One man's take on Guitar Center

[johnhall]

I don't agree with everything this fellow says about Guitar Center but there is some interesting information presented.

Guitar Center and the end of big box retail

My main concern is that there would be a domino effect that might take down a number of their suppliers, both big and small, if they were to close or downsize. While it wouldn't hurt our business in the least, I have to say we've enjoyed working with them more recently now that they've made (some) positive changes from our perspective. Still, that doesn't mean they have the right business model that aligns with the market as it exists today.

[8mileshigher]

Interesting article. Thanks for sharing.
Makes one wonder what the future or "correct" business model will be, down the road here, for retailing musical instruments ?

[rickyfricky]

Interesting article. Thanks for sharing.
Makes one wonder what the future or "correct" business model will be, down the road here, for retailing musical instruments ?

Here's one scenario: we can give any instrument a "virtual test drive" from the comfort of our sofa, and have an Amazon drone deliver it to our door within the hour...

Hopefully I'm old enough that I'll be feeding the tree before that day arrives.

[libratune]

I have always wondered when there would be a saturation point with the outflow of musical instruments (okay, guitars) into the general population. Unlike most stuff sold in big box stores, if well constructed and cared for, guitars don't need to be replaced like clothes, appliances and other stuff do, they just live on.

As the author notes, the Dow is up but the Dow is made up of multinational corporations and has very little to do with the available discretionary income spending of most people in the US, which is generally down since the 2008 financial system meltdown. And IMO its discretionary spending that drives places like GC.

I also think there has been saturation and slowdown in the market for many Fender, Gibson and other overextended brand names which will continue. Supply up, demand down. And as that goes, so goes Guitar Center.

[deaconblues]

I think you nailed it, Ron. The "guitar as investment" thesis seems to have run out of steam lately.

[Hotzenplotz]

I think you nailed it, Ron. The "guitar as investment" thesis seems to have run out of steam lately.

+1


Amen!

[johnhall]

I think you nailed it, Ron. The "guitar as investment" thesis seems to have run out of steam lately.

I'm not sure there ever was any steam. As far as I'm concerned it was always smoke and mirrors from an investment standpoint. Even though one would presume I'd be an advocate of guitars as investments, it's not something I would ever do for myself. A collection is one thing, while an investment is something else.

[antipodean]

As the author notes, the Dow is up but the Dow is made up of multinational corporations and has very little to do with the available discretionary income spending of most people in the US, which is generally down since the 2008 financial system meltdown.

WARNING - ECONOMICS CONTENT!!!
Weirdly, the stock market's correlation with economic fundamentals (domestic or international) is rather rubbery. A huge chunk of the Dow's current rather high valuation is due to the concerted loose monetary policy run by the Fed, the ECB and the Bank of Japan. When the yield on "low risk" assets like deposits and bonds is depressed by such policy, investors switch to other asset classes such as equities, triggering a rally in the price of such assets. Given the history of financial markets, it is odds-on that such a rally will be overdone to a spectacular degree.
END OF ECONOMICS CONTENT

Back to GC - the article is spot on that this is a business-model issue rather than an isolated GC problem. Large retailers down in Oz have struggled to come to grips with competition from virtual stores (who can kill them on price for a range of generic goods by virtue of minimal overheads) and niche players (who kill them on expertise and service on specialised goods). They're being squeezed from both ends of the spectrum. Sadly, for many of them, its almost impossible to let go of the business model that has served them so well in the past.

[antipodean]

I think you nailed it, Ron. The "guitar as investment" thesis seems to have run out of steam lately.

I'm not sure there ever was any steam. As far as I'm concerned it was always smoke and mirrors from an investment standpoint. Even though one would presume I'd be an advocate of guitars as investments, it's not something I would ever do for myself. A collection is one thing, while an investment is something else.

Absolutely! I've always seen the upper end of the vintage guitar market (e.g. '59 LPS) as a classic speculative bubble.

[8mileshigher]

What appears to have run out of steam along with "the guitar as investment theory," is the theory that one can saddle an enterprise with enough debt to sink a battleship, and speculate that disposable incomes will generate sufficient consumer sales, (in a saturated market) to re-float that hopeless business scenario .....

If businesses could succeed by borrowing their way into prosperity, everyone would be doing it.

[johnallg]

If businesses could succeed by borrowing their way into prosperity, everyone would be doing it.

Naw, I won't say it. We can't talk about it here.

[8mileshigher]

If businesses could succeed by borrowing their way into prosperity, everyone would be doing it.

Naw, I won't say it. We can't talk about it here.

[Danotron]

I think you nailed it, Ron. The "guitar as investment" thesis seems to have run out of steam lately.

I'm not sure there ever was any steam. As far as I'm concerned it was always smoke and mirrors from an investment standpoint. Even though one would presume I'd be an advocate of guitars as investments, it's not something I would ever do for myself. A collection is one thing, while an investment is something else.

This is the key, at least as far as I'm concerned. If the value of my guitar collection went down the tubes I would still love the guitars. I'm an addict!

That being said I am also somebody that gets a table at our local Southern California guitar show and buys/sells guitars. Overall, sometimes you make some money and sometimes you lose money. I enjoy it! Any money I make generally goes back into hunting down other guitars anyway (and keeping "Guitar Money" separate from "Bill Money" is a good idea).

I liked this article and it was clear to me that the guy was from St. Louis due to the picture of that particular Guitar Center and because he mentioned "Killer Vintage" (I used to live in St, Louis and still have family there so I visit). I would imagine there are probably only one or two Guitar Centers in the Area. Here in Southern California, GC's are everywhere (and I enjoy going in them to look around too).

Interestingly enough I had a friend that called me 2 days ago and told me he had a friend that was looking for an "old American Telecaster". Knowing my friend and being that I don't think my friends' friend was looking to spend $20,000 or so (and I don't have any Telecasters) I told him to check out Guitar Center.............................they have walls of them

[rickenbrother]

I would not miss Guitar Center

Neither would I. They never have anything I'm looking for. They are especially poor for products for bassists. The greater amount of their stock is inferior products made in China. Unfortunately Sam Ash is going the same way.

For non Rickenbacker gear, I'd rather call a place like Sweetwater with a great selection of products and speak to a salesperson who actually knows what they are talking about. The staff at GC seems to get worse every day.

[kennyhowes]

Jumping on here to follow the conversation.