Battle of the band suppliers

Nov 01, 1999 10:30 PM  By

Stan Werbin, owner of Lansing, MI-based Elderly Instruments, remembers when competition among retail and catalog marketers of musical instruments in regional markets was scarce, and margins were high. In fact, when Werbin opened his store in 1972 and his catalog operation three years later, he set himself apart from his few local competitors by selling most of his products at 40% off the list prices.

But competing on price no longer makes $12 million Elderly Instruments unusual in its market, as discount retail giants such as $297 million Guitar Center, having already built huge stores throughout the country, enter the direct marketing arena and also offer discounted prices.

In May, Agoura Hills, CA-based Guitar Center acquired the country’s largest cataloger of musical instruments, Medford, OR-based Musician’s Friend, for $50 million. (The deal also gives Guitar Center an established Internet presence.) At around the same time, national instruments retailer Sam Ash launched a direct mail program.

Werbin claims not to be overly concerned about the increased competition from deep-pocketed companies with economies of scale that enable them to slash prices. “The mom-and-pop businesses that have survived have learned to operate on narrow margins,” he says.

Beyond the discount factor

Other small music supplies catalogers are using the Web to take aim at their larger rivals. Lon Palmer, owner of retailer Freeport Music in Huntington Bay, NY, recently stopped mailing his Let’s Make Music catalog – but not because of increased competition or flagging sales, he says. Rather, Palmer is investing in his firm’s Website, which generates “geometrically more sales” than the more costly print catalog.

“We’ve got more than 500 pages on our site, and we’ll be increasing that to 1,000 pages this year,” Palmer says. “Now I don’t have to sell an instrument with four sentences. If I’ve got a better way than Guitar Center to explain something, I get the business.”

The Web is also the prime focus for American Musical Supply, an instrument cataloger based in Spicer, MN. “But it’s not going to detract from direct mail,” says sales manager Brian Jensen. “I can see a time when we’ll use direct mail primarily to drive traffic to the Internet.”

Jensen even sees a bright side to the increased competition. “Some small, not-so-great dealers have gone by the wayside. Now a smaller number of companies are doing more business, and we’re doing it better.”