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Music

Aug 31, 2012

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

Musicians and music lovers may have a fondness for their bricks-and-mortar stores, but the demise of Allans Billy Hyde shows music is not immune from the changes sweeping retail.

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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.

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