tip off

The day the music died (in store) goes to retail woes

I love music shops.

I can’t play an instrument to save my life, but I’ve long harboured a not-so-secret joy while browsing among the rows of beautiful guitars and drum kits. My sister plays piano very well, and I vividly remember shopping for sheet music at Allans with her and my father when I was a boy. When I got older and got into electronic music and hip-hop, I used to enjoy ogling all the boxes with knobs and pads — the drum machines, the sequencers, the mixers, the pedals … the lot.

Allans Billy Hyde hit the wall last week, another victim of Australia’s rapidly changing retail landscape. The retailer reportedly pulled in about $110 million of revenue, but was not earning nearly enough to service its considerable debt burden. Seeking funding to buy up stock for the Christmas rush, the company instead found itself in the hands of receivers Ferrier Hodgson, after secured creditor Revere Capital decided to pull the plug.

With $27 million owing, Revere had rolled the dice on the Australian Music Group only in May. At the time, Australian Music Group CEO Tim Mason flagged serious problems with the retailer’s contracting margins. The Revere bailout was seen as the last chance for the flagging retailer. Another private equity firm, Crescent Capital, already got its fingers burnt — it bought a majority stake in 2008 but sold out in 2011 with losses of $50 million.

Now Revere has packed up and gone home, leaving unsecured creditors and voucher holders in the lurch. “You would have to say, at the moment, that there is probably not a high prospect of any sort of major return,” Ferrier Hodgson administrator James Stewart told the ABC’s Michael Janda.

Music retailers and industry analysts agree times are tough for music retailing.

Stephen Green, managing director of music industry consultants SGC New Media Marketing, told Crikey the problems of music retail are well known. “The first signs were when [Allans and Billy Hyde] merged, a few years ago,” he said. “Music instrument retailers have had a pretty hard road over the last 10 years or so anyway. I haven’t spoken to anyone in music retail for a decade that haven’t said that things are not looking so great.”

Green argues the problems are structural, rather than cyclical: “They’re selling instruments that can be imported [by consumers] at a price that doesn’t have a distributors’ margin. It’s the same as your Harvey Norman, it’s a discretionary consumer good. The main trade is hobbyist musos, and if times are tough … do you buy an extra tin of baked beans, or do you get your old guitar strings replaced?”

Veteran music industry entrepreneur Greg Dodge says much the same thing. Dodge is best known for developing the “Weekend Warriors” program for amateur rock musicians. “I think the business models are so out of date, and eventually it’s caught up with them,” he told Crikey. “So it’s no real shock.

I joined the industry in 1975, and if you look back over 30 years of history in the Australian music products scene, in Melbourne there was Suttons, Brashs and Allans; Hyde’s didn’t emerge until the 1990s to really became a force. Eventually at the end of the day there was a thing called Chinese deflation, which was going to define the industry. The other issue they were really confronted with was online. It was coming and we was always warned [about it].”

Other industry figures interviewed last week echoed that theme. Manny Gauci-Seddon — proprietor of well-known Fitzroy music shop Manny’s — told the Herald Sun: “It’s no different to any retail business, people are importing directly from overseas and it’s inevitable more stores will go under.”

Music retail looks to be suffering the same perfect storm faced by other specialty retailers like bookshops. For many years, music shops such as Allans were the only places musicians could buy famous instruments like Gibson guitars or Pearl drums. That oligopoly financed a whole tier of middlemen in the form of distributors, who often charged hefty mark-ups to retailers in return for exclusive rights to stock particular brands.

But the internet has opened up retail to global competition, allowing consumers to search for the gear they want at the cheapest possible price. Products purchased on the internet can often be bought straight from a manufacturer or an overseas retailer without any local distributor mark-up.

As a result, prices have been falling. Savage deflation across the industry has pared margins to the bone.

For some consumers, guitar shop ambiance wasn’t a drawcard anyway. Journalist Sophie Benjamin wrote a witty blog post this week about the difficulties she experienced as a young woman getting retail assistants to take her interest in top-end guitars seriously:

Once I went into Allans Brisbane City store and picked a Taylor acoustic off the rack. I managed around five minutes worth of noodling when a salesman took it off me.

Oh honey, you don’t want that. I’ll show you what you might like.”

He put the Taylor back on the rack and returned with a flower-shaped Daisy Rock guitar. Daisy Rock make guitars especially for women, because having a v-gina obviously means we can’t play a Les Paul or a Mastersound.

Even so, there will certainly be something lost when music shops go the way of the dinosaur. The community focus they provided for local musicians remains one of their biggest public benefits, even if that effect can’t easily be monetised.

For the time being, Allans and Billy Hyde shops will stay open. Ferrier Hodgson will keep the business trading, but the long-term future for the group looks grim. Musicians on the hunt for some bargains can pop in for the receivership sale.

4
  • 1
    The Old Bill
    Posted Saturday, 1 September 2012 at 12:15 am | Permalink

    For all of the waffle on discretionary spending, outdated business models etc etc this is a timely warning for many businesses following the Allens / Billy Hyde model.
    First Billy Hyde buys out Allens when it ain’t doing too well, then it swallows up all the smaller specialist stores like ( in Adelaide’s case ) John Reynolds, Derringers. It then cheapens them by having them all sell a load of the same crap, leaving less money to stock and hold quality instruments. Result??? Those looking for bargain crap first play one store off against the other, cutting into the bottom line, or buy it online cheaper, because crap is crap. Those looking for a quality product are sadly disappointed and either buy at one of the few remaining independants with a good reputation, ( in Adelaide’s case Twang Central or similar, ) or on their next overseas trip, leaving the three large stores who are still competing against each other (though they have the same owners) with absolutely nothing.
    The lesson here? True Musicians will never buy an instrument without trying it first. It is bad management and bad quality stock, coupled with aggressive takeovers of good businesses with no real plan for their future that is to blame here.

  • 2
    Wiz Aus
    Posted Monday, 3 September 2012 at 7:23 am | Permalink

    I have to say I was a bit surprised by the news of Billy Hyde’s/Allan’s closure - after all, I wouldn’t see their business model as massively threatened by online sales, unless that is, schools (who must be one of their biggest clients) have started ordering instruments from overseas (or encouraging/providing means for their students to do so). Interestingly enough I have two small independent musical instrument stores just around the corner from me, one of them that just opened up in the last few months. I also know of at least 3 stores not far from me that exclusively deal in classical string instruments, that have been around for a very long time, and couldn’t be said to be under threat from online sales*. If the demand of musical instruments is depressed currently then surely that is “cyclical” - e.g. schools cutting back on their music programs because of funding issues, or because music for whatever reason isn’t considered a key part of school curriculum currently. Once it picks up again, there has to be a market for an Allans-sized business that can operate as a chain or franchise.

    * What such stores ARE under long-term threat from though is the fact that the technology for making/repairing quality instruments progresses extremely slowly, meaning that today’s violin maker or repair is barely any more efficient than those of 100 years ago. In other words, the economic value of what these professions do hasn’t kept up with the rest of the economy, and hence their wages are going to struggle to keep up. This is even more true of actual musicians (though of course the ability to make recordings and sell them en masse did give a massive one-time boost).

  • 3
    Robert Brown
    Posted Tuesday, 4 September 2012 at 10:24 am | Permalink

    I used to hate going into music stores. I love the gear, but the staff always sneered at the non-pro (despite,as we learn here, hobbyists being their “main trade”).

    And why it it that (as with used cars) the sticker price is meaningless? I’m supposed to haggle, but because I’m not cool enough, or buddys with the sales jerk, I know I’m getting ripped off.

    These issues have improved over the last decade or so, thanks (I reckon) to internet - the great equaliser. Online retailers have grown here and in the US because they don’t treat their customers like idiots. I think there are lessons to be learnt here for any retailer that wants to survive.

  • 4
    honest
    Posted Saturday, 8 September 2012 at 8:32 pm | Permalink

    My advice is no matter what sales price Allans offers you, you will find another music store in Australia that will better it. I used to pay the “Allans’ tax” 20 years ago when I first started buying quality pro gear but soon learned better. They were called Pallings back then and they were still known for the same high price, low discount policy then. It has always irked me when companies advertise their goods at retail recommended price. I always punnish these companies by researching online, and normally in Australia, and try to give my loyalty to stores that advertise the lowest price. And quite often these music shops will still discount further if you continue to show loyalty. Ellaways has always been one of thse stores to me and thats why I continue to give them my patronage even if they flinch a bit when they see me come in. But not once have they ever been beaten on price and I do my research. I hope that customers will continue to punnish Allans for years to come, no matter what they decide to re-call themselves after the shit hits the fan, for insisting on asking the highest price, next to nothing discounts, arseholes behind the counter and poor service. I have dealt with them at least 20 times in 22 years and had to put up with the lost box or powerpack routine , half a dozen calls never being returned, “sale” that was more expensive than anyone else in Australia with no compromise and the “professional muso salesman” that was just getting over his Kylie covers gig from the night before. I will say it again, if you want fair prices in this country punnish these companies. It is not the customers fault that the economy has taken a turn for the worse after all Allans would of been making a killing of us when things were good!

Womens Agenda

loading...

Smart Company

loading...

StartupSmart

loading...

Property Observer

loading...