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The Sinking Ship

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Guitar Center

 

Just read an interesting article. It seems Guitar Center`s financial woes are far more dire than suspected. The new head of the company, allegedly, doesn`t know a thing about music or gear. Investors are jumping ship and stocks are plunging. There has been a new round of firings including some top people of the company. Guitar Center is in serious trouble and will most likely be forced to file for Chapter 11.

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Never been in one. I think the closest one is at the other end of the state.

 

I guess living in a remote area has it's advantages.

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Been there, done that...

 

We've been here before and I suspect rumors of GC's demise are greatly exaggerated.

 

This will simply bring forth a new round of corporate restructuring and management practice/policy. They ain't likely to be boarded up and abandoned any time soon...

 

This has been an ongoing thing for many years now that is seeing the dead-wood trimming that has needed to have been done to right this ship. It keeps getting closer and closer to a course of true profitability with each successive adjustment. When the marketplace is now an eternally changing dynamic thanx to technology and other economic factors it's tougher these days to hit that moving target..

 

They'll keep shootin'...

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IMO it likely has more to do with the economy. Guitars are luxury items. And when things go downhill in the economy, guitars are among the 1st things people sell. So the used guitar market is booming. And there's some really great deals out there on higher end instruments. And that make guitars of every level available cheaper than GC can sell them. And even then it's hard to sell a used guitar. Why would you pay retail under these circumstances? Case in point. About 2005 I bought my nephew a new Epiphone PR 150 at GC for $150. The same guitar now sells new at GC for less than $100. And I bought one to use as a camping guitar last year used for $60.

2nd: GC is a HIGH VOLUME SELLER that can undercut mom & pop stores by buying from the manufacturer in high volume. And these types of deals are usually made under contract. We agree to accept X number of guitars at X price over X amount of time. If guitars aren't selling and they HAVE to take inbound under contract shipments, they're HURTIN. They've had to cut their profit margins in attempt to move existing stock in attempt to make room for arriving stock. And still can't match the deals that can be found on the used market.

Does this reflect poor management? Possibly, if you count failure to anticipate market fluctuations. But really, who saw it coming or expected it to last this long? And if that's the determination, there are literally thousands of Corporate Managements that are in the same boat. Unfortunately for them, GC isn't considered "Too big to fail" like some. And the tax payer hasn't been burdened with bailing them out.

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I have been shopping at GC since 1988, starting with one of their San Diego stores. I have given them thousands of dollars of business.

 

But not anymore. I was a the Lawndale Ca store yesterday and was interested in a Octave pedal made by POG. It was retailing for $220, I asked for their best deal, they wouldn't budge, so I said how about throwing in a battery? Still wouldn't budge. The guy waiting on me knows me and knows how much I spend there, he knows I am a valued customer. So asked him what's up? he said the company was under new management and there is a policy of no haggling on price. WTF?

 

It's best that I didn't buy that pedal anyway, it had a cheap casing and maybe $5 worth of electronics in it, but I loved the effects. So after 26 years as a loyal GC customer spending well over 25 grand there over the years, I have decided no more GC for me. They have lost my business.

 

 

 

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I'll buy from GC..... They have always been good to me..... And since they are having troubles, I'll pick up another Gibby acoustic from them just to help out, since they helped me out as a young musician way back when....lol

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I am not trying to cast any ill will here but I never understood the bartering concept when it comes to items such as guitars appliances etc. I mean I do understand it on cars and houses. The concept only cuts into profit margins then we complain when companies fold, if people do not want to pay the amount asked go find it else where or wait or buy it used. The USA is not Tiajuana Mexico, I used to sell part time at a well known retailer and had a Dr come in and ask me if that was the best I could do on price on a 150.00 item I know he was a Dr because I had to see him once, anyway I asked him if the next time I came to him if he was gonna reduce his fee's to help me and he said no, so I said well then you have your answer don't you. I often wonder with Musicians who Gig if they negociate their fees as well? Do they take reduction in what they would normally ask? I know some who say hell no even on doing charity events but yet will go into a music store and ask for reductions..I just dont get how they could do so? No offense meant to anyone personally here.

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Valid point Kelly Campbell!

 

It is exactly the practice of cutting into an already lower price point than yer gonna find at any Mom & Pop shop, that sent the Daddy's Junky Music chain; I've spoken about before, out of business... They were competing with these big boys and their policies almost seemed to give the sales personnel the discretion to sell at what seemed like below cost even... Certainly below the profit margin needed to keep them afloat!

 

And now they're gone. I hope the company solidifies financially even if it means no budging on their already deeply discounted selling prices...

 

Somebody's gotta pay the piper, we can't all simply mortgage the store to China, like our Government...

 

I'm also with Duane V... I'll patronize them to help out as they've done right by me too!

 

And I'll not expect even more off their already lowest price on the block!

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I always try to get a good deal simply because I buy and have 10 times the gear I actually need. If I do not get a good deal, that's fine I do not need to buy pretty much anything else for the rest of my life.

 

The problem with music gear is that a good portion of their sales are driven by unnecessary purchases.

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Yep, Healthcare companies have tools on their websites to find the better discounts on doctors, hospitals, services and drugs.

 

A guy at Nashville Used&New Music told me once the retail mark up on Fender is 40%, that is pretty crazy by any standard. the manufacturer gets 60% to manufacture the product and pay for materials, labor, shipping, etc. and the retail store gets 40%?

 

It reminds me of insurance brokers, they get a ton of money in commissions and they do not have any risk.

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I have always been able to bargain with GC until now, for those folks that don't mind paying the price as given more power to you. Negotiating for price is an American tradition. BTW I own 6 Gibsons all purchased at GC except one. And I always got the price negotiated down. You folks that want to pay full pop is just plain silly.

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I don't belive in the barter system. I expect to pay a fair price for an item. Why should one person pay more or less for the same item at the same store? Just because you think you deserve a better deal than the next guy? How is that treating people with respect? How upset would you be if I got a great deal and you were fleeced? Yeah, I bet you would never go back there. Everyone should get the same fair price.

 

For me the difference is with the people I deal with. Customer service is where its at, be friendly, attentive and honest and you have my business.

 

As for GC, they might have to restructure, even down size, but I would expect them to stick around.

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I agree Drog.....So I understand why some people do and other do not negotiate but I hear none of those who said they do answer the other portion of my question about what they do when they are asked to lower their prices for performing...I would like to think that if you ask for lower prices you are then also willing to give a lower price when asked. Also do those of you who do barter..when you go to a decent restaurant do you tip?? Be honest, some of my best friend are ones who barter and one I have sold to before and I always hated to do so because I worked on commission and they would always come to me and then attempt to take money out of my pocket, also the same guy I have heard him tell a guy in a guitar store " I don't normally do this but is that the best you can do" ? I was floored because I know better...I just could not do it that way it is embarrassing.

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Negotiating a price is not the barter system.

 

I don't belive in the barter system. I expect to pay a fair price for an item. Why should one person pay more or less for the same item at the same store? Just because you think you deserve a better deal than the next guy? How is that treating people with respect? How upset would you be if I got a great deal and you were fleeced? Yeah, I bet you would never go back there. Everyone should get the same fair price.

 

For me the difference is with the people I deal with. Customer service is where its at, be friendly, attentive and honest and you have my business.

 

As for GC, they might have to restructure, even down size, but I would expect them to stick around.

 

I don't care what someone else paid for a thing. I care I paid. The deal someone else got is none of my beez wax. But if they did get a better deal more power to them.

 

I never pay retail.

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I agree Drog.....So I understand why some people do and other do not negotiate but I hear none of those who said they do answer the other portion of my question about what they do when they are asked to lower their prices for performing...I would like to think that if you ask for lower prices you are then also willing to give a lower price when asked. Also do those of you who do barter..when you go to a decent restaurant do you tip?? Be honest, some of my best friend are ones who barter and one I have sold to before and I always hated to do so because I worked on commission and they would always come to me and then attempt to take money out of my pocket, also the same guy I have heard him tell a guy in a guitar store " I don't normally do this but is that the best you can do" ? I was floored because I know better...I just could not do it that way it is embarrassing.

 

I perform for free as I don't think my art is good enough to charge money for. I do have other talents that I charge money for and I'm always negotiating new deals. You wouldn't believe how little Donny has been paying for my rewinds. :)

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Also do those of you who do barter..when you go to a decent restaurant do you tip?? Be honest

 

I do, every time, even when the service is not so good, actually I just went to a BBQ joint that is essentially self-service and tipped 20%. I think you are confusing negotiation skills with being a cheapskate. If most of us were cheap we would not have the ungodly number of guitars we have.

 

I think you are vested too much emotionally in this concept.

 

Price competition exists, a true fact of capitalism and it is a driver to be more efficient and do things better, I work for an evil health insurance company and we have to negotiate rates when brokers bid business and even when they do not, hell they do not even need a reason...at all, the best way to make money is to be efficient, better than the competition and still make a profit, that's how it works, that's how it all works.

 

I would be retiring at 55 if the rates I quote weren't challenged by anyone, hell my bonus would be double or triple, but as it is I'll probably retire at 77, does this mean that somebody is taking money out of my pockets? I'd be living in a fantasy if I thought that way.

 

This is were GC has has poor performance, they are big and impersonal in a business were people want customer service, people put up with them because they are a necessary evil the likes of Walmart, as of late they have tried to change some things like not having a person checking at the door whether you stole something or not. A lot of their employees are decent but some kids working there need some training.

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I do, every time, even when the service is not so good, actually I just went to a BBQ joint that is essentially self-service and tipped 20%. I think you are confusing negotiation skills with being a cheapskate. If most of us were cheap we would not have the ungodly number of guitars we have.

 

I think you are vested too much emotionally in this concept.

 

Price competition exists, a true fact of capitalism and it is a driver to be more efficient and do things better, I work for an evil health insurance company and we have to negotiate rates when brokers bid business and even when they do not, hell they do not even need a reason...at all, the best way to make money is to be efficient, better than the competition and still make a profit, that's how it works, that's how it all works.

 

I would be retiring at 55 if the rates I quote weren't challenged by anyone, hell my bonus would be double or triple, but as it is I'll probably retire at 77, does this mean that somebody is taking money out of my pockets? I'd be living in a fantasy if I thought that way.

 

My standard tip is 20%. Outstanding service will get more and crappy service will get less and every year between Thanks Giving and Christmas I pick one good server and tip them 100%. You would be shocked at how well they love me at Red Robin these days. [thumbup]

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My standard tip is 20%. Outstanding service will get more and crappy service will get less and every year between Thanks Giving and Christmas I pick one good server and tip them 100%. You would be shocked at how well they love me at Red Robin these days. [thumbup]

 

When I used to go out drinking often at Jonathan's in Cool Springs I used to tip 100% all the time because the beer was such a good deal at 2x1 but the waitresses had to work harder and yea, they were always nice and friendly.

 

Deciding how you spend your money is not the same as being a cheapskate.

 

The thing is, in capitalism earnings are earned...hell of a concept.

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I find it interesting that people are against negotiating. When you accept a new job, to you take the first salary offer they give you? No. Same goes for a large purchase or a contract.

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While I admit that I never attempted to barter for better price than GC's already lower than most other places prices. I do find it hard to believe that someone would refuse to do any further business with them just because a barter attempt was refused. Especially in light of the fact that GC is having financial trouble and has already lowered prices/profit margins below what they were a few years ago. But the reality is that in most cases GC likely will have what you want/need at an already lower price than you get it anywhere else except used. And if you choose to go elsewhere and pay more, that certainly your perogative. I'll still shop GC myself.

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I am not vested too much emotionally I just think that from my experience the people who want to negotiate are cheap. I believe there is a difference in a job versus buying goods. But too many here seem to be taking it personal I am only speaking from my experiences selling. I would still like to see the artist who normally gigs come down in their price, I think there is some negotiating that goes on but is rare that the artist comes off his normal price they may negotiate to get more I am not saying that never happens. But please don't take it personally I am not trying to single out anyone it was just an observation...how many people go to eat and ask for lower prices?? hardly ever they just don't go there they go somewhere else. I am retired at 55 and I did not get that way by trying to barter every purchase I ever made and more power to those who do. I think there are things like cars and houses that the seller expects it but not Sears or places like that. Sorry if I offended anyone.

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No offense taken but you say there is a difference between a job and buying goods and then you cite the example of a gigging musician which is a job.

 

A lot of industries work with negotiation, others don't.

 

No, I do not negotiate prices in a restaurant but I do not come back if I do not like the price or go in at all to begin with.

 

I am not sure how you retired at 55 but I am not sure it is in a financial field. No offense meant.

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Yep, Healthcare companies have tools on their websites to find the better discounts on doctors, hospitals, services and drugs.

 

A guy at Nashville Used&New Music told me once the retail mark up on Fender is 40%, that is pretty crazy by any standard. the manufacturer gets 60% to manufacture the product and pay for materials, labor, shipping, etc. and the retail store gets 40%?

 

It reminds me of insurance brokers, they get a ton of money in commissions and they do not have any risk.

 

 

Man, that's not crazy by my standards. If I owned real physical (i.e. not just on-line) stores I'd be wanting at least that percentage on a starting retail price (before discounting). I mean its not like you buy a bunch of guitars and sell them 5 minutes after you put them on the floor - in the interim period (weeks, months, years?)you pay inventory carrying costs (or opportunity cost thereof), rent, power, insurance, staff and management wages and overhead ete etc etc - and then need to make sufficient profit for it to be worth your while (if mom & pop) or to pay all the corporate costs and promotion etc (if a major chain) whilst growing shareholder equity - there's a hell of a difference between gross margin and net profit - and the retailer carries by far the most risk. I'd be confident the manufacturers net profit would (should) be greater in percentage terms than the retailers. Hence any wonder on-line goes so well in appropriate product and service categories. seriously, how far would the theoretical $400 profit (before any cost) on a $1000 Fender go on all the expenses mentioned - and more - and how many do you need to shift each week to make it profitable.

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