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Guitar Center Possible Bankruptcy (yet again)

Discussion in 'Bad Dog Cafe' started by warrent, Oct 26, 2020.

  1. scooteraz

    scooteraz Friend of Leo's

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    At least, but it keeps showing up on the business pages/sites like it is fresh news. Sort of like the decade and a half of stories about Sears. Or name your failed company here....
     
  2. Drew617

    Drew617 Tele-Meister

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    Yep. For a couple generations there was only one guitar store, an independent, on the south side of my hometown. I moved away a long time ago, but got nostalgic for a minute when I read that they closed recently. Examining it a little more, some of the guys there were always too cool for school (and for me), made us get permission to get an instrument off the wall, and would stand a foot away from us while you tried to noodle and examine a guitar. I did buy a few inexpensive guitars there as a teenager and young adult. Seems like bad business as I could have, and did, turn into an adult with some discretionary funds.

    I don't have a lot of tolerance for sales tactics, but any GC I've ever been to allows me to pull anything I can reach of the wall, play it for as long as I feel like, and walk it to the register myself if/when I'm ready to buy it. I can't tell if they're really understaffed or inattentive, if I appear like a noncustomer according to their sales traning, or if my eyes and body language just say "go screw" effectively enough, but the GC situation works for me. First guy or girl to talk to me "gets" the sale, I guess.

    You do have to abide some teenage guitar heros at GC. Never, ever, ever go on a Saturday afternoon.
     
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  3. joebloggs13

    joebloggs13 Tele-Afflicted

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    No.... WKRP! :lol::lol::lol:
     
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  4. MervsMods

    MervsMods TDPRI Member

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    Perhaps GC and MF will combine into one entity. I saw a used amp on GC, did a search for the same amp because I've not heard of it, and found the EXACT same amp at the same price at MF. WHEN did MF start selling used gear?

    Kinda looks like they are already be doing this....
     
  5. Peegoo

    Peegoo Poster Extraordinaire

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    Large corporations don't live and die inside of a year; it takes multiple years to be truly successful, and multiple collisions with icebergs over time to sink a multi-million-dollar operation. GC was in trouble five years ago. One good year cannot be the hail-mary catch in the end zone.

    Gibson did a similar thing: they combined a short-sighted view of the market with arrogant greed; that led to the forced liquidation of much of their subsidiary holdings in order to keep the brand alive. They came very close to disappearing as we have known them.

    The relationship between GC and MF has always puzzled me; they're owned by the same corporation. They also own LMI, Woodwind & Brasswind, Music 123, and others. GC was the brick-and-mortar side of the business, but I could not understand how a corp that contains several huge Web-based retail operations would be able to also operate physical locations with inventory and staff. Did the GC stores serve as a loss leader for the greater good of the corp? I think so. Going by what they paid their employees, it was obvious the stores were a shoestring operation.

    Based on reports I've read here and elsewhere about many GCs having very little inventory, I figured it was just a matter of time before the doors would start shutting for good.

    Don't expect drastic liquidation sales. Pier 1 serves as a great example of how companies go belly-up these days: they advertise the GOOB sale, and their prices remain near where they were prior to the corporate dumpster fire; not much moves, and the majority of inventory that remains gets auctioned off to discount retailers.
     
  6. elihu

    elihu Poster Extraordinaire

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    Is it time to drop the turkeys out of the helicopter yet?
     
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  7. beninma

    beninma Friend of Leo's

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    This times a million.

    Fender/Martin/Taylor/Gibson are clearly not going to go out of business.. they're all having record years while GC says the year is a disaster. Guitars are flying "off the shelves" or "out of the warehouse" it's just they're not being sold through GC.

    Hard to say if the guitar manufacturers would actually get left holding the bag. If they're significant creditors of GC they'll be in the bankruptcy proceedings trying to get paid just like everyone else GC owes money too.

    In any case if the guitar manufacturers are having such a tremendous boom they'll be able to weather GC going bankrupt.. they'll be in good position to absorb a lost if GC manages to screw them, and they've clearly already figured out how to move product without GC.

    The whole thing appears to be mismanagement + 2 rounds of playing russian roulette with the devil (AKA private equity). If GC had stayed public this whole time & cleaned house with a new management team way back when instead of dealing with Bain & then with Ares they could have ended up in a very different position. Good management the last 10 years could very well have meant they had a much bigger online presence + inventory management as well.
     
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  8. Drew617

    Drew617 Tele-Meister

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    This alone won't have have affected GC's viability, but something I've noted...

    I tend to buy used gear from Reverb sellers if I'm impatient, really concerned about condition and want hi-res photos and reliable descriptions, and if items are relatively low cost and it's not critical to score a "deal." Some other gear I will wait to find used at GC, because:
    • Their used pricing appears to be somewhat random or arbitrary
    • Their used pricing frequently appears low versus market data available from Reverb and eBay
    • Their used items are frequently misidentified
    I've watched their process and POS systems as associates take gear in trade. From what I recall, an associate, who is probably not incented to be accurate, first has a chance to match the gear to a known SKU in their POS which may or may not be accurate, otherwise has to key in a description that may or may not be correct. This happens while other staff and customers are in line for the POS terminal, and while the teenage guitar heroes are going nuts on the sales floor.

    The result is that there are occasionally crazy used deals on the website if you're willing to watch - they are giving money away. Sometimes American guitars are misidentified as imports. Sometimes the real item is given an entirely different (wrong) description and price. IME if a photo and description don't match, the photo has been correct. And there is no risk in gambling as a customer: If I guess wrong, they'll take the item back without question.

    I am an engineer by trade, now management, mostly concerned with business processes and designing out inefficiencies/leaks like these. I do this for an engineering firm, a small business of about 50 people. I can identify the problems above passively, as a bored customer standing in line, but it appears that GC hasn't.
     
    Last edited: Oct 26, 2020
  9. chris m.

    chris m. Poster Extraordinaire

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    Whether it be on Wall Street or on Main Street it is easy to find business articles praising some management and booing other management. There are extreme cases like Enron-- lauded as the best company in the USA and then it turned out their financial acumen was based on accounting smoke and mirrors.

    Then there are other less egregious cases. But still, lots of business folks are lauded for their business acumen, and others are derided for their poor decision making. And yet those that are paying attention recognize and acknowledge that there is a TON of luck involved. Opening up the right business for the right market at the right time, and having nothing happen that upsets the apple cart. It's not an inherent difference between the managers as much as just being in the right place at the right time plus a little bit of good luck that makes one look like a genius and the other look like a dolt.

    That's also why most successful investors diversify their holdings across a variety of sectors and a variety of companies. Because they know any company is subject to "firm risk".... a.k.a. bad management and/or just plain bad luck.

    There is a generational aspect to this as well. If you are around my age (57) and happened to major in computer science and be a decent programmer, then with a little luck you got in on the ground floor of the tech boom and made a gazillion dollars. Now all these millenials and Gen Z folks are going into tech, but odds are that they won't be so lucky.

    With GC it seems that their luck ran out-- that market is moving away from big box stores and more towards two niches-- on-line and more boutique in-person. But they certainly haven't shown a lot of acumen in terms of pivoting in a smart way to adjust to the changing market. But maybe their degrees of freedom are extremely limited and just about anyone would be trying to manage a sinking ship as best they could. Some might do a better job of plugging holes and getting the bilge pumps going....while others would be putting more holes in the hull. It seems from distant observation that the GC deals with private capital were plugging holes in the short term while laying a big detonation charge deep in the hull and setting it on timer at the same time.
     
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  10. Telefan33

    Telefan33 Tele-Meister

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    In the late 90s and early 2000s I had a Mars Music and Guitar Center in the town over. If I could go to Mars Music or Guitar Center it was always Mars Music. I have never had a good experience in Guitar Center. The shops I have been to have always been really small and not really suited to test gear out or protect the instruments. Mars Music was a music superstore that closed in the early 2000s BTW.
     
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  11. Danb541

    Danb541 Tele-Afflicted

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    Only time I end up at Guitar Center is when I need a part or something and I don't want to wait for shipping. This is also very limited because GC doesn't carry squat for parts and charge too much for the parts they do carry. If they go under I won't miss them at all.
     
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  12. CharlieO

    CharlieO Friend of Leo's Ad Free Member

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    I always preferred Mars Music to Guitar Center, but Mars went out of business a long time ago and Guitar Center is still around today. I guess maybe that says something about Mars Music. I got some screaming buys at Mars' holiday weekend sales, including a nice Ibanez bass that I didn't need that was marked down dramatically because of a bowed neck. I took it back to the store three days later to have the neck adjusted for free. When I picked it up I saw a guy who was demoing an identical bass. I told him that I would sell him my brand new bass for $100 less than Mars' price. We walked outside and did the deal. $100 profit for me and a great deal for that guy. I guess that is why Mars is long gone.
     
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  13. Whatizitman

    Whatizitman Friend of Leo's

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    Well, when you think about it, 30 years does seem quite long for a step out to the grocery store for milk. That would make sense.

    In any case, I've moved on.
     
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  14. chris m.

    chris m. Poster Extraordinaire

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    If I recall correctly, Mars was also a chain music store, but smaller square footage, not quite as "big box" as GC. I bet they had lower buying power, too. But I agree that the ones I went into provided a better customer experience. I think the big box strategy was 1) lowest possible prices and 2) big inventory. They knew that rock bottom prices trumped customer service, every time. And that worked for quite awhile.

    Now that we have moved in to a new age of Internet marketing, fancy inventory optimization algorithms, etc., I agree that GC has probably not kept up with the times as much as they coulda woulda shoulda. Their two main competitive advantages are now gone, defeated by the Internet, so what do they do now? It's a nice theory to think they could downsize square footage, offer more service/lessons/niche stuff, but that's like asking a lion to become a cheetah. Not very easy to change your entire business strategy as well as your physical infrastructure.

    Same thing happened to Barnes and Noble, Circuit City, and lots of other big box stores once Amazon came along.
     
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  15. Marc Morfei

    Marc Morfei Friend of Leo's Silver Supporter

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    Yeah, this aspect of GC cut both ways. True you could pretty much have free rein to play whatever however wherever. So if you want to be left alone it's great. Any they usually had pretty good inventory. But the flip side was that if you needed help or attention, good luck, get in line, maybe wait a half hour until you can find someone to take your money. And while they have inventory, they generally don't know anything about their inventory.
     
    Last edited: Oct 26, 2020
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  16. Jakedog

    Jakedog Doctor of Teleocity Ad Free Member

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    GC was fine when it was run like a music store. It was ridiculously successful. Then they got away from the music store model, and tried to run it like any other retail business. It was an abject failure. Music stores aren’t staples or Walmart, and will not successfully function as such. They can’t. It’s just not how they work. You can’t take 60 years of music store culture, and decide to change it over night and treat all your customers like they’re shopping for towels and paper clips. It was never going to work, and it hasn’t. Its not like other businesses.

    Add onto that that they don’t really care if it succeeds or not. The whole name of the game with the last few ownerships was to squeeze as much out of it as possible, while paying as few bills as possible, and if it dies, well then it dies. They don’t even care if it succeeds or not. They’ll all get to keep their money. It’s everyone else involved with them that’ll get screwed.

    This business doesn’t have to be failing, and it doesn’t have to be bankrupt. They did it very nearly on purpose. These firms whole M.O. is to buy up these big companies, run them into the ground, and then go get some more.
     
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  17. archetype

    archetype Fiend of Leo's

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    A big company in trouble is news. They teeter back and forth, so they're news over and over.
     
  18. archetype

    archetype Fiend of Leo's

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    I prefered Mars to GC by a big margin. Both Fenders I bought new were from Mars. They overexpanded adding stores, stupidly hadn't figured out how capital, financing, and revenue would balance for all that, and couldn't get sufficient financing to right the ship, maybe because it was obvious that they didn't pay attention to the fundamentals. In Indianapolis, IN, they had a GOOB sale, and a wholesaler bought the remainder. It all went away in semi trucks. A Sam Ash moved into the same space and I prefer them to GC by a big margin.
     
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  19. secretsoundz

    secretsoundz TDPRI Member

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    I'm not sure if this is telling or not... The last time I visited a GC it was because I was looking for an item they showed in stock online at my local store. I went it to buy it and that place was a wasteland. They hardly had any inventory and what they did have was strategically placed to make the store look fuller. They didn't have the item I was after and the clerk apologized. He said management had told them to stop doing inventory.
     
  20. Drew617

    Drew617 Tele-Meister

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    I feel like I've read something about this in the past but can't trace my way back to it now. So caveat emptor, I'm thinking aloud and might be talking about my ass: Is it possible that GC/MF represents enough of Fender, Taylor, Martin, et al's distribution that they won't be allowed to fold? Fail maybe, but they seem to be doing that anyway. If manufacturers can't afford to lose distribution, maybe there's little downside from private equity's perspective.
     
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