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The latest music industry battle - manufacturers vs retailers?


Phil O'Keefe
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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.

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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.

 

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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

 

 

 

Edited by Notes_Norton
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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.

 

 

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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.

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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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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.

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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.

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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.

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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

Edited by nat whilk II
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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.

 

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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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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...

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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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Hey everyone, thanks for the interesting thread. I wrote the guest editorial because I don't like where some of the manufacturers are trending. As I said in my editorial, I think ultimately this is not good for the musicians and eventually we will all suffer. Craig is absolutely correct, we are seeing the trend accelerate with some manufacturers. This is really not about Sweetwater, (we are doing just fine, thank you)! To me, it is really about the musicians and the long term health of this industry which I love so much. I also want to be clear, many, many manufacturers (in fact, most) are respecting the dealer channel and see the value that good dealers bring.

 

Nat hit it pretty straight on. I have no idea why manufacturers think they can competently sell to end users. Some probably think it is an easy sale. In most cases, they just can't do it. I know this after dealing with them for nearly 40 years. They can make great products, but they can't ship single orders very effectively and heaven forbid if there is a problem. They don't have relationships with the customers and frankly, they don't want to, nor are they set up to do so. I don't know if they are doing this because they think it is an easy sale or maybe they don't have faith in some of their dealers.

 

Whether you are talking about Sweetwater or any of the other 5000 music dealers across the country, good dealers usually bring extra value to the customer. We give loaners, we give advice, we let you try things, we take returns, we have your back if something goes wrong...on and on...

 

If you will give me some grace, I'd like to talk about a few things we do at Sweetwater. I am not writing this to be a commercial, but rather to try and show the value we bring that manufacturers would struggle with. Again, there are many other great dealers who do similar or even different things.

 

We now have about 1500 people at Sweetwater. I don't have that many people because I want to give musicians jobs, I have that many because I need that many to run a company our size with the kind of customer service that I want to offer. We have 400 Sales Engineers. I know that term bristles with some people, but that is the best term we can come up with. Most of them have 4 year degrees and then we put them through 13 weeks, 8 hours a day, 300 different classes ... before they ever talk to a customer. Are they perfect, heck no...we are all human, we make mistakes or have bad days, but I can assure you they all really care and are trained better than most in our industry. They can truly give helpful advice and we have 150 people in our Service Department, more than 50 of them give free technical support all day long 6 days a week.

 

We have our Guitar Gallery where we evaluate/inspect every guitar (more than $299) with as many as 55 points of inspection and then we take high quality pictures of it. Believe it or not, some of those guitar manufacturers have defect rates nearing 20%. (most are much better than this, but they still have issues) I will not sell a guitar that is not of the quality I would use. We fix them or we send them back. Those manufacturers know the standards we have and how we inspect and yet they still send us instruments that I am not proud of. What do you think they would do for a single customer? Again to be clear there are some fabulous guitar makers and where we see very few problems, also.

 

You all know about the marketing and education we do, so I won't elaborate too much, but I will say we have the most comprehensive and biggest music products website in the industry with more rich content, pictures, details, specs, etc. We have a SweetCare database that we work on and update every day. It has more than 28,000 helpful and current articles and tips.

 

We try and make sure to have the latest software or firmware installed in electronic products. We install custom banks of sounds into many keyboards.

 

We offer two year warranties on most everything we sell.

 

Heck, even I am accessible to customers-:)

 

I could go on and on, but I really am not trying to make this a commercial. I am just pointing out a few things that most of the manufacturers don't or can't do. I believe good dealers can truly have the customers best interest in mind. I have supported some of my very same customers for 40 years while some of the manufacturers have come and gone.

 

Again, let me be very clear, most of our vendors are great companies, making amazing products. I just don't want to see the industry or the musicians hurt.

 

I hope this further clarifies some of my thoughts. Please ask away if you have more questions.

 

Thank you,

 

Chuck Surack

Founder & CEO of Sweetwater

Edited by Chucksweet
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Atypical company. I recall making a purchase or two in the 90s when I was still tone foraging. The experience was hassle free and as promised. I did find the telemarketing annoying but I suppose full time pros would appreciate the live connection.

 

What concerns me about supply side is, evolution of the customer seems to be a non priority. Music degrades with each passing minute and professionals have always reflected this. It seems if the industry had its way, the only thing available will be compact media generators that require nothing more than a customer base.

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Chuck, thank you very much for weighing in and giving your perspective.

 

I think a lot of what goes on behind "a sale" is invisible to most people. It's like Auto-Tune - when it's done properly, you don't know it's there. But if it's done carelessly, you swear at it.

 

One company I consulted to during the "GC is gonna die" era (not Gibson, FWIW) talked with me about "the nuclear option," which was going direct. It was not something they wanted to do at all, so at least they understood the potential pitfalls. They saw it as a "what do we do when brick and mortar goes away." They were not happy about the thought of going it alone.

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Even though I'm European I still consider this being the most interesting thread in a very long time. I have been involved in the MI business internationally in different roles for a long time and I'm seeing similar thoughts popping up in many EU countries.

 

I've been following Sweetwater with interest and while the impact of Sweetwater commands respect, the article and the post here by Mr Surak himself makes me respect both the man and his company even more.

 

Craig, maybe you and I should do a Sweetwater Crawl. I'd love to!

 

Cheers,

 

Mats N

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Chuck, thank you very much for weighing in and giving your perspective.

 

I think a lot of what goes on behind "a sale" is invisible to most people. It's like Auto-Tune - when it's done properly, you don't know it's there. But if it's done carelessly, you swear at it.

 

One company I consulted to during the "GC is gonna die" era (not Gibson, FWIW) talked with me about "the nuclear option," which was going direct. It was not something they wanted to do at all, so at least they understood the potential pitfalls. They saw it as a "what do we do when brick and mortar goes away." They were not happy about the thought of going it alone.

 

'Brick and mortar', 'mom and pop', 'local retailer'..terms that many think are destined to vanish like buggywhips. I, on the other hand, believe that, especially for musical instruments, the need to physically try one out close to home will always be a necessity. I will admit that I have done the 'dirty deed' and tried out things at local retailers and then ordered online [sometimes from Sweetwater, thank you, Chuck! ;) ] because the price was better, but that is fast becoming the nature of things: price driven [as long as the service is good].

Sadly most of the 'mom and pop' music stores here in LA have been relegated to lessons and ancillaries for convenience [if you need a string or a drum head now], which is really unfortunate, but they really are unable to compete [at price-point or as far as selection or 'labels'] with the 'big chain stores' like GC or SA. Fender and Gibson have priced 'the little guys' out of the market due to their sales structuring.

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For what it's worth Chuck, I'm a customer of yours. I've bought a couple of guitars, a keyboard, some cables, guitar picks, and some software from your company. I couldn't get the software to work, and my sales engineer, Derek Kemp, hooked me right on over to one of your in house tech guys. I put my computer in share mode and the Kat literally went into my computer and had the software working...In Minutes.

Derek has never hounded me about any sales, just sent e-mails, occasionally, letting me know about certain sales and discounts. He's first rate. Whatever I ordered arrived either on time or early, and always in perfect condition.

 

I'd order more....But that would require more money...lol.

 

I think you have a great company, and wish you well in this bit of battle you have going on.

 

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What Chuck @ Sweetwater seems to know is that we are all in the service industry. Not everybody gets that, but some of the most successful sales companies and sales people know that.

 

A good salesman/saleswoman listens to the customer, finds out what the customer wants and needs, and does his/her best to supply that need. A good salesman/saleswoman is there to take care of the customer after the sale. There will eventually be problems, and a problem is an opportunity to either make a customer for life, or lose a customer for life. A good salesman/saleswoman makes the customer for life by making him/her glad they had the problem.

 

A bad salesman/saleswoman sells whatever is most profitable for themselves. The customer may or may not come back.

 

A good salesman/saleswoman will even recommend something they cannot sell you if they find out it is exactly what you need.

 

I can't see going to Gibson to get a guitar and having the sales person ask what kind of music I want to play, and a dozen other questions and end up saying that I should be buying a Fender Strat. But a good music store salesman will do that.

 

My local Mom & Pop owner will recommend things he cannot sell due to franchising if he figures out it's what I need. He loses that sale, but keeps me as a customer for the next one, the one after that, and the one after that. Plus I buy my consumable products like strings and reeds there, because I know cash flow and those few pennies profit help keep him in business so when I need the benefit of his expert advice, he will still be there.

 

I think when we buy via the manufacturer, or a big box store we are being short sighted and not looking out for our best interests. But that might just be me.

 

Insights and incites by Notes

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