Tuesday, March 14, 2006

Best Buy + Guitars = No Threat to Guitar Center, Yet


Best Buy hasn’t become the last man standing in the notoriously fickle electronics retailing business for nothing.

Few other retailing concepts generate as steady a rate of failure as electronics retailing—falafel stands in Fargo, North Dakota, I suppose—and the formerly large publicly traded electronics retailing flameouts I can name without pausing to think about it includes Crazy Eddie, Newmark & Lewis, The Good Guys! and CompUSA.

(Circuit City looked like it was coming close to joining that parade, but it’s still standing up, although not quite as tall as Best Buy.)

Best Buy has managed through electronics product cycles better than anybody: the corporate culture is terrific at focusing on new product categories and dominating them, re-formatting the stores when necessary to accommodate what customers want—home theater being the latest example.

Which is why I was intrigued to hear Guitar Center management mention a Best Buy experiment in musical instruments on their earnings call recently.

Other than the fact that the Best Buy store was in Riverside California, Guitar Center claimed to know little about how it was going or what it might mean—except that it would no doubt expand the category by encouraging many more consumers to pursue their inner Joey Ramone, as it were.

(“Expand the category” is what every retailer in existence has said whenever a bigger, better-run player has moved into their category. I wasn’t there at the time, but I imagine that when smallpox-infested whites began settling the Eastern Seaboard, the more optimistic Native Americans were telling their friends the pasty-skinned intruders would “expand the category.”)

Having been to Riverside, I can report that while Best Buy’s musical instrument effort is decent enough, it is no Guitar Center—yet.

The most impressive part of the whole thing, in my opinion, was the fact that Best Buy carved it out of the rear corner of the store in such an unobtrusive way that it’s hard to remember what had been in that corner before. It’s big and airy, but it fits the store. You wouldn’t know it hadn’t always been there.

The second impressive aspect is that, yes, there are real guitars—Gibsons, mainly—hanging up across the back wall, in Sam Ash/Guitar Center-fashion. While not nearly as comprehensive, it does tell you they’re selling something besides a plastic grab-and-go disposable gift-pack for somebody’s birthday.

There’s also a glassed-in room with acoustic guitars set up so users can try them out. And along the other, non-guitar wall (we’re in the corner of the store, remember) is a row of computers set-up to show how to create your own home studio. I was told this gets a lot of traffic.

That’s the good stuff—from my point of view, as a hack-drumming semi-regular customer of local Guitar Center and Sam Ash stores.

The rest of the lay-out was weak, I thought, with a very limited set of song books and accessories, and a haphazard collection of electronic pianos and synthesizers scattered around the floor, along with stacks of the grab-and-go guitar/amp starter sets.

Furthermore, the second glassed-in playing room was stuffed with electronics and a measly single set of drums—not very inviting. (It was explained to me that when the drums had been out in the open they attracted a little too much attention from boys.)

On the whole, the new musical instrument section in the Riverside store makes a good first impression, although I doubt it will siphon off the hard core Sam Ash/Guitar Center customers. Eventually, however, I suspect Best Buy will get it right.

Up to now, the musical instrument business has operated in a relatively quiet backwater of Big Box consumer retailing.

Whether Best Buy “expands the market” for the current market leaders, or does what the whites did to the Native Americans, remains to be seen.



Jeff Matthews
I Am Not Making This Up


© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

30 comments:

Gone to the blogs said...

*sigh* This makes me long for the bygone days of the true "buy,sell,trade" shops; where one could "demo" every instrument in sight and BS with the skinny long-haired guys working in the store for hours at a time. Next thing you know, Dell will be selling guitars, basses and drums in a direct consumer-direct model.

Todd Kenyon said...

Guitar Center stores largely cater to the professional or wannabe hobbyist (guilty). I just don't see either of these customers buying anything of musical value at a Best Buy. If you are going to spend well over $1k on a guitar (e.g., most Gibsons) you want alot of selection, maybe some guidance, maybe a few different amps to play it through with a variety of effects, etc. Then you hope to able to cut a deal at sale time. You may even want to have somebody with some expertise set it up for you. None of this will ever happen at BB. Sure a certain type of client may buy there, but they are not the typical GTRC client. Just the thought of buying a decent instrument at Best Buy sort of makes me sick.

Sistatroll said...

You forgot to mention the Gibson's that Best Buy sells are knock-offs. The SG they carry is not an actual SG... it's is a Signature Series by Gibson/Baldwin.

Did you pick one of them up? They're worse than Squires.

In addition they carry a Fender Starcasters. What in the hell are those?

Anyone purchasing something that like deserves what they pay for and they're not the clientel GC is trying to cater too.

If you want an acoustic, BB also carries Vinci and Silvertone. (???)

I can't imagine Best Buy ever being competition for Guitar Center. The salesmen at GC aren't always the most knowledgable, but even the girls at the front door know the difference between an acoustic and electric guitar.

pristine85 said...

this is interesting... is there a potential competition here? Is best buy really prepared to take on this sort of competition??? GC has the whole store dedicated to music...best buy would have to open separate stores dedicated to music retail to really combat...?? just stirring things up....

Tara said...

"gone to the blogs": Direct-to-consumer online sales are already happening. Rondomusic.com sells asian knock-offs of most of the popular electric guitar styles, and as long as you're willing to buy sight-unseen, they beat the pants off any price you'll see at Guitar Center or Sam Ash.

The future is here.

As for the lost mom&pop guitar stores, the rise of Best Buy is the best thing that could happen in that regard. Remember how CD/Record giants like Musicland pushed all the small record stores out of business? Once Best Buy crushed the major CD store chains, they left a hole in the market (specifically, vinyl, indie lables, imports, and used albums) for small stores to fill. Today there are far more privately-owned record stores within driving distance of my house than there were back in the late 80s.

I suspect a similar thing will happen if Best Buy stomps out Guitar Center. Unlike Guitar Center, Best Buy won't bother trying to serve the entire market. They will probably leave gaps which will create opportunities for new ventures.

Tara said...

Sistatroll: You obviously haven't actually seen one of the new Best Buy music departments. They are stocked up with genuine Gibsons & Epiphones (as well as Fenders, Peaveys, Yamahas, Daisy Rock, and several other brands.)

The sales people are not part of the main-floor staff, but people hired specifically to work in the musical instruments department, chosen specifically for their knowledge of guitars & music gear.

It's basically a store-within-a-store concept. Noting to do with ignorant front door checkout staff.

Cara said...

I just paid what was a lot of money (to me, anyway) for a tambourine to be
sent to my daughter for Valentine's Day. I ordered it from Musician's
Friend on February 9. I paid extra for expedited shipping. I AM SO ANGRY!

Musician's Friend:
1. Sent the package via USPS parcel post (the cheapest, slowest service possible) rather than FED EX Second Day Air.
2. Sent it to the WRONG PERSON (using my name rather than my daughter's) (And will the mail room at my daughter's dorm figure that out? Fat Chance!)
3. Gave me an invalid tracking number, apparently just making one up.
4. When I asked about the invalid tracking number, said that USPS sometimes just "recycles" tracking numbers. That is a LIE!
5. Said that maybe they will give me a refund IF I SEND THE PACKAGE BACK. But I don't have the package! (Given the switching of names, the fact that my daughter and I have different last names, and the vagaries of a college mail room, I'm willing to bet that I'll NEVER have it. Nor will my daughter!)
6. Certainly the opportunity for the once-in-a-lifetime little Valentine's Day surprise is over forever.
7. This is my daughter's picture. Shouldn't she have had a tambourine for Valentine's Day?

Be careful when using Musician's Friend. Find an honest, reliable company.

ZoomControl said...

I am a long time employee of Guitar Centers corporate office and a musician. The Guitar Center store experience is going to be a hard experience to match for Best Buy, this much is true. The stores set-up and culture For GC was established years ago when the corporate office was made-up of many ex-store employees slash musicians, who understood the needs and wants of the professional (or even hobbyist) musician. Fortunately for the chain, that previously established format is what is carrying the chains in present day. The problem I foresee here is that after Best Buy tests the waters and starts to develop a groove and they start to become more familiar with what works and what can be improved upon, Guitar Center does not stand a snowballs chance in hell. If or when Best Buys becomes more comfortable with how they are going to ultimately approach the industry, then start to improve on the approach, the Guitar Center corporate office has been so watered down with business executives that have no clue about the industry and have been so incompetent on so many levels, that there is no way they would be able to compete with Best Buys corporate office. When it finally reaches a level where Guitar Center is forced to adjust to win back the market from Best Buy, Guitar Center will sink. The corporate office has turned into a patchwork nightmare of old systems and old backward thinking and the mistakes continue to snowball unchecked. I’m sure that other large companies would cringe if they actually caught a glimpse of the GC corporate infrastructure. Best Buy could not have made this move at a better time. They could really rally this into something big if they exploit the weakness that currently plagues our corp office.

Kie said...

I work at the Best Buy in Athens, Georgia as a sales operator....and in this town full of college students just needing some hours for beer money, I feel pretty lucky to have scored this job. I have been with the company now for going on two years and I moved to this area for the music scene having been a performer and sound engineer/composer for the majority of my life. I am a gear snob...because I know what quality is and I would expect that any good musician will naturally reach for top shelf instruments. I have a Vox AC30HW, 65 Amps London, 1972 Gibson ES-335, Gibson '58 Custom Shop, Gretsch 6120RHH, Fender Plus Deluxe Strat, G&L Legacy, Taylor GA6, Martin 00016 Special, Fender Precision Bass, SWR Super Redhead....AND so on. I was asked to manage the upcoming department mentioned here and am very excited to be a part of it. I have managed several music stores in my life and also spent quite a bit of that time servicing and repairing musical instruments from harps to dulcimers to guitars both acoustic and electric. This is a wonderful opportunity for me and I hope to be able to reach out, knowing what I know about "gear", and bring endless possibilities in music to folks both young and old. I think it's a wonderful idea...despite it being admittedly "odd" to have such a set-up within a Best Buy. It's a step in the right direction as far as I'm concerned. Because in big box electronic retail stores, you don't find a department dedicated to creativity as a whole. I know it's all about the bottom dollar, but I can assure you that, should I get the position offered me based on my experiences, you will have a go-to guy to talk with about your new song, your endless fascination of music, your new guitar that may need a set-up, a custom order that you may need....simply put, I am THAT guy that cares about your musicianship more than getting into your wallet. In some instances, I can see this concept being truly ridiculous considering. But I can only hope that the person(s) in those new music departments truly understand a musicians needs and NOT just approach it like another new "product" for the consumer market.

Chase said...

I have the tendency to be very long winded, but I will do us all a favor and be brief. As a former Guitar Center employee who laughed out loud when I heard my store manager announce that Best Buy is opening a musical instrument store let me say that this is no joke. I'm now an employee for Best Buy's musical instrument department and there is a lot happening in the very near future. Don't get me wrong, Guitar Center has it's benefits but Best Buy is going to make large steps to truly improve the experience of buying instruments. If you don't think that there are professionals or a good selection of amps and guitars there think again. That pool is only expanding as well. Let's all face it, Guitar Center is in desperate need of a good competitor, it's in everyone's best interest (yes even Guitar Center employees). Best Buy is a $40 billion dollar giant, who has the intelligence and innovation to take on anybody in pretty much any field period.

Don't Panic said...

I just visited the new musical instruments section at the Best Buy in Madison, WI, and I've got to say I was impressed. I walked in expecting to see the crap plastic gift box guitars, and found a pretty decent selection of good guitars. I tried out a Fender Jazzmaster, which I haven't seen at other local music shops (Good n' Loud, GC), and talked with one of the employees about different guitarists that use them, etc. I actually went to GC afterward and asked if they had any Jazzmasters in stock and the 2 different employees I asked didn't even know what a Jazzmaster was. I chatted w/ the manager of the instrument section at BB (who did all the hiring) for a bit, and apparently all his employees have degrees in music. On the whole, the selection was a bit small but there was definitely quality (up to a $3k Gibson, the most expensive guitar I saw there) and the employees are knowledgeable. And they had good financing (18 mos no interest... I could have that Jazzmaster for $55 a month... so tempting). I have qualms because I do love Good N Loud, but it seems like BB have put some real effort into this...

lovetoblog said...

The musical instruments idea is an interesting one for Best Buy, everytime I'm in my local Best Buy their employees talk about price matching or trying to get me to buy there based on price, how does really expensive musical instruments fit their store: What could they possibly remove from their stores to make room for the musical instruments? There isn't a section of the store that someone from my family isn't shopping in.

Anonymous said...

THE DIFFERENCE BETWEEN GC AND BB IS NIGHT AND DAY, GUITAR CENTER EMPLOYS PROFESSIONAL MUSICIANS WHO LOVE AND KNOW THE GEAR WHILE BB HIRES ANYONE. I'VE CHECKED THE NEW "MUSICAL INTRUMENT" AREA OF THE PASADENA BEST BUY, AND THEY HAVE NOTHING ON GUITAR CENTER. NOTHING. THE SALES GUY WAS THE SAME GUY WHO WAS SELLING BLENDERS A WEEK AGO. REAL MUSICIANS WILL STILL PREFER GUITAR CENTER AND "GUITAR HEROES" MIGHT GO GRAB A KNOCK OFF GIBSON AT BB. JUST BECAUSE MACY'S SELLS IPODS, YOU WOULDNT TAKE YOUR MAC THERE TO GET SERVICED, RIGHT?

Bob said...

Just stumbled upon this today in a Chicago area Best Buy.

I think they're doing it right and through pricing and promo's will put a huge dent in GC's market share. They don't have anywhere near the selection of GC and I don't think they want to.

All the sales people working the music section were musicians themselves, a couple coming over from GC.

Anonymous said...

Well well Best Buy is a musical instrument retailer. Sounds crazy I know, but it is true and surprisingly awesome! For the most part everyone I've met at the new stores have been very cool with a good amount of musical knowledge. Many of them are gigging musicians or pro/semi pro engineers. It's a good selection with more product arriving all the time. The best part. . . non-commission sales people! They give me honest advice and sell me what's in my best interest, not what makes them the most money. And they don't surround you like starving vultures(GC). I've been playing long enough to know what I want, but it's nice to try things out without being harassed. They don't have everything that GC offers, but the items that they do carry are quality and not knock-offs. I met a Gibson Rep while I was there, and we weren't talking about fake Les Pauls I assure you.

Anonymous said...

PRS guitars at Best Buy? Not SEs either..... Custom 24 and 22s. Watch out Guitar Center and Sam Ash. Oh and by the way I just saw a $5000 Taylor there today. Awesome!!!!

Anonymous said...

I get sick thinking of shopping at either one of these mega-chains for a guitar - or anywhere else that has "corporate offices" for that matter. Do you think Hendrix would have chosen Guitar Center or Best Buy over Manny's? Fat Chance. They may as well sell cookie-cutters at these places - wait, Best Buy probably does on their website. Maybe OfficeMax and Toys-R-Us will try their hand at music retail next. I remember the days when music stores were opened by musicians who had a love of the instruments, not some board of directors sitting at a table saying "Guitar Hero II was one of our top-selling SKUs last holiday season, we should capitalize on that market to the fullest extent." Yuck.

Magio said...

I live in a smaller town with only a cheesy local music store or two.

I was pretty psyched to find the music store in Best Buy - kind of blown away, actually! It's huge, they had quality guitars (not 'Starcasters', rather $1800 Stratocasters, etc), nice quiet rooms where I could jam Ampegs, a sick wall of pedals, and overall the selection was pretty intense. I could see them doing well with this, once people know it's there.

Magio said...

Also, having grown up on the East Coast, practically every guitar store I went to was staffed by some stuck up jerks who would totally ignore us... so, whatever.

Anonymous said...

Talk about being ignored - I went to Best Buy with intentions of buying the best computer they had in stock. Couldn't get one person to raise a finger to help. I asked if they had the one I wanted in stock - they said no. I found one myself on the shelves. When the guy went to get the monitor, he came back with a box with a giant hole in it. When I asked him if he had another one in stock, he let out a huge sigh like I was totally putting him out. It was by far the worst major purchase experience I ever had. And after you help them put your local "cheezy" mom and pop shops out of business, have fun ordering your strings online everytime you need them when Best Buy decides the musician thing isn't as lucrative as selling refrigerators anymore, or they go out of business like Circuit City and all these other big corps seem to be doing.

Anonymous said...

For the people that keep saying that Best Buy is selling knock offs, I can assure you we're not. Real Gibsons, real Fenders, and Taylors too! I am a musician, not some guy that was selling blenders a week ago. Quit posting crap that you have no idea about.

Anonymous said...

As a musician, I have to say that I like the new instruments in BB, and I think it will be competition for GC. Whenever I am looking to buy a new instrument, I go online to first see what guitars are out there. I then go to the local stores to see if I can find the one I want to test it out. Musical instruments in BB just means I have more to choose from when testing out instruments. And if I like it I see no reason to purchase from GC as opposed to BB.

Anonymous said...

dude i dont see how you can say this is a bad thing, we just got one in ours in tallahassee and its the shit! i just go in there play all the expensive guitars that id never buy for an hour or so get some new strings then walk over pick up a new game for my 360 then leave

Anonymous said...

I travel around so cal and have been to almost every BB that has a musical instrument store inside...I can say that while the selection is not exactly as wide ranging as GC, the service, knowledge and deals to be had blow GC out of the water. Almost every BB music employee I have talked to USED to work at GC, and got fed up. I used to work at GC and got fed up, too (many years ago). BB seems to put high end stuff on clearance often....I have scored major deals...and not on squiers....but on an Eric Johnson strat, Gibson '61 SG reissue, Gibson Slash Les Paul, Marshall JVM, etc. All in mint condition, all heavily clearanced at far far less than GC would even consider.

Right now I am in the market for another Les Paul, and I will surely check out BB first.

Oh, and I have never had an issue with the BB guys knocking 10% off right off the top of regular priced items...sometimes more! GC's "pay the retail price or get out" mentality (which is newer, BTW...we used to be able to lower prices) will put them out of business eventually. I bought my Eric Johnson strat at BB for over 1k less than GC's "lowest price". pffft.

Tara said...

I agree that it's become a great place to find deals. Last Spring I bought an '07 Highway One Telecaster as a new-old-stock clearance for just over $400!

Anonymous said...

Just a word on Best Buy MI employees... When our new store opened up (Oct 2009) there were over 200 applications for our Musical Instruments section! We ended up hiring only 5 employees and only took the best of the best. Most of our employees have a degree in Musical Performance or Education and the ones that don't are even more knowledgeable and have extensive backgrounds in private lessons and custom guitar building. For pro audio and home recording we have a guy who recorded multi-platinum artists and still does with his personal recording studio! We have a classically trained pianist who specializes in teaching beginners. For DJ equipment, we carry the best new digital and analogue equipment from numark and stanton and we back it up with lessons from a gigging DJ. In short, we know what we are doing...

Anonymous said...

Best Buy will never beat the selection, prices or customer service of online stores like Musician's Friend and American Musical Supply, I have been purchasing from them for many many years, and would recommend them over Best Buy any day of the week. Best Buy doesn't even have a section for Guitar Pedals! Musician's Friend has over 800 pedals, Best Buy has about 4.

Reverend Rick said...

I am visiting San Antonio for Christmas and there is a Best Buy with an actual music section - this isn't just 2-3 knock off intro guitars like the "starcaster". For example, I was pretty impressed that they had low prices on American made telecasters. Something didn't sit right though. Why is it that picking up a guitar in an electronics store like best buy makes it feel cheap? I'm a little confused though now - I just looked up the price for an american tele on Best Buys website and it was $1,199. (pretty normal retail) - but I saw a new american tele yesterday marked $749.99..??? Holiday specials??

Anonymous said...

Best Buy will never, ever even make a microscopic dent in GC's sales. I've been a professional musician my entire adult life and I'd never go to a discount electronics store for my gear. I did check BB out, of course. Laughable. Junk for the ill-informed. Good luck to them, though. They're gonna need it.

Anonymous said...

I stumbled across this "old" thread and had to add my feelings on the subject. When it comes to buying a guitar I am a strong believer in the small music store model. There are a few in my area which are a pleasure to spend time in. Their Inventory may be smaller than a GC but when its time to purchase they are, in most cases, more susceptible to make a deal and the quality of personal attention is unparalleled. You will never get this at a Best Buy, at least not the one in my area. Their inventory is extremely limited and staff (usually consists on one person) knows little to nothing about guitars. The guitars are unkempt hanging on a single wall. GC has it's issues but at least the inventory is large and the staff are enthusiasts them selves.