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  • The latest music industry battle - manufacturers vs retailers?

    Here's an interesting editorial from Sweetwater's Chuck Surack regarding retailers and the reaction to manufacturers who are starting to sell direct to customers - I'd be interested in getting everyone's take on it.

    Guest Editorial: The Downside To Manufacturer Direct Sales

    https://www.musictrades.com/news1.html

    **********

    "Look at it this way: think of how stupid the average person is, and then realize half of 'em are stupider than that."
    - George Carlin

    "It shouldn't be expected that people are necessarily doing what they appear to be doing on records."
    - Sir George Martin, All You Need Is Ears

    "The music business will be revitalized by musicians, not the labels or Live Nation. When the musicians decide to put music first, instead of money, the public will flock to the fruits and the scene will be healthy again."
    - Bob Lefsetz, The Lefsetz Letter

  • #2
    It won't take long for the manufacturers to realize they don't have the bandwidth to do marketing. They may not even have the bandwidth to handle sales properly, let alone support. A company like Sweetwater does those things for the company in return for making some money on what they sell.

    Suppose a company sells a product with an MSRP of $100 and Sweetwater gets $30 of that. I suspect it would cost the company at least that same $30 to duplicate what a company like Sweetwater does. Ultimately, they won't make any more money...and they lose the ability of the Sweetwaters of this world to reach a much larger client base then a company's email list.
    The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!

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    • #3
      Maybe I don't pay enough attention the products that Chuck's talking about, but I don't see Sennheiser or TASCAM or PreSonus or Focusrite with a shopping cart button on their web site. I see small companies that probably can't make enough product for a large retailer to bother with. And those small manufacturers are the ones who you contact directly if you need support. You don't have to wait for your retailer (who doesn't know the answer to your question) to contact the manufacturer and try to explain your problem. [Yeah, I've gone directly to manufacturers who don't know the answer either, too]

      Sweetwater is sort of in that niche where they wouldn't mind taking on a line that might sell a half a dozen products a month, particularly if they had an exclusive. Vintage King doesn't carry too much product that you can get at Guitar Center, and Guitar Center doesn't carry much that you can get at Vintage King either. I'm glad there are both ways to buy a product. Honestly, when it comes to software, I'd rather go directly to the folks who made it, whereas, with hardware, if my local dealer sells it, I can try it out, and it's easy to return if it's not what I need.
      --
      "Today's production equipment is IT-based and cannot be operated without a passing knowledge of computing, although it seems that it can be operated without a passing knowledge of audio." - John Watkinson, Resolution Magazine, October 2006
      Drop by http://mikeriversaudio.wordpress.com now and then

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      • #4
        I have had great non-brand biased advice from my local Mom & Pop retailer (first choice) and Sweetwater (where I go when my local cannot get what I want). This will never be available direct from the manufacturer. If we lose retailers, we won't have they wealth of their experience to decide say if the Roland or the Yamaha similar product would fulfill my personal needs better. (Substitute any other two brands for Roland and Yamaha.)

        I think that would be a great loss.

        On the other hand, there are competing 'boutique' manufacturers like Barone Saxophones, Reverend Guitars, and so on that the retailers never-ever see. These manufacturers can sell similar quality instruments and without the middle-man expense, undercut the "big guys". The big guys might fear that.

        I'd hate to see the retailer go, because through the years they have helped me immensely choose one brand over another for my personal needs.

        More later - I gotta go - gig time.

        Insights and incites by Notes


        Last edited by Notes_Norton; 11-19-2018, 04:23 PM.
        Bob "Notes" Norton
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        • #5
          Originally posted by MikeRivers View Post
          Maybe I don't pay enough attention the products that Chuck's talking about, but I don't see Sennheiser or TASCAM or PreSonus or Focusrite with a shopping cart button on their web site.
          AKG, JBL Professional, and presumably some other Harman brands sell direct, so does Fender.

          The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!

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          • #6
            Originally posted by Anderton View Post
            It won't take long for the manufacturers to realize they don't have the bandwidth to do marketing. They may not even have the bandwidth to handle sales properly, let alone support. A company like Sweetwater does those things for the company in return for making some money on what they sell.

            Suppose a company sells a product with an MSRP of $100 and Sweetwater gets $30 of that. I suspect it would cost the company at least that same $30 to duplicate what a company like Sweetwater does. Ultimately, they won't make any more money...and they lose the ability of the Sweetwaters of this world to reach a much larger client base then a company's email list.
            The resellers have paid the mfgrs profit so maybe not and product is already overpriced so the margins are there. Fronts that go under merely inflate the illusion of costs. Besides product is evolving into a printable incarnation - chips and even mechanical components alike. More bank if you ask me.
            Originally posted by Unconfigured Static HTML Widget...








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            • #7
              I suppose the main incentive in the Manufacturer's logic is eliminating the middle man, thus increasing their bottom lines. I have to go with what Craig, and Chuck said...They are being short-sighted. The probably don't even have the infrastructure and support staff to handle returns, warranties, service.

              As far as Sweetwater is concerned, if you are thinking about a purchase and want info beyond what you can get from the website, you can pickup a phone and somebody will answer your questions.

              Plus, it's nice being able to shop for other brands, items, in one location. There's a lot to be said for music stores in general. The experience of going into a brick and mortar establishment. Even if it's a place like Guitar Center, which while the atmosphere might be iffy, it's still got tons of stuff to look at, check out. Sweetwater's web site is not completely unlike that experience. Tons of stuff.

              The direct sales angle will leave a bad taste in retailer's mouth, maybe cost some jobs as well.

              I mean..You gonna order a Ford direct from Ford Motor Company? Gonna drive it to Dearborn to get the cruise control fixed?

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              • #8
                Originally posted by Anderton View Post

                AKG, JBL Professional, and presumably some other Harman brands sell direct, so does Fender.
                Well, they're big enough so that they can do whatever they want.

                I don't know what the trade-offs would be between buying a Telecaster direct from Fender or mail-order from Sweetwater, but when it comes to a guitar or amplifier, I'd really want to buy it in person - look at the finish and feel how the guitar plays (or pick the best one out of a litter), listen to the amplifier and see if I could carry it easily, stuff like that. However, I know that there are people living in places where they don't have that luxury.

                If I couldn't buy locally, I'd look for who had the best shipping and return policy, and who did or didn't collect sales tax in my state.
                --
                "Today's production equipment is IT-based and cannot be operated without a passing knowledge of computing, although it seems that it can be operated without a passing knowledge of audio." - John Watkinson, Resolution Magazine, October 2006
                Drop by http://mikeriversaudio.wordpress.com now and then

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                • #9
                  Originally posted by AlamoJoe View Post
                  I suppose the main incentive in the Manufacturer's logic is eliminating the middle man, thus increasing their bottom lines. I have to go with what Craig, and Chuck said...They are being short-sighted. The probably don't even have the infrastructure and support staff to handle returns, warranties, service.

                  As far as Sweetwater is concerned, if you are thinking about a purchase and want info beyond what you can get from the website, you can pickup a phone and somebody will answer your questions.

                  Plus, it's nice being able to shop for other brands, items, in one location. There's a lot to be said for music stores in general. The experience of going into a brick and mortar establishment. Even if it's a place like Guitar Center, which while the atmosphere might be iffy, it's still got tons of stuff to look at, check out. Sweetwater's web site is not completely unlike that experience. Tons of stuff.

                  The direct sales angle will leave a bad taste in retailer's mouth, maybe cost some jobs as well.

                  I mean..You gonna order a Ford direct from Ford Motor Company? Gonna drive it to Dearborn to get the cruise control fixed?
                  Depends on the product doesn't it? But all these moves go back to the investors. They drive the downsizing and sloppy driving. All the Suracks talk service.; customer comes first. Fact is nobody goes into retail to serve. Nobody competes to make as little money as possible. They're there to grab your dollar. Sure Sweetwater does a good job of taking care of the customer. That's what they're SELLING.
                  Originally posted by Unconfigured Static HTML Widget...








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                  • #10
                    Originally posted by 1001gear View Post
                    Sure Sweetwater does a good job of taking care of the customer. That's what they're SELLING.
                    Exactly! Call Chuck crazy, but he has this weird idea that if you take care of customers, they'll continue to buy from you instead of someone else. Probably the toughest aspect of a manufacturer going direct is creating a relationship with the customer. They need people to do that.

                    Sweetwater's "sales engineers" are the most visible part of the company, and they all get salaries. It's a lot of infrastructure. Because the people sell all different kinds of products from different companies, Sweetwater can spread the cost of that infrastructure over a lot of products.

                    For example, someone buys something from Sweetwater, and that sales engineer handles the transaction. Two minutes later that sales engineer will be selling something else to someone else, but one salary can cover many products and manufacturers. The manufacturer will have to sell a lot of items to justify having that salary become part of their financial picture.
                    The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!

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                    • #11
                      I wonder what triggered Chuck Surack's comments? Why right now? As Craig mentioned, some really big manufacturers sell off their websites (Gibson included.)

                      Bottom line is - if it works, it works. Can't blame businesspeople for trying this and that. The trend is global and inexorable towards online purchasing, away from physical retail.

                      Sweetwater has a very interesting position in the shopping landscape - it's not brick and mortar - it's not just a clearing house for postings like Amazon - it's basically a big warehouse and a highly trained salesforce.

                      Sweetwater offers the retention of the actual human connection. They call me year after year, my sales guy - and it's been what, 6 years since I bought something from them? Geez, if AT&T would treat me that way maybe I wouldn't hate their guts....and I'd probably upgrade to something a bit beyond what I bottom-line need.

                      So far, there's always been a place for a well-trained, informed sales force. They'll try to replace every last salesperson in the world with bots sooner or later - Chuck is probably fighting the long defeat. I'm glad Sweetwater is there - if only there were more outfits like them. They can profit off me, and I'll thank them for doing so.

                      nat
                      Last edited by nat whilk II; 11-20-2018, 01:14 PM.

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                      • #12
                        Originally posted by nat whilk II View Post
                        I wonder what triggered Chuck Surack's comments? Why right now?
                        Probably because Chuck tends to take a longer view, and he's seeing the trend accelerate. I think if he saw this as being harmful only to Sweetwater, he would regard it as just another kind of competition and not say anything. He clearly sees it as harming the industry in general over time, because consumers need more support than ever before - that's the premise that has allowed Sweetwater to grow. If manufacturers offering products online don't do a good job, ultimately it could actually benefit Sweetwater. But if people become disenchanted with what they buy, then we could end up with the "keyboard that ended up in the closet and is destined for a garage sale" effect.

                        I would think the reason he's speaking up now is because this is a genie that will be difficult to get back into the bottle. Companies need to think about whether they're trading off short-term benefits for longer-term issues, and think through the kind of infrastructure they need to pull off doing a good job of online sales. Granted the companies will make more money because distributors won't take a cut, but it seems very likely that creating a new infrastructure will eat up the extra profits.
                        The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!

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                        • #13
                          It may be a little off topic but one of the things I always enjoyed doing when shopping for music gear (and other things as well) was using the internet to hunt down the best possible price. This "passion" of mine seems to have become more elusive as every retail option appears to be more price fixed than it used to be. I suppose it's because of people like me using the internet to hunt down the best possible price!

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                          • #14
                            One example of the failure of direct only sales is Carvin/Kiesel. If this is a model manufacturers in the Music Equipment industry are considering, then they are going to have an uphill battle. Having worked in the industry on and off over many years, as well as for a number of other industrial manufacturers who tried to open their own web stores, the issues are multiple.

                            Shipping alone can be brutal. Sending a truckload or even an LTL load ot a retailer has a reasonable per unit cost ,and advantages in internal pick and pack efficiencies. Shipping single unit sales ups the operational expenses across the board, degrading the profit margin.

                            Plus, MAP is rarely the price paid at a retailer, but the manufacturer has to find other 'incentives' to offset the fact that they can't sell a single unit at wholesale to an individual. I did everything I could to discourage my last employer from doing online retail due in no small part to the costs my departments [I was the Plant Director, so all Operations groups were under my budget] would be burdened with, particularly small order pick&pack, single item shipping [we had great bulk rate shipping contracts, but couldn't get to an absorb-able price point on single box without having immense volume]. plus the cost of administration of sales via the web portal [which the Sales Director tried to dump on Customer Service, another department under my aegis]. All CEOs want to think they can compete with anybody in their market, but it isn't so; the logistical aspects alone can be a deal killer. Not to mention how many really crappy web sales/shopping systems I have seen over the years...
                            "We are currently experiencing some technical difficulties due to reality fluctuations. The elves are working tirelessly to patch the correct version of reality. Activities here have been temporarily disabled since the fundamentals of mathematics, physics and reason may be incomprehensible during this indeterminate period of instability. Normal service will be restored once we are certain as to what 'normal' is."

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                            • #15
                              Originally posted by daddymack View Post
                              One example of the failure of direct only sales is Carvin/Kiesel. If this is a model manufacturers in the Music Equipment industry are considering, then they are going to have an uphill battle. Having worked in the industry on and off over many years, as well as for a number of other industrial manufacturers who tried to open their own web stores, the issues are multiple.

                              Shipping alone can be brutal. Sending a truckload or even an LTL load ot a retailer has a reasonable per unit cost ,and advantages in internal pick and pack efficiencies. Shipping single unit sales ups the operational expenses across the board, degrading the profit margin.

                              Plus, MAP is rarely the price paid at a retailer, but the manufacturer has to find other 'incentives' to offset the fact that they can't sell a single unit at wholesale to an individual. I did everything I could to discourage my last employer from doing online retail due in no small part to the costs my departments [I was the Plant Director, so all Operations groups were under my budget] would be burdened with, particularly small order pick&pack, single item shipping [we had great bulk rate shipping contracts, but couldn't get to an absorb-able price point on single box without having immense volume]. plus the cost of administration of sales via the web portal [which the Sales Director tried to dump on Customer Service, another department under my aegis]. All CEOs want to think they can compete with anybody in their market, but it isn't so; the logistical aspects alone can be a deal killer. Not to mention how many really crappy web sales/shopping systems I have seen over the years...
                              That's super interesting. I wonder what sells management on the idea that a bulk-shipping manufacturer can morph into a single-item shipper, starting from ground zero, without entering a significant period of losses before some market share can be captured.

                              I wonder if third-parties come into this offering the manufacturer some turnkey package to take excess inventory off their hands and handle all the fulfillment and customer service. And how long it would take to get burned that way...

                              nat

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                              • daddymack
                                daddymack commented
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                                What sells management? GREED...
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