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Why we fired Fender


Searcy

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I thought this was interesting.

 

http://www.msretailer.com/msr/fired-fender/

 

 

 

Editors Note: The Music & Sound Retailer recently reported that Fender is preparing plans to sell all its Fender brand products direct to consumers through its Web site. In this op-ed, Gabriel OBrien, Sales Manager at Larrys Music Center, a prominent brick-and-mortar retailer, addresses the broader issues at play. The writers opinions are his own, and should not be construed as reflective of the views of the publisher or The Retailer.Independence is what started rock n roll: independence from our parents, from Big Brother and from the status quo. The nature of independence is self-sufficiency, individual choice and setting our own course.

 

The spirit of independent rock n roll, though, has now been co-opted by some of the same Wall Street bankers who brought you the dot com bubble and the housing crisis.

 

We are witnessing a consolidation in our industry similar to what has happened in media, banking and telecommunications. Private-equity firms have been buying up both retail stores and wholesale manufacturers, mostly using leveraged debt backed by junk bonds for the purchases. By owning both wholesale and retail, they are selling themselves product, and then selling it to consumers.

 

One well-documented case is Weston Presidio, which owns stakes in Fender and Guitar Center, a fact that is proudly displayed on the portfolio page of its Web site. The pitfalls of this have been discussed by market analyst Eric Garland in an excellent series he has published on his Web site, ericgarland.co.

 

Heritage brand names like Fender have been built on the backs of independent brick-and-mortar music stores. Purchasing decisions used to be in the hands of retail stores. However, they have progressively shifted into the hands of manufacturers and wholesalers that are dictating terms, pricing and SKUs.

 

Independents continually complain about Internet sales and big-box stores while, at the same time, buying products from manufacturers that sometimes share ownership by the same private-equity firms. By purchasing from these companies, we are propping up our big-box competitors.

 

Three years ago, Larrys Music Center Owner Brad Shreve and I began evaluating the way in which we choose products and our vendor relationships, and we developed a simple set of criteria: we want only to carry the coolest products we can find and we want to buy them only from independent-friendly companies that demonstrate they have our best interest at heart.

 

This new business philosophy quickly raised some questions about lines we were carrying. We have since eliminated several traditional suppliers in favor of companies with better or comparable products, terms that are more favorable, better customer service and stocking demands that are less stringent. One brand we discontinued carrying was Fender.

 

After 25 years as a Fender dealer, we had been struggling with constantly evolving requirements we had to meet, as well as the way in which they were prescribed. As a result, we were no longer able to decide for ourselves which products worked in our stores, which items met the level of quality we wanted and which products were sufficiently profitable to be worth our while. Those terms were being dictated to us in ever-increasing increments. And, despite a banner year, the demands were getting higher.

 

Last year, Fender announced a custom-design program offering consumers the ability to build a custom guitar and buy it directly from the company via its Web site. Taylor Guitars offers a similar program, except the sale goes through a dealer, thus keeping the dealer relationship intact. At the time, and despite assurances from our Fender sales representative and his boss that only high-end custom guitars would be available direct, it seemed like a test balloon for further direct sales. After careful consideration, we deemed these business practices untenable and, as a brick-and-mortar retailer, we decided it was best for our store to terminate this relationship.

 

Some of these decisions were difficult at first, given the perceived weight particular brands hold when assessing our value as a store. The simple truth is MI retail stores are slow to adapt and stuck in the past, often anchoring themselves to brands less because of their current value and more due to their historical significance. In a marketplace as fast-paced and dynamic as todays is, this is simply not good business.

 

We admitted to ourselves that we had been afraid we wouldnt be perceived as a real music store by giving up a marquee brand name. However, as soon as our new philosophy was put into practice, we realized our fears were unfounded.

 

We live in a fortunate time when there are more great brands and quality products to choose from than ever before. Now that we arent spending so much of our buying power in one place, we are free to explore other brands. These are not B-level brands without any name recognition, either.

 

We have acquired linessome of them include Duesenberg, Reverend, EarthQuaker, Marshall and Washburnwith buy-in requirements that we consider more favorable, all while getting better margins. We have maintained our relationships with other brandsthese include Taylor, Korg, Vox and Yamahaall of which have buy-in requirements that we feel are fair and meet our needs. And, we continually buy plenty of used Fender products to offer our customers.

 

Being independent is an asset, and it should be treated like one. As retailers, we must take back control. If we dont, these manufacturer-dictated terms will become progressively more difficult to adhere to. We should be deciding what we carry, negotiating for terms and pricing, and doing whats best for our stores. We do not make decisions by committee or because of stockholders; we make decisions based on what we believe is right for our business and what our customers want. Independent dealers must assess the value of their product lines, and of the companies that own those lines, based on the market as it isnot according to our memories of decades past.

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Thanks for that Mr. Searcy. I just had a discussion with one of the local small shop Fender dealers and he was very concerned about things in the near future, this article helps make some sense of the things he was saying.

 

Good to see you in here, I'm sure you are a busy guy.

 

rct

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Hmm...

 

I don't really know what to think about this situation.

 

Edit:

 

I'm more curious if those small shops who sell Fenders are now going to chase after the other brands that make Fender "copies".

 

Perhaps I'll contact Music Zoo and see their view on this...

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As long as private equity investors pay less taxes than the working stiffs that buy their products, the business world will continue to become more polarized. Giving rich guys a tax break to make it easy for them to do business undermines the value of the companies they invest in and doesn't do anything to make the economy any healthier. It discriminates against small businesses and individuals, plain and simple.

 

I always did business with the people at the bottom of the economic totem pole, so I appreciate how much they mean to small business and a healthy economy. You give them a dollar and they spend it quickly and in the right place. Give a rich guy a dollar and it's not worth a darn to the economy.

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As long as private equity investors pay less taxes than the working stiffs that buy their products, the business world will continue to become more polarized. Giving rich guys a tax break to make it easy for them to do business undermines the value of the companies they invest in and doesn't do anything to make the economy any healthier. It discriminates against small businesses and individuals, plain and simple.

 

I always did business with the people at the bottom of the economic totem pole, so I appreciate how much they mean to small business and a healthy economy. You give them a dollar and they spend it quickly and in the right place. Give a rich guy a dollar and it's not worth a darn to the economy.

 

I am glad at least one other guy is as grumpy as me about it all.

 

rct

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I have mixed feelings about this as a consumer, and I completely understand the problem that the retailer has. As a consumer, I want to be able to pay the least amount for the highest quality. What a brick and mortar store is give me the opportunity to test an item that I couldn't have by ordering direct. On the other hand, I paid over $2000 for a Carvin without ever seeing it or hearing it, and it is still my favorite guitar after over 2 years Plus, it was custom built (in the US) from dozens and dozens of options. It remains the best value of the guitars that I have owned.

 

While it may be good for Fender to dictate how a dealer handles their product (Gibson has been doing it for years), it really squeezes dealers, and selling direct may ultimately hurt Fender.

 

I'll be interested in following this thread to see what the rest of you have to say about it. I actually think that Gibson (and consumers) could benefit more from selling direct.

 

Edit: You're exactly right, bbp, but saying that wealthy people/corporations take money out of the economy becomes a political issue, and I didn't want to go there.

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I'm sorry if I made that seem like it was my op-ed. It was something that was forwarded to me from a friend that I thought would be interesting reading for you guys.

 

 

I have long been unimpressed with the folks running Fender. It does not have a thing to do with the tax system (although I have complaints about that). It's about what people will put up with. I can't count the number of friends I have who complain about WalMart constantly and yet they shop there almost every week and hide behind the excuse of "Well.. the little guy has to shop there. We have no choice."

 

Wimps...

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I'm with you zz. At a higher level, retail in general is shifting very rapidly away from brick/mortar and I'm not sure it's necessarily a bad thing.

 

Local retail outlets just aren't offering the value-add they used to. I can't count the number of times I've asked for something in a store and I get an offer to have the item(s) ordered for me by the store. I can do that myself, thank you very much!

 

I do business with my local guy when he has something I want, but that is happening less and less frequently.

 

Retail outlets will find legitimate ways to add value, or they'll have to do something else. The idea that they are owed their existence and ability to force a manufacturer to only sell to/thru them is a bit absurd, IMO. Life marches on.

 

I suppose we could just tax the rich until the situation improves, but I don't see the connection really. In many cases, 'the rich' are the ones that own the retail outlets. Increase their cost of doing business forces them to raise prices, further exacerbating the situation.

((Note also that making 'the rich' a collection point for higher taxes doesn't necessarily make them the ultimate payer of the tax. There is a huge difference between tax payers and tax collectors))

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Some things brick and mortar stores offer over online: the ability to try many different instruments at once, someone to,directly deal with any issues, a face to talk to, rental gear should mine need repairs. No online retailer can offer the same experience you get once you build a rapport with a local shop. There is more to buying musical instruments than just a good price. Also for the person that has a problem with a local store needing to order in some instruments/parts, well the time line is still the same, you still have to wait and order but you lose out on the personal experience and instant support.

 

The music scene is very much a community, music stores not only serves its customers but are also members of that community and offer support in the community. They are your neighbours and fellow musicians. This is something you will never get from online, ever.

 

I much prefer to support my local stores. So what would you do if there were no stores and had to order everything from online? Is this really what,you would prefer? Talk about inconvenience.

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I've already had a couple of dealers in my area Fire Fender. They did ok by selling other brands. Another big name store had issues with Gibson, and didn't do Gibson sales for a couple of years. The local store is what I prefer, to have hands on to see the product, but most are getting very selective on the stock they keep on hand. I know they can't afford to get everything in stock, but a bit more than almost nothing is something to show. Other than seeing a bass on the Sweetwater Guitar Gallery site, about the only company I trust anymore to order a bass from is G&L through a local dealer.

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Some things brick and mortar stores offer over online: the ability to try many different instruments at once, someone to,directly deal with any issues, a face to talk to, rental gear should mine need repairs. No online retailer can offer the same experience you get once you build a rapport with a local shop. There is more to buying musical instruments than just a good price. Also for the person that has a problem with a local store needing to order in some instruments/parts, well the time line is still the same, you still have to wait and order but you lose out on the personal experience and instant support.

 

The music scene is very much a community, music stores not only serves its customers but are also members of that community and offer support in the community. They are your neighbours and fellow musicians. This is something you will never get from online, ever.

 

I much prefer to support my local stores. So what would you do if there were no stores and had to order everything from online? Is this really what,you would prefer? Talk about inconvenience.

 

I can agree with most all of what you say here. But what if my local mom and pops, barely plural, are littered with Jay Tursers and Seagulls? One set of my strings on the rack? Nothing for recording at all? What would anyone else do? I can drive 40, 50 miles, even further if I want to go to a pretty good small guy. Talk about inconvenience when I get there and they have the same three Mexican, and the same three American Standard Fenders as the other Mom and Pop shops, and 400 Squiers.

 

I'm the consumer. I want to buy what I want to buy, not what they want to sell. Same goes for the big guys, most of them work off matrices that tell them not to hang anything they don't think will sell, based on prior quarter sales. That's how the big guys stay "competitive", they can shift inventory to points that sell vs points that probably won't. And yes, the massive "choices" the big companies offer are actually part of the problem, I get that. In the end, it's the same sunburst on the same body and same neck screwed or glued to it, with a dizzying array of pickup "choices".

 

Make good guitars, make a reasonable amount of options that are not based solely on price point, and they might be able to support both little local guys and the big ones. Price Point Retail is where it all went to sh1t in my opinion, and that is just my opinion, I don't own a guitar shop.

 

It's a rough world. The mom and pops are nearly gone in this area. The big guys aren't doing all that hot either.

 

rct

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I can agree with most all of what you say here. But what if my local mom and pops, barely plural, are littered with Jay Tursers and Seagulls? One set of my strings on the rack? Nothing for recording at all? What would anyone else do? I can drive 40, 50 miles, even further if I want to go to a pretty good small guy. Talk about inconvenience when I get there and they have the same three Mexican, and the same three American Standard Fenders as the other Mom and Pop shops, and 400 Squiers.

 

I'm the consumer. I want to buy what I want to buy, not what they want to sell. Same goes for the big guys, most of them work off matrices that tell them not to hang anything they don't think will sell, based on prior quarter sales. That's how the big guys stay "competitive", they can shift inventory to points that sell vs points that probably won't. And yes, the massive "choices" the big companies offer are actually part of the problem, I get that. In the end, it's the same sunburst on the same body and same neck screwed or glued to it, with a dizzying array of pickup "choices".

 

Make good guitars, make a reasonable amount of options that are not based solely on price point, and they might be able to support both little local guys and the big ones. Price Point Retail is where it all went to sh1t in my opinion, and that is just my opinion, I don't own a guitar shop.

 

It's a rough world. The mom and pops are nearly gone in this area. The big guys aren't doing all that hot either.

 

rct

 

^^^ this

 

I drive 5 hours round trip sometimes to still not be able to pet what I'm looking for. It's sad, but the guitars I end up buying from my local shop are the cheap ones; PRS SE model, cheap Peavey, some Ibanez and Korean Fenders. Several of those over the years. There was no place I could go to see a selection of my latest purchase, a '14 Studio Pro. I *had* to buy it online. The world did NOT end.

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Retail outlets will find legitimate ways to add value, or they'll have to do something else. The idea that they are owed their existence and ability to force a manufacturer to only sell to/thru them is a bit absurd, IMO. Life marches on.

 

This. I go to my local guys because they offer value to me. I go for the expertise, the relationship, and the experience.

 

dotcoms offer me a few dollars in discount, but the potential for hassle. I'd rather put a few dollars into local Dave's pocket than give it a bigbox or giant web store. Dave works with me. Dave looks out for my interest. Dave even offered to sell me a 2015 Gibson with standard tuners (he'll swap 'em out and says he'll eat the cost, but I'm sure he's got an angle). No one else is going to do that. GC will sell me the guitar, extra tuners, and charge me to have some high school kid swap them.

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Searcy...thanks for posting what I had long suspected. I knew about the "buy-in" factor and was appalled when I heard the bottom line for a particular franchise (NOT FENDER). It was 75K with an outrageoius minimum per month. I have no idea how these guys stay in business given the saturation of the market. More power to you retailers fighting the good fight. If dropping a franchise or two makes the difference between going belly up or staying ...then I say drop it. Small business is what this country was all about once. Mom & Pop corner stores and gas stations.... at one time the backbone of America.

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All I know is the ONE local brick and mortar store dropped Fender several months ago. It mainly had to do with them placing higher and higher purchase minimums and not-so-good service. His store was once part of a small chain in Maine and had the buying power to have SOME US Fenders in stock. He's been on his own since 2012 and hasn't been able to stock ONE US Fender because of the sheer amount of money he'd have to lay out.

 

I know that's a reality faced by most retailers at some level; we've discussed Gibson's "Five Star" dealerships and what not. But good lord, Fender is wide and varied enough, they could let an American Standard Strat get loaded into the back of a UPS truck without FMIC crumbling.

 

No, FMIC will likely never 'crumble" but I can see some dumb "money comes first and we're not guitar players anyway" moves. Their consumer loyalty will drop.

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Internet business will continue to grow and destroy the locals..I am not saying that is good or bad but it is happening and not just in the music industry. I too would love to do business with a smaller local retail for the personal touch and value added but they can not afford to stock or even do business with the major brands because of the demographics of the area I live in it is really disappointing to have to drive a minimum of 50 miles to see Fenders, Gibsons,Martins or Taylors..but I have to that far to either Sam Ash, Guitar Center or Sweetwater. I mean it is not exciting to go into a local store and just see Washburns,Ibanez,Seagull and then only the low ends of those brands..so it really is sad but we had better get used to it because this is where we are heading. I would much rather go into a retail space and "pet" the ones I am considering...but what do you do? The only way to really correct the problem is for people not to buy over the internet but that is not going to happen.

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Two things that will never disappear are greed and stupidity.

 

Greed tends to breed other things like arrogance and indifference. Once a Board Of Directors and Marketing take over, each and every product then becomes aimed at a Target Demographic. The "harder" they work, the higher the targeted demographics' disposable income must become. There has been a descriptive phrase for this around for a long time: pricing oneself out of a job. It took care of Detroit. The worst part is, Statistics label it simply as a "trend" and there is no moral obligation to accept either the implications or responsibility of the outcome.

 

Consumers who can afford it will settle for "close enough" instead of "exactly what they want", and be happy as long as they can get it on terms. They won't care about those who can't.

Those with more money will dictate what is for sale to anyone else. Those with little to no disposable income will be reduced to taking scraps where they can get them.

 

The guys in the middle have been being phased out for some time now. We may all have been affected by it in one form or another. It is called downsizing. Not much sits in warehouses any more unless that warehouse is also a point of sale.

Manufacturers treat independent dealers like they are warehousing subsidiaries. The stuff that sells quickly will be in a distribution hub for a short time. Stuff that doesn't, won't. If you want something different be prepared to wait or spend more, or both.

 

Buying online taps into the human "I want it now" gratification center. Choosing options makes it an even more "enjoyable" experience. Marketing constantly fine tunes the delivery of this opiate for each consumer.

 

Try arguing with an Economist about the meaning of the word progress. ](*,) They'll "trickle down" on you every time. [mad] If you don't like the way its done, don't buy it. [-(

 

Σß

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this been coming for a long time.

 

back around 2000, I was working at a music store teaching, was very good friends and band mates with one of the store managers.

 

He saw it coming back then, knew that the emerging mail order stores were the just more nails in the coffin for the local music stores. They were really not even called online retailers back then and half of them didn't even have web sites to the extent that they all have today of course, places like Guitar Center (and the short live Mars Music) were more of the same. Big stores, massive buying power, walk in and be amazed, everything you could ever want, there, in stock, and many times, in the factory shipping container,, - wait, I don't have to go home with a floor model?

 

I recall that back then, these guys were realizing that it was very hard to maintain status as a Gibson retailer, and these guys ended the relation ship with GIBSON USA and were more or less forced to go with Epiphone because they couldn't move even Gibson USA brands.

 

Back then Fender was a lot easier to work with, and now as we see, everything comes around, and they are playing the same game Gibson was 15 years ago.

 

I sort of share RCT's point of view, the local store rarely has what we "need", but I'm sort of lucky as there are two within 2 miles. One usually has what the other doesn't if I'm in a bind, (and we're talking something as basic as the strings I prefer to use on, for example -- my acoustics.

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There is more to democracy than voting for poeple in office.

 

The wallet is one of the best forms of that, and even speaks more. It's only one vote and may not seem to make a difference, but all the votes count. We all vote every day.

 

Me, I am grateful for the paychecks I get. I don't think I am the only one who has visions of my bosses knowing who I am and having some sort of responsibility in wanting to put me in a position to give me money for what I do for them. Why shouldn't I care about the same thing when it is my turn?

 

I don't shop at Wal-mart because I don't want to support companies that move our economy to China. It's that simple.

 

When it comes to buying online vs Guitar Center vs Mom and Pop, I realize full well there is a price difference coming out of my pocket. But for me, the truth is, I would prefer to SEE the guy who is getting my money, and I like to know where and who is getting my portion of the money. Even if it is just a salesman, at least I have a chance of knowing how his boss treats him, maybe what kind of guy he is. And, I can SEE what they do to perform to EARN that money. So if it's a couple hundred more for a guitar, I feel better about that that just kissing the whole purchase price goodbye. It's gone forever anyway.

 

Point is, (and I am just as guilty as anyone), the fact that online dominates and brick and morter is gone is a result of our own votes.

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Many good points above, and let me add my 2 cents. As righteous and naive as this may sound, I truly believe....

 

AS CONSUMERS, WE HAVE THE POWER.

 

Any retailer, regardless of ownership or products sold, can only stay solvent if we, as consumers, purchase goods and services from them. As consumers, WE choose where to spend our discretionary income, and have CREATED and ALLOWED the "Wal-Mart Syndrome" to take over retail sales of virtually ALL products.

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There is more to democracy than voting for poeple in office.

 

The wallet is one of the best forms of that, and even speaks more. It's only one vote and may not seem to make a difference, but all the votes count. We all vote every day.

 

Me, I am grateful for the paychecks I get. I don't think I am the only one who has visions of my bosses knowing who I am and having some sort of responsibility in wanting to put me in a position to give me money for what I do for them. Why shouldn't I care about the same thing when it is my turn?

 

I don't shop at Wal-mart because I don't want to support companies that move our economy to China. It's that simple.

 

When it comes to buying online vs Guitar Center vs Mom and Pop, I realize full well there is a price difference coming out of my pocket. But for me, the truth is, I would prefer to SEE the guy who is getting my money, and I like to know where and who is getting my portion of the money. Even if it is just a salesman, at least I have a chance of knowing how his boss treats him, maybe what kind of guy he is. And, I can SEE what they do to perform to EARN that money. So if it's a couple hundred more for a guitar, I feel better about that that just kissing the whole purchase price goodbye. It's gone forever anyway.

 

Point is, (and I am just as guilty as anyone), the fact that online dominates and brick and morter is gone is a result of our own votes.

 

I agree, but I think there is more than just a price difference. For example, as others have said, the local guy doesn't always carry what I want at any price. When he has what I want, I gladly pay a few bux more to help the local economy and to have local support. And honestly, the local guys prices are pretty darn close anyway - he matches legit online prices for the stuff he carries.

 

The shift to online purchasing opens up a world of almost endless selection. And convenience. I live far away from significant retail centers. In most cases there is no local alternative. A brick/mortar shopping trip requires planning at the calendar level :) Or, I can order online and have what I want delivered to my front porch more quickly than I could plan a trip and visit a store for the purchase. I've been disappointed in selection during enough of these trips that I hardly bother any more.

 

Point is that a lot of the wallet votes being cast in favor of online would NOT have been local votes had online shopping not matured.

 

I hear WalMart is stocking $250B in Made In The USA merchandise this year ... this is where the real voting takes place, IMO. Not at WalMart or online, but the decision to buy MIC or MIA. A lot of voting has already taken place, so there simply isn't a MIA alternative in a lot of cases.

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Many good points above, and let me add my 2 cents. As righteous and naive as this may sound, I truly believe....

 

AS CONSUMERS, WE HAVE THE POWER.

 

Any retailer, regardless of ownership or products sold, can only stay solvent if we, as consumers, purchase goods and services from them. As consumers, WE choose where to spend our discretionary income, and have CREATED and ALLOWED the "Wal-Mart Syndrome" to take over retail sales of virtually ALL products.

 

Local guy, I was buying from him for 15 years or so. He had our hosts and the guys in California. Like, Everything from both companies. We, the consumers, went there and bought. Two, three miles from him, GC opened.

 

Within two years he at his small store with himself and three employees(24 hour service for the local giggers) he was required to pony up the very same amount of money to keep his franchise as the GCs in our district, three of them.

 

Myself and the other consumers had absolutely nothing to do with that. This is what really kills me. It IS naïve to think such a thing. Probably 85% of what goes on in retail and impacts everyone in the community everyone in the community had nothing to do with.

 

rct

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ya,, that's the killer Rich,

 

The local guys have no choice but to try and keep up with the rules that the large chains can comply with.

 

These guys try to maintain that run rate, and they have to close the doors.

 

GC on the other hand can get so far in debt (as they already are) can't possible get out of it, but the size of the "support structure' behind these chains they are-- "Too big to fail"..

 

Manufactures appear to WANT to force the small places out of business.

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Interesting that Walmart has all the power over their suppliers, no matter how large they are. Walmart tells their suppliers how the deal is done. GC should have been handling Gibson, if they weren't already. I guess it's likely the lawyers and the bean counters who are running that show, now.

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