Fender guitars. This may be a move FMIC is making to get out of that bubble before it bursts. A couple years ago, GC owed Fender eleven million dollars and Fender was looking for an IPO to raise cash.

 

The FMIC family of brands are strong enough to survive even if you had to wait a few days for that new Stratocaster. They probably could survive online only, but maybe we'll see them available through Amazon or some retail outlet. I would have guessed Best Buy, but their toast, dare I say Target or Wal-Mart?

 

Honestly, I don't think we will see the end of Fender's non-direct sales. It's safe to say (from FMIC as the source) that soon all FMIC products will be available online. If you have the choice of ordering from the factory vs a third party when you buy something new who would you order from first - providing the cost was the same?

 

It will certainly be a new option for everyone.

 

I can only speak from the experiences I have seen online, but it would be interesting to know how many people have purchased a new guitar from an online retailer (MF, GC, M123, Sweetwater, Sam Ash, Zzounds, etc...). These days people (and especially the younger people) are more and more comfortable doing this.

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When CBS sold out the company started again from scratch and they were good.

 

When they accepted an outside investment company they went bad.

 

The years inbetween those 2 events above were great years for Fender with quality products.

 

Now they are looking quarter to quarter, no long term view, pushing tons of new low priced models just to increase cash flow. They got into a jam with GC due to eye wide for cash flow.

 

Doesn't the FSR Butterscotch tele for 500 kill the sales for the Vintage 52 Tele? They've seen the bad light and moved to where the money is, cranking out low priced instruments with average to poor QC.

 

Gibson's lifestyle curve is no longer working so they are doing the same thing but Gibson has been in the gutter for a long time, Fender is just now joining them.

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When CBS sold out the company started again from scratch and they were good.

 

When they accepted an outside investment company they went bad.

 

The years inbetween those 2 events above were great years for Fender with quality products.

 

 

I agree 100% when CBS sold the company they had been getting their clock cleaned and came out with some really innovative products and also began the reissues, which have been very popular. They also made some cool amps.

 

I remember meeting Bill Schultz during Guitar Week at Berklee when I was a student there. Fender did a 'free restring' on students' guitars and there were four or five Fender executives there (Schultz and Jack Schwartz - back when he wrote the silly Frontline column IIRC) and they had a lot of questions for the guitar players about what we were using, why we were using it, what we thought about the new FMIC things, etc....

 

You don't usually see that kind of interaction from big companies, but it did leave an impression on me.

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