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Title: GC Severs Relationship With Behringer
Post by: paul bell on May 20, 2014, 08:21:28 PM
http://www.musicincmag.com/News/2014/140519/140519_GC.html
Title: Re: GC Severs Relationship With Behringer
Post by: paul bell on May 20, 2014, 09:01:09 PM
he responded
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 20, 2014, 09:18:36 PM
Regardless of manufacturer some brands may appear to be a profitable solution to a companies needs. Better than 50% of the time that is not the case. Returns, failed hardware and customer perception all have a profound effect on the bottom line. A manufacturer can spew facts pertaining to overall sales, but once the manufacturer moves the product from wharehouse to reseller it becomes the resellers job to insure customer satisfaction. I applaud GC for their stance, regardless of reason. GC, MF, and a few others will be effected as will be their customers. Hopefully for the best.
Title: Re: GC Severs Relationship With Behringer
Post by: Tim McCulloch on May 20, 2014, 09:32:26 PM
Regardless of manufacturer some brands may appear to be a profitable solution to a companies needs. Better than 50% of the time that is not the case. Returns, failed hardware and customer perception all have a profound effect on the bottom line. A manufacturer can spew facts pertaining to overall sales, but once the manufacturer moves the product from wharehouse to reseller it becomes the resellers job to insure customer satisfaction. I applaud GC for their stance, regardless of reason. GC, MF, and a few others will be effected as will be their customers. Hopefully for the best.

Sounds more like a pissing contest to me, Bob.  Music Group put Guitar Center on COD and left GC with some crow to eat with customers.  GC tries to spin this in their favor, MG says "not so fast."

As for the rest, sure, perceptions are reality in marketing but the apparent numbers to say that MG/Berry is shoveling crap out the door simply don't appear, Bob.  Remember, I'm not exactly a fan boy - far from it - but I prefer to make claims that can be substantiated.
Title: Re: GC Severs Relationship With Behringer
Post by: Jim McKeveny on May 21, 2014, 07:58:38 AM
I see this as private equity (Bain Capital and Ares) vs. Music Group.

Private equity typically beats up on vendors with tactics of slow payment and endless renegotiation of terms. They do not "partner" with anyone to deliver product. Music Group is efficient, but low-margin, and needs reliable payment for its business model to work. GC isn't worldwide, MG is.

Music Group survives with or without Guitar Center. Guitar Center will eventually go the way of Circuit City and the like...IMO.
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 21, 2014, 02:19:30 PM
Sounds more like a pissing contest to me, Bob.  Music Group put Guitar Center on COD and left GC with some crow to eat with customers.  GC tries to spin this in their favor, MG says "not so fast."

As for the rest, sure, perceptions are reality in marketing but the apparent numbers to say that MG/Berry is shoveling crap out the door simply don't appear, Bob.  Remember, I'm not exactly a fan boy - far from it - but I prefer to make claims that can be substantiated.

I don't beleive I said anything about MG shoveling crap out the door Tim, and my post referenced the industry, not just the Behringer brand. Actually not just this industry, but any industry. It's been proven many times over through the years that low cost hardware will often require more support than the higher priced spread. Why, because entry level and consumer products are for the most part used by consumers who have no training or experience with the product.
Title: Re: GC Severs Relationship With Behringer
Post by: John Roberts {JR} on May 21, 2014, 02:44:30 PM
  It's been proven many times over through the years that low cost hardware will often require more support than the higher priced spread. Why, because entry level and consumer products are for the most part used by consumers who have no training or experience with the product.
Proven?

In my experience the "value" business model is to make generic products that perhaps contrary to actual reality, the value customers already think they know how to operate. The reason why designing value products is actually harder than designing high end gear, is because you have to engineer in "user tolerant" functionality. The heavy lifting is making a product that still works as the customer expects it to work, despite misuse and abuse by the inexperienced customers.

Classic examples of this approach are clip limiting, short circuit , and thermal over-load protection in power amps. These features came first to the value segment because it is so much more successful to engineer out bad experiences than educate the inexperienced customers to avoid making those common mistakes, or worse make them pay for blown up gear even when the failure was clearly their fault. The customer is always right, and doesn't appreciate being reminded with a repair charge when they are not.   

There is no margin or budget in value products for hand holding. The shift to big box stores and direct sales, from mom and pop dealers just squeezes even more end user support from the distribution channel.

These days it's all about price, and customer support costs money. 

JR
Title: Re: GC Severs Relationship With Behringer
Post by: Dan Mortensen on May 21, 2014, 07:38:16 PM

Music Group survives with or without Guitar Center. Guitar Center will eventually go the way of Circuit City and the like...IMO.

MG is telling its dealers today that GC has tried to get product from MG dealers, and that dealers who sell to them are violating the terms of their dealership agreement and will be terminated.

They also say they've sold over 150,000 units of X32, which I assume includes all members of the family and is an amazing number to me.

I'm believing that MG terminated GC and not the other way around.

Correction: rereading the announcement from Uli, it does indeed say that GC severed, not MG, after MG  "evaluat(ed) their credit worthiness. As a result of their credit rating, it was determined they were a high risk and we were forced to put them on business hold."

I don't really know what "business hold" is, but this seems like good news for other Behringer dealers. If GC is perceived to be not credit worthy, your Circuit City analogy seems apt.
Title: Re: GC Severs Relationship With Behringer
Post by: Tim McCulloch on May 21, 2014, 10:12:06 PM
Correction: rereading the announcement from Uli, it does indeed say that GC severed, not MG, after MG  "evaluat(ed) their credit worthiness. As a result of their credit rating, it was determined they were a high risk and we were forced to put them on business hold."

I don't really know what "business hold" is, but this seems like good news for other Behringer dealers. If GC is perceived to be not credit worthy, your Circuit City analogy seems apt.
\

Business hold means "before we ship any more product you have to pay your back bill and new shipments are COD or pre-paid."  GC strung Music Group for too long.
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 21, 2014, 10:30:35 PM
Agreed, and purely a case of paying the bill(s) that represents the majority of the chains guaranteed highest profit margin. Gibson, Fender, JBL, etc. are product lines that GC must protect. This a rough patch for GC, MF, American Musical and all the other outlets represented under the GC banner. But even though GC has hit a rough patch I'm sure they'll recover. I might also suggest that the X32 count may not be quite as high had the GC conglomorate not been a primary source at the time the product was announced. Like any other product the key to volume sales is distribution.
Title: Re: GC Severs Relationship With Behringer
Post by: Joseph D. Macry on May 22, 2014, 11:40:34 AM
Business hold means "before we ship any more product you have to pay your back bill and new shipments are COD or pre-paid."  GC strung Music Group for too long.

This sounds strangely similar to Mars Music right before it went under. Vendors were owed a lot, and Roland finally said "enough" and put them on business hold. Mars did not have large cash reserves, as they were rolling profits and new investments into constant expansion (and some other silliness like buying naming rights to a sports stadium). The owner could not find the new investment cash needed, so the whole chain went into Florida bankruptcy court, then liquidation.
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 22, 2014, 12:09:16 PM
Proven?

In my experience the "value" business model is to make generic products that perhaps contrary to actual reality, the value customers already think they know how to operate. The reason why designing value products is actually harder than designing high end gear, is because you have to engineer in "user tolerant" functionality. The heavy lifting is making a product that still works as the customer expects it to work, despite misuse and abuse by the inexperienced customers.

Classic examples of this approach are clip limiting, short circuit , and thermal over-load protection in power amps. These features came first to the value segment because it is so much more successful to engineer out bad experiences than educate the inexperienced customers to avoid making those common mistakes, or worse make them pay for blown up gear even when the failure was clearly their fault. The customer is always right, and doesn't appreciate being reminded with a repair charge when they are not.   

There is no margin or budget in value products for hand holding. The shift to big box stores and direct sales, from mom and pop dealers just squeezes even more end user support from the distribution channel.

These days it's all about price, and customer support costs money. 

JR

Yes proven.
Title: Re: GC Severs Relationship With Behringer
Post by: Ned Ward on May 22, 2014, 02:48:41 PM
Bain bought GC in a leveraged buyout, and had hoped to go public or sell the company before the debt came due. That didn't happen, and now cash flow is suffering. We've seen similar things with US retailers (or UK for that matter) where manufacturers make the tough calls to stop shipping product because their accounts receivables are so far outside the average that it becomes lost.

I don't see things improving at GC anytime soon, given the financial burden they have from being over-leveraged. If the GC in Lawndale, CA is an example, the store is a lot more empty, not just from foot traffic but also new inventory. If I were Fender or Gibson, I'd be hedging my bets and being sure that I had a solid relationship with mom& pop stores, as they may turn out to be more reliable and less risk in the long run...
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 22, 2014, 03:52:21 PM
Gibson, Fender, and a few others severed those relationships a long time ago by demanding the M&P buy more and more until finally most were priced out.
Title: Re: GC Severs Relationship With Behringer
Post by: Ned Ward on May 22, 2014, 04:07:17 PM
Bob - seeing the results of this first hand as our local shop no longer can be a Fender guitar dealer. However, with GC having credit issues, Fender, JBL, and others will have to look to diversify back to smaller dealers or distributors. Otherwise, they'll have a disastrous few quarters if all their receivables are tied up in a company heading to bankruptcy.

Like the Titanic, there are only so many lifeboats, and unfortunately manufacturers won't be at the front of the line, even the bigger ones given the debt load.
http://www.thedeal.com/content/restructuring/ares-capital-strikes-a-chord-with-guitar-center.php

Title: Re: GC Severs Relationship With Behringer
Post by: Scott Olewiler on May 23, 2014, 07:41:19 AM
GC has no way to forcibly improve sales so the only option to get the financials straight is to leverage their online sales by eliminating the biggest overhead burden, which is the brick and mortar store.  My guess would be the online portion is very profitable and the retail stores are for the most part operating at a loss. I have not personally set foot in a local music store for quite a few years. The sales staff usually knows a lot less about the products than I do and without sales tax it's much cheaper to buy everything on line.  Like it or not online sales is the only business model that works for MI gear.

IMHO GC's biggest mistake was keeping the stores open this long. The writing was on the wall years ago.  Imagine the millions they have wrapped up in display inventory,  a lot of which will end up in a clearance sale being sold at cost or less. In today's world you do not want to be sitting on more than 15-20 days worth of inventory. I bet most of the stores have  a  years worth of sales hanging on the wall.
Title: Re: GC Severs Relationship With Behringer
Post by: Ray Aberle on May 23, 2014, 12:00:49 PM
My guess would be the online portion is very profitable and the retail stores are for the most part operating at a loss. I have not personally set foot in a local music store for quite a few years. The sales staff usually knows a lot less about the products than I do and without sales tax it's much cheaper to buy everything on line.  Like it or not online sales is the only business model that works for MI gear.

Yeah, except that their website sucks. When I go to search for something on there, their search function is not intuitive enough, so a search for CDJ does NOT bring up Pioneer CDJs unless I get way more specific. Then, to start a new search, you have to go back to the main site page; you can't just search from where you're at. This has been going on for a couple of years-- I suspect that they've started using some flashy gizmo plug in to make it work right, but if you don't tell people what that is... leads to frustration, and I end up shopping elsewhere.

Ray
Title: Re: GC Severs Relationship With Behringer
Post by: Andrew Broughton on May 23, 2014, 02:57:18 PM
Yeah, except that their website sucks. When I go to search for something on there, their search function is not intuitive enough, so a search for CDJ does NOT bring up Pioneer CDJs unless I get way more specific.
I just typed in CDJ in the big textbox labelled "Keywords..." on the top left of the home page and got lots of results.
http://www.guitarcenter.com/Search/Default.aspx?internal=1&browser=&fsrc=cdj&src=cdj
So maybe it's better now?
Title: Re: GC Severs Relationship With Behringer
Post by: Ray Aberle on May 23, 2014, 05:32:12 PM
I just typed in CDJ in the big textbox labelled "Keywords..." on the top left of the home page and got lots of results.
http://www.guitarcenter.com/Search/Default.aspx?internal=1&browser=&fsrc=cdj&src=cdj
So maybe it's better now?
Yeah, so they fixed that, but now you cannot click on items to get to them, you have to control-click to launch the item into a new window. Either way, if they want people to buy things on their website, they should probably take some time to make it, you know, actually functional.... lol.

Ray
Title: Re: GC Severs Relationship With Behringer
Post by: Andrew Broughton on May 23, 2014, 05:48:30 PM
Yeah, so they fixed that, but now you cannot click on items to get to them, you have to control-click to launch the item into a new window. Either way, if they want people to buy things on their website, they should probably take some time to make it, you know, actually functional.... lol.

Ray
What are you talking about? Clicking on an item or a description opens a detail window where you click a button to buy them. What browser are you using, 'cause it works fine on FF and IE and Safari.
Title: Re: GC Severs Relationship With Behringer
Post by: Ray Aberle on May 23, 2014, 06:55:01 PM
What are you talking about? Clicking on an item or a description opens a detail window where you click a button to buy them. What browser are you using, 'cause it works fine on FF and IE and Safari.
Safari. Last time I checked Firefox it was doing that as well. I presume (as I mentioned before) that there's some new widget or gizmo that website developers are requiring now, but they don't tell you about it. Probably linked to Facebook, but since I don't use FB, I don't get prompted to install those sorts of things. Same problem with their navigation menu, where you cannot click on a sub category to look in it. *shrugs*

Not important, just annoying that it's difficult/impossible to use.
Title: Re: GC Severs Relationship With Behringer
Post by: Andrew Broughton on May 23, 2014, 08:26:42 PM
Safari. Last time I checked Firefox it was doing that as well. I presume (as I mentioned before) that there's some new widget or gizmo that website developers are requiring now, but they don't tell you about it. Probably linked to Facebook, but since I don't use FB, I don't get prompted to install those sorts of things. Same problem with their navigation menu, where you cannot click on a sub category to look in it. *shrugs*

Not important, just annoying that it's difficult/impossible to use.
It sounds like you've definitely got issues with your browser, so there's not much point in complaining about their site when the problem is on your end...
Title: Re: GC Severs Relationship With Behringer
Post by: Ray Aberle on May 23, 2014, 09:11:43 PM
It sounds like you've definitely got issues with your browser, so there's not much point in complaining about their site when the problem is on your end...

Issues, or again, they're now requiring something "cool" that they didn't need before. It worked fine and then about two years ago it stopped working fine. I know they redid their website around then (The company that developed my site bid on their site; even delivered the bid in a road briefcase! Haha.), so something was changed *on their end* that makes it so it doesn't always work fine anymore.

Again, no big problem cos it just costs them sales, but it shows an interesting trend with the internets to always "be new and cool and flashy," and not worrying that the usage of new and cool technologies might be problematic with a system that's not being upgraded every week in a vain effort to keep up.

We're way off track now, though, from the original thread. :-p
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 24, 2014, 10:00:10 AM
You mentioned "It worked fine and then about two years ago". If the site has been upgraded or changed in that period of time I have no doubt those changes probably require plug-ins that are a little more up to date than those from 2 years ago.

I personally have no issues with GC or MF. Both have served me just fine. That may be because I don't depend on them for support, but the prices are fine and the product available or easy to get.
Title: Re: GC Severs Relationship With Behringer
Post by: Tom Burgess on May 24, 2014, 12:50:05 PM
...If I were Fender or Gibson, I'd be hedging my bets and being sure that I had a solid relationship with mom& pop stores, as they may turn out to be more reliable and less risk in the long run...
Gibson, Fender, and a few others severed those relationships a long time ago by demanding the M&P buy more and more until finally most were priced out.
These are 2 interesting points.  Until about 2 months ago the only Gibson dealers in the state of OK were GC's as Gibson had indeed acted just as Bob describes.  Something's definitely changed in Gibson's mind since now our 3 stores here in the OKC area are the only non-GC Gibson dealers in the state.  Fender, on the other hand, has maintained a much larger number of dealers, including us.  Granted, they have a much broader product line to represent and now the own the former Kaman Group of companies.  Point being that at least in our area Fender was not nearly so aggressive as Gibson in the demands that were placed upon their dealers.
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 24, 2014, 01:53:07 PM
Tom,
Owning a music store I'm sure you understand the costs for stocking Gibson products as a franchised reseller. I believe the initial buy in per year is over 250K at this point, and to many smaller dealers that's substantial. If Gibson has indeed lowered the buy in that would be wonderful as long as the franchise/product costs were the same in all cases. Most of my guitars have been "hands on " sales, or hand picked by a trusted, very trusted, third party. The Gibson franchise also opens up the door to Epiphone. My thought is that now that Gibson as a brand has decided to market a lower cost product line bearing their name many dealers are willing to chance the franchise fee on the belief the sale of many low cost instruments pays for the franchise, allows the purchase of higher costs "custom shop", LP, and semi hollow body instruments on a mostly "on demand" basis. Good for Gibson, and good for the dealers. I hope you're able to also take advantage of this trend.
Title: Re: GC Severs Relationship With Behringer
Post by: Tom Burgess on May 24, 2014, 03:05:51 PM
Tom,
Owning a music store I'm sure you understand the costs for stocking Gibson products as a franchised reseller. I believe the initial buy in per year is over 250K at this point, and to many smaller dealers that's substantial. If Gibson has indeed lowered the buy in that would be wonderful as long as the franchise/product costs were the same in all cases. Most of my guitars have been "hands on " sales, or hand picked by a trusted, very trusted, third party. The Gibson franchise also opens up the door to Epiphone. My thought is that now that Gibson as a brand has decided to market a lower cost product line bearing their name many dealers are willing to chance the franchise fee on the belief the sale of many low cost instruments pays for the franchise, allows the purchase of higher costs "custom shop", LP, and semi hollow body instruments on a mostly "on demand" basis. Good for Gibson, and good for the dealers. I hope you're able to also take advantage of this trend.
For clarification, I'm not the owner... just a monkey turning the crank, lol!   8) 

(But I am a senior monkey)

The buy-in and commitment levels may well vary from market to market so I think it would be inappropriate for me to comment on the numbers but it is significant.

Thus far the response has been excellent.  We've taken on the full line including Epiphone but the greatest interest up to this point has been in USA Gibsons.  We're also full-line Fender.  Our high end GTR room is looking pretty sporty at the moment with Gibson, Fender, Martin, Taylor, and Takamine.

Being a full-line musical instrument store is a double-edged sword to be sure but at least it's never boring.

On the topic of MG and GC, it'll no doubt be an interesting soap opera to view as they untangle whatever financial obligations that still exist. What GC does with existing MG inventory will be intriguing as well.  Does MG hold UCC1's on unsold product in the store?  Does GC blow it all out through MF before MF and GC get separated, (as some experts seem to think will happen)?  Does MG buy back and redistribute unopened items?   Who knows?
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 24, 2014, 06:58:58 PM
Point made. The lower costs Gibsons probably fly out the door with the Epiphones doing the same but at a higher rate. I think GC may move their existing B inventory at very low advertised pricing not caring if it's under MAP or not with the hope and good chance that loss leaders will generate additional foot traffic and a chance to sell other or additional hardware and accessories with their point being if you need support call Behringer. As I had said, people who buy low end hardware often need more support than those who have been through that purchasing/learning cycle.
Title: Re: GC Severs Relationship With Behringer
Post by: John Roberts {JR} on May 24, 2014, 07:40:55 PM
As I had said, people who buy low end hardware often need more support than those who have been through that purchasing/learning cycle.

They may need it and want it, but if they don't pay for it they don't get it.

As I said, low end gear is designed to be easy to operate, or it doesn't do well.

JR
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 24, 2014, 09:03:15 PM
I agree with the premise John, but that's seldom the case. John Doe walks into the store and buys his first $99 compressor, takes it home and doesn't have a clue, calls or goes back to the store and someone in sales has to teach him how to use it. You could always tell the person to RTFM, but that will come at the expense of a dissatisfied customer. For every one pissed customer you make you lose 10 sales. In the end you help the always right customer at the expense of missed opportunity and lost manpower. GC can stop most of this by tracking productivity, or at least track productivity, come up with an analysis, a baseline, and a plan to enhance productivity.
Title: Re: GC Severs Relationship With Behringer
Post by: John Roberts {JR} on May 24, 2014, 10:06:33 PM
I agree with the premise John, but that's seldom the case. John Doe walks into the store and buys his first $99 compressor, takes it home and doesn't have a clue, calls or goes back to the store and someone in sales has to teach him how to use it. You could always tell the person to RTFM, but that will come at the expense of a dissatisfied customer. For every one pissed customer you make you lose 10 sales. In the end you help the always right customer at the expense of missed opportunity and lost manpower. GC can stop most of this by tracking productivity, or at least track productivity, come up with an analysis, a baseline, and a plan to enhance productivity.

In my experience if i designed Peavey products that required some salesman to explain how to use them, they died in flames after too many customers asked for their money back.  ::)  We even taught seminars in MS for sales-people but the instruction was all about putting the customer into the right level product, NOT TEACHING THEM HOW TO USE THEM.

I did design one $199 (retail) compressor and it was pretty damn simple, fast-med-slow switch for attack/release, etc. Not remotely as complicated as the compressor I designed for Loft back before I worked at Peavey. If you couldn't operate that Peavey (AMR) compressor you probably couldn't tie your own shoes or dress yourself.

Of course maybe I'm wrong...    ;D

JR
Title: Re: GC Severs Relationship With Behringer
Post by: Bob Leonard on May 24, 2014, 10:51:59 PM
You're correct, but as time has passed the need for more bells and whistles has become THE sales edge for low cost products regardless of whether they work or not. It's not the same day you and I grew up in where some type of skill was developed by actually learning how to use the product yourself before you cried to the salesman or owner about a product that didn't work correctly. In 1984 I had a woman tear my head off because her brandy dandy new $5000 dollar PC didn't have an any key. Not much has changed. To your point Peavey product were and still are easily understood and used. Over engineering has never been my style, but that's me.
Title: Re: GC Severs Relationship With Behringer
Post by: Kevin Maxwell on May 25, 2014, 11:33:04 AM
In 1984 I had a woman tear my head off because her brandy dandy new $5000 dollar PC didn't have an any key. Not much has changed.

I thought the solution to that was to stick a small “ANY” label on the space bar.  ;D