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Mars Music Is Busted

Anyone who has read this column for long, knows my opinion about big box music stores running roughshod across the retail music landscape. I don't like it and it's not good for musicians.

In some ways big companies contribute enormous value to the musicians of the world. Most manufacturers are big and most contribute positively. But in the retail space, big merchants must be constantly watched so they do not alter the musical perceptions we all take for granted.

Music and musicians are the basis for this audio artwork which we call music. Musicians are the visionaries that drive the retail music instrument industry. Without musicians to create music, nothing else (in this industry) even matters. It all starts with the music.

By our very nature we are open to new ideas and perceptions. As artists we perceive things and reflect that in our music. In this way you can start to see how we are vulnerable to being marketed to.

When we are marketed to as a mass of humanity that can be influenced and turned into buyers, we should be very aware of exactly what is going on because we are going to be influenced. We need to be aware because we have too much to lose. One of the things we stand to lose is a caring, nurturing music shop that cannot compete with big box pushers and still make a living. They will disappear and when they go, they go forever and so does their knowledge.

Another thing we could lose is reasonable pricing. History has shown time after time that when competitors go out of business, prices go up. We stand to lose a lot! The Internet may buffer us from some of this, but the "brick and mortar" retail scene will be effected.

This kind of talk can seem extreme and far fetched, but if you see the internal workings of stores and the business engines that run them, you start to understand these are real world problems that affect us all!

We get marketed to every day. Everyone who sells something does it or should do it, myself included. The problem occurs when large companies with very deep financial pockets lower prices and then sit back to see who can hang with predatory pricing. They gut the retail market. I have seen it happen in several different cities in America over the last few years. Cleveland Ohio and Atlanta Georgia come to mind.

In addition to this, some large chains are able to strike deals with manufacturers that the little guy cannot compete with. The big guys can publish a retail price below their wholesale price. I am not kidding. Who wins here? Is it the guy that pays a few dollars less to buy a guitar and then needs to ask another person how to change the strings? This exact situation happened last week. A new player bought a guitar from Mars Music which then closed their doors and stranded this guy without even showing him how to change his strings.

He asked me! And the last time I talked with him, we were not at all sure the guitar was in proper working order. He could not get the strings out of the sockets! But now Mars Music is gone and so it this guy's money as well as the conduit to understanding how to engage his instrument. Thanks guys! What a disservice!

For anyone who missed it, let me tell you what happened.

Mars Music is gone! Finished. Mars Music was the second biggest music instrument retailer in America until late September. They tried to reorganize under chapter 11 to buy enough time so they could find a buyer. No buyers came forward. Next thing you know they are in chapter 7, which means there is no reorganization plan. Time to liquidate inventory! No buyers, no interest and absolutely no verification from the free market system that this was a good idea (in the first place). Good-bye!

Mars Music is one of the big chain stores that decided they could capture market share that was dangling out there for the taking. They came with a go big or go home mentality. All you have to do is open stores in every major city and start to compete with a discounted price strategy and watch this new stress work through the dealer channel. At the same time a few other players like Sam Ash and Guitar Center settled on about the same strategy. The littered landscape these behemoths left behind consists of broken up dealers, erosion of profit margins and a lot of very disgruntled customers. Everyone loses but these guys in fancy suits that continue to tell us how important the customer is.

Want some horror stories? Go to any of the discussion forums and filter on the names on any of these giants and you too can read story after story of musicians who paid good money only to be left with a set of problems and lost opportunities. Was their money no good? Of course not. That money is now in the coffers of these big companies and working against the smaller dealers and their customers.

This stuff is hard to see if you are not in a position to get behinds the scenes. It happens in a very silent way. Think about it for a minute. If you wanted to take over the world and shape it in a way that serves you first and everyone else second if at all, would you tell anyone? No, you would harbor your hidden agenda and work the issues behind the scenes so no one would know. If you have a hidden agenda, you usually don't want anyone to know. If it comes to light, that is a bad thing. Someone may figure out what you are doing and stop you or at least expose you.

But talk to a music store owner that cannot figure out how these giants can sell below their cost and make any money. This is a recipe for disaster and some manufacturers are too stupid to figure it out. Or worse yet, they may not care.

Listen, we want music stores to make money! We need them to make money so they will continue to serve us. We want manufacturers to make money too, so they will see the opportunity in developing the next generation of cool products. When you buy a new guitar at a local music store, a part of your money gets invested in the welfare of the store and the owners. I say invested because when (not if) you need help, you need to be able to go back in and ask for it. If their doors are shut and you end up with a guitar you can't play, was it a good deal? Are you happy?

Now what do you do? You go ask whoever will listen. This happens all the time. I don't mind that these giants exist, I just don't think we should suffer because they do. If you find out after you buy something, it is too late for the little guy to benefit from it. The only thing they can do is provide some service in the hopes it turns you into a customer. They may very well tell you they cannot help you. Once again, everyone loses. Believe me they lose sleep over it.

Mars went bankrupt. They are gone. They couldn't even find anyone to buy them! No one was able to look at their business plan and tender an offer because the business model doesn't make enough sense to offset the risk. The opportunity costs are greater than this opportunity.

Nobody in the business community thought enough of the model to buy it for pennies on the dollar. So now Mars Music will be picked clean. How does this affect the basic dealer? Once again, in a bad way. Now there is 54 million dollars worth of inventory finding it's way into the retail space. This is happening just in time for the holidays. The dealers left now have to compete with this insane inventory right before the biggest buying season of the year. This parting shot ensures they will have to fight just to have a descent fourth quarter.

Sure some consumers will benefit from this in the short run. But how many more dealers will go out of business or face hardships in the mean time. How many guitars will be purchased by people that will not even be able to change strings. Remember when a person tries to learn to play a guitar, they will give themselves only so long to get it before they quit. First they have to figure out how to change strings. Strike one!

What about Guitar Center and Sam Ash? Hard to say, but something tells me Guitar Center is not going away. They seem to have better cash flow and a better business model along with some aggressive marketing. I think they are here to stay. Only time will tell.

Are smaller dealers the answer for everyone? No way. There are some small dealers that have real problems. No expertise or a business owner that never did care. But you can see these guys a mile away, and if you do business with them, the experience will turn you to another store the first or second time. Plus there are lots of smaller dealers to turn to instead. Some of them care deeply and offer good value.

It seems to me, small dealers are more resilient than I first thought. Small stores did not suffer the mass extinction many people predicted, (including me). They just tightened their belt and rode it out with smaller expectations. Some did go out of business, but most now know they stand a chance of competing. At least there is one less predator out there now.

Here are a few links in case you are interested.

Harmony Central

Mix Online

Mix Again