Tail Wagging The Dog: The Guitar Center Effect
It was a musical nightmare. I was in the middle of a gig, performing in the pit orchestra for a musical. The house was packed. There was a poignant moment on stage underscored by an exposed accompaniment— “gentle strumming ala Radiohead” is what the part indicated. Suddenly, in the hushed moment, I heard a crackling. Notes began cutting in and out, and then, finally, just silence. The electronics in my acoustic guitar were malfunctioning, causing the signal from my guitar to my amplifier to fail. I managed to get the signal working again by (incredulously) “tapping” the volume knob on my guitar. But the damage was done. I was embarrassed, to say the least. As a professional musician, I pride myself on using reputable equipment. This wasn’t an entry-level model. I paid good money for this guitar. I expected it to work, and it let me down right in the middle of a performance. When I took it to a local repair shop, the technician advised me it was a bad potentiometer that had malfunctioned and caused the guitar to cut out. He said the potentiometer should easily have lasted 10 or more years. But my guitar was only three years old. The warranty covered defects in workmanship for two years. Thus the part— upwards of $200— was no longer covered. The tech advised me to call the manufacturer and explain the problem. His comment was, “The manufacturer knows a part like this should never go bad this quickly.” To its credit, when I called the manufacturer and explained what happened, the representative offered to send a replacement part at no cost to the nearest authorized repair shop. All I would have to do is pay labor. The original repair shop was not an authorized repair shop, so I had to find a new one. Coincidentally— or not— the very same amplifier I was using to power the acoustic guitar on that fateful gig began having its own troubles. For its size, it was rather pricey, though it’s made by a reputable manufacturer. But, like clockwork, at about the 30-minute mark of use, it would make an electronic whirring noise, audible to anyone within earshot. The interesting thing is that I purchased the guitar and amplifier on the same day. They are exactly the same age. Now if it had just been the guitar failing, I might have chalked it up to a fluke. All equipment eventually fails. But when two pieces of equipment concurrently failed in so little time after their purchase, a pattern emerged and raised the question: what is happening that my equipment is malfunctioning after only a few years of use? To get an answer to that question, I located an authorized repair shop in the area and brought in my acoustic guitar. When I got there, I found a modest shop bursting at the seams with gear in for repair. I literally had to get in line behind other customers waiting to have a word with the owner. It quickly became clear he was highly sought after. It turns out he had spent decades on the road as a guitar tech and audio engineer with some big-name acts. He really knew his stuff. When I finally got my turn, I explained what was happening with the acoustic guitar and the amplifier, trying to understand what would cause my equipment to fail in such a short time. His response: “Guitar Center.” As I learned, there is an unavoidable process that takes place when a musical instrument manufacturer creates a new product. After the research and development team has painstakingly crafted and tested its new product for best use by the musician, it takes it to its retail partners. The biggest of these would have to be Guitar Center. There are, of course, a few notable competitors:
-Sweetwater, a predominantly online retailer that has a physical store in Fort Wayne, IN
-Musician’s Friend, which at one time had some physical locations that sold discounted gear, but now only sells online
-Sam Ash, a retailer with locations in 16 states; also sells online
All told, however, none of these retailers can truly compare with Guitar Center’s sheer breadth, with locations in 32 states, twice that of Sam Ash.
A sidebar worth mentioning. One retailer that gave Guitar Center a run for its money about 15 years ago was Mars Music. Mars’s corporate model was similar to Guitar Center, with stores not quite nationwide, but edging toward it. Mars also had some ideas that made it unique at the time: a busy instructional venture attached to the retail store called The Learning Center, a robust DJ and lighting section, and, notably, a giant stage right in the middle of the store, designed for clinics and performances. Conceptually, the idea was great. Mars, however, expanded too quickly and could not turn a sufficient profit to afford the floor space in its ginormous stores. So it went under. Incidentally, the aftermath of its chapter 7 bankruptcy left a bad taste in the music industry’s mouth— several manufacturers, chiefly Fender, were owed millions of dollars, while Mars’s CEO walked away scot free. A cautionary tale at best. In contrast, Guitar Center, possibly learning from Mars’s pitfalls, is spatially more shrewd than Mars was. I’ve noted two things in particular: 1) in smaller markets, Guitar Center opens smaller stores; and 2) all its stores are packed wall-to-wall with gear. Thus, it doesn’t lay more floor space than it can afford, and it ensures that its space is optimized with merchandise. These savvy business decisions— along with others— seem to have elevated Guitar Center to the top of the music retailer pecking order. So getting back to the original story of my guitar repair, the technician described to me what Guitar Center’s response is when the R&D team takes its new product to them. “We love it, but in order for us to move X number of product, you will need to lower the cost.” The R&D team now has to figure out how to produce their meticulously-researched and developed new product for less. This is not so easy to do while maintaining quality. So the R&D team resorts to that old chestnut— cheaper parts. The short-term result is that the product works exactly the same as it did with the more expensive part. Through its warehouse-like purchasing power, Guitar Center can now buy this new product in bulk, which enables it to keep the product priced low. In turn, the consumer can purchase a nice piece of equipment at a discounted price. Everybody wins! Not exactly. There is a longer-term consequence. When the manufacturer swaps out higher-quality parts for lower-quality ones, the unintended byproduct is that the lower-quality parts break down sooner. And that means the consumer ends up with a piece of equipment that unexpectedly fails in the middle of a show after only three years. Then, when the consumer takes the prematurely failed but out-of-warranty product for repair, the manufacturer— if it’s honorable— has to send out a new part for free. But sending out all these free replacement parts so early in the life of a musical instrument is going to financially catch up with the manufacturer. Ultimately, the manufacturer is going to have to choose from a bevy of losing propositions: stick to their guns and use higher-quality parts but risk Guitar Center not carrying their products; or continue to use shoddy parts and a) have to send out free replacement parts; or b) not send out the replacement parts and lose a substantial portion of the market to angry customers whose guitars failed in the middle of a gig after only three years. If the manufacturer used higher quality parts in the first place, it would save money by not sending out so many free replacement parts. In turn, it would have happier customers who would be more likely to buy more of their products and recommend them to their friends, and that would offset the upfront cost of higher-quality parts. But it doesn’t work that way, because Guitar Center won’t carry the product in the first place unless it can sell it at a certain price, and that forces the manufacturers to resort to cost-cutting measures. The retailer is dictating to the manufacturer. It’s the tail wagging the dog. This is not a new scenario. For instance, during a short hiatus from the music industry, I worked for Jaguar Cars North America in the late 90’s. At the time, Jaguar was making somewhat of a comeback in the North American market after recently being acquired by Ford. The joke was that if you wanted to own a Jaguar, you really had to own two: one to drive and one to keep in the shop. This is because, long story short, Jaguar began using cheap parts in the early 90’s, which made their cars break down. Jaguar then developed a reputation for being unreliable, lost sales, and nearly went under. Fortunately for Jaguar, Ford purchased it, and Ford’s formidable resources enabled Jaguar to use better-quality parts and rebuild its reputation. When I began working for Jaguar, they were experiencing a renaissance of sorts, as they introduced the retro-looking S-Type, the first Jaguar under $50K. The musical instrument manufacturers, however, do not have the luxury of a Ford-like behemoth behind them. They are controlled by the retailer from whom they are likely to make the most profit, Guitar Center. From a business standpoint, then, the manufacturers have no choice but to comply with Guitar Center’s stipulations if they want to prosper. Now here’s an interesting twist to the tale. The failing acoustic guitar and amplifier I purchased three years ago were not purchased at Guitar Center. They were purchased at a music retailer that operates a small chain in the Northeast. But the products it carries— because of Guitar Center’s influence— end up being the same ones Guitar Center carries. So, essentially, Guitar Center’s strategy is felt ubiquitously, resulting in questionable equipment for everyone, everywhere. I should mention that top-of-the-line instruments— those in the range of $1000 or more— may be immune to this scenario. Manufacturers don’t seem to skimp on workmanship at this price point. But the real money isn’t in this price range, anyway. It’s in the entry-level and mid-range instruments, and Guitar Center’s primary demographic is the beginning, amateur, or part-time musician. Even though they are buying less expensive instruments, these folks represent a much larger segment of the market. This is true for a hundred different industries— cars, food, you name it. For professional musicians, I suspect they own top-of-the-line gear for the style they specialize in. But many musicians also play other styles, and they need reliable gear for these jobs. They won’t buy entry-level equipment, because it will sound bad and break down, but they also may not be able to justify spending an exorbitant amount on equipment for only occasional gigs in other styles. So the solution is to buy quality mid-range equipment— it sounds good and gets the job done but doesn’t break the bank. Apparently, however, equipment at the mid-range level is impacted by the Guitar Center effect, because the acoustic guitar and amplifier I purchased fall in this category. Now this isn’t an indictment of all things Guitar Center. I have friends and family who work or have worked for Guitar Center. Whenever I have shopped there, I have found the sales clerks friendly and helpful. No, the issue at hand stems from decisions made way above the pay grade of the store employees, who are only doing their jobs. For certain items, like supplies, Guitar Center is fine. But for even a mid-range piece of equipment, you might be taking your chances. Perhaps a viable alternative is to purchase an older used instrument from an independent online seller. But buying online can be problematic, because you can’t test out the equipment before you buy. You have to rely on the seller’s integrity or on customer reviews, which may be biased or uninformed. And if the equipment isn’t what you thought you were getting, the process of shipping it back to the seller is a hassle no one wants to deal with. Thus, in the age of online retail, one thing Guitar Center’s brick-and-mortar stores have going for them is that people like to try out musical equipment in person. So Guitar Center wins again… for now, because something has to give. This cycle can’t be sustainable. With little protection available to consumers and manufacturers against inferior equipment, the market won’t tolerate it forever. Maybe the professional musician will turn elsewhere, but your average weekend warriors will eventually get fed up with throwing money away on bad equipment when their guitars cut out in the middle of a gig after only three years.