Should Fender be raising prices or stocking minimums?

[chazmo]

I thought this would bear some repeating and wider audience in a separate thread as we were talking about this earlier... So, what are your thoughts? Lately, I believe we've heard from several folks around here that the trend is to price the Guilds higher and ask for higher commitments from the dealers. Is this the "right" thing for Fender to be doing? is this the right time to be doing it? How will it affect the brand? Initial comment from frono, below, after I'd noted that several long-time music stores in my area are hurting for sure with respect to guitar sales right now:

Yeah, it's hurting a lot of areas, paddlefoot, but my point was that you don't make it *harder* for a dealer to carry your wares in tough times; you make it easier. One should not try to squeeze water from a stone.

Just my opinion.

So does anyone know what fraction of Fender product goes through mega-stores like GC, chains and now Best Buy? How does that compare to the amount going through small and independent stores? I suspect Fender can meet sales goals whether the little guys have product or not.

I won't push it too far but an analogy to bookstores might be appropriate. Publishers started giving volume discounts. Small shops could not match price with big ones and so went out of business or moved into a niche where the small shop sales did not compete or depend upon volume. Note that book publishers actually prefer to deal with chains and in large volumes because it makes their distribution more efficent and cuts costs.

Bottom line, I guess, is that making it harder for some dealers to carry your wares can be a successful strategy, at least from the point of view of the manufacturer.

 

[Overcomer]

Good question...My question from this is - why are they raising prices or what are they trying to accomplish with it? I don't have an answer to either, and I won't speculate the answers either.

That said I have two thoughts about it...one, I think it is a bad time to make any major shifts in pricing etc. right now with the economy (with regards to something like guitars). I say this generally speaking and I realize there are exceptions. Secondly, the shift in pricing may not make much if any difference. Guild is Guild and I say if someone is looking to spend (for example) between $1k and $1.5k on a guitar a small change in pricing isn't going to sway a niche group of people who are making a purchase anyway. Not everyone is affected by the economy and they could be thinking people in the market for a Guild are not going to be swayed by a price increase...It's a tough call anyway you look at it.

 

[jazzmang]

Or is the simple answer the one that says they need to overcome the increased cost of production in CT?

 

[Bill Ashton]

Just so we are clear, my reference to the price increase, and then the FMIC rep. "strong-arming," was for the February '09 raise and then subsequent relaxation of pricing later.

I was not in the market for a Guild then, so I do not know what the price level was
at that time. However, in October '08 I ordered a Fender Classic Player Jaguar which had
an internet price of around $800. (I don't know what the list was). I purchased the guitar from my local authorized dealer, who beat the interest price without even me asking...good thing I did, for there were problems with it afterwards that FMIC would not stand behind. My dealer was willing to take it back, but I didn't want him to take the hit, and he performed a mutually acceptable repair/mod that has me very happy with the guitar. With the increase in list price, this guitar went up to $1400 (internet pricing a little over $1K). Had that been the level at the time, I probably would not have ordered one and looked at the used market.

There are probably some similar stories out there that are Guild related.

 

[fronobulax]

Is this the "right" thing for Fender to be doing?

"Right" does depend upon where you are sitting. As a hypothetical stockholder of FMIC (which I'm not because it is not publically traded, but you get the idea) what is "right" maximizes the return on my investment. Even then, right may depend upon whether I am short sighted and looking at next quarter's profits or invested for the long haul in the hopes that FMIC has the proper strategic vision.

If I am a consumer, anything that makes it harder for me to buy the product (either price increases, limited distribution or both) is not right.

If I am a Guitar Center stockholder, then cutting deals with my suppliers that increase my volume and profit is right.

If I am a mom and pop music store already reeling from the fact that the Arts seem to get the first cuts in education budgets then not being able to stock a marquee brand such as Fender is the kiss of death. I can add value to a Fender by setting it up pre-sale or throwing in a few "free" lessons to justify charging more than GC does, but if I can't get the guitar then I lose the sale.

If I am a "Guild evangelist" then it's not clear whether FMICs actions are right or not. As a Guild fanatic, I want the world to recognize that I have one of the world's best guitars and I want people to affirm my belief that Guilds are greater than or equal to the competition whether we talk about sound quality, volume, projection, "feel", workmanship or value. What is "right" depends upon whether FMIC is willing and able to manage the brand or whether benign neglect applies. Raising prices and restricting distribution is a strategy for establishing a luxury brand which might make the strategy "right". On the other hand GC and Best Buy are a bit too mass-market for "limited availability" to really mean something.

Consider a simplified world in which the old General Motors flourished. You had a Caddy as the high end, luxury brand. Buicks were upscale. Pontiacs were sportier. Chevys were solid, somewhat pedestrian, but a good value and an occassional surprise like a Corvette. GM had market niches and advertising campaigns for each one. They didn't compete with each other as much as they did with other car companies.

So "right" for the Guild enthusiast probably depends upon which niche the person wants to see Guild compete in. If FMIC has a strategy and it is what I imagine then the volume increases and subsequent distribution changes are part of a strategy to establish Guild as an upscale brand that can compete, in the new market, with Martins and Gibsons but provides better value.

 

[Bill Ashton]

Frono, FMIC needs you on their Board of Directors...

 

[Paddlefoot]

Second that Bill. Frono is on the mark here. I think some have taken me as the FMIC company boy here. Frono has stated the situation very well. Fender is also subject to circumstances that they may not like and will have to make tough decisions on to stay profitable or even in business. I have studied quit a a bit of foreign currency trading and have found that major international businesses frequently have special advisors to help them make decisions regarding the effects of these markets on their products and where to hold blocks of their assets. The price and perceived value of a product can be strongly impacted if someone ignores these factors or guesses wrong. Tenths of a cent on the exchange rates make huge differences to companies on their scale of trading. We may not see it directly but that exchange rate has an effect on any resource that comes from another country whether it is wood or tuners or electrical componants. Also affects what our product can be sold for elsewhere. Point being that Fender probably has to do some things it would preferr not to do to make sure their produt lines are stocked and serviced in a way that make them the most desireable and profitable. We expect that of their product.

 

[Brad Little]

If I were in charge at FMIC, this is what I would do. Eliminate all Fender acoustics. Revive the Madeira name for the GAD line. Pressure the big box stores to carry a fair number of Guild acoustics in order to keep the Fender line (it could be in the manner of marketing, co-op advertising, any sort of enticement short of actual quotas). Then look at those stores that do a high percentage of their sales with acoustic instruments, especially the Taylor-Martin-Gibson lines, and offer them co-op advertising and/or in store promotions/workshops. My gut says that many of these will be indies or regional chains, although I may be wrong.
Then go with some product placement. Offer some of their Fender endorsers a custom model if they will switch to Guild.
I would also resume archtop production. Sure it's a niche market for the full-size these days, but Guild has name recognition that may be second only to Gibson in this area, at least for non-luthier product, and the Starfire is a great alternative to the 335 class. I'm not sure what I would do with the old Guild solid body models, perhaps wait and see how the rest of the line went and add one or two at a time.
I had a similar thought for Chrysler at one time. Make Dodge the truck line, Chrysler the auto and van line and Jeep the SUV, but did they listen? No, and look what happened to them
Just my 2 cents
Brad

 

[Bill Ashton]

Brad, nice plan.

Interestingly, I had a similar thought for Chrysler...so, if mere mortals like us could work that out, what happened with their BODs...???

Digressing further, my grandmother was a young girl from Hamden...back in the early '80's I took her back for a drive around, her family home was still there and we walked about a small roadside cemetary where some were at rest...her family name was Jewett.

 

[Paddlefoot]

Chrysler is an excellent example of my point regarding the servicing of the product. I have a good friend who runs an auto repair shop. His family has been in this biz for 40+ years. As an independant he gets less than the best support from the big auto makers because they want to keep his business for themselves. Andy buys a Jeep from the local Chrysler dealership (which is now out of biz) and has a shifting problem with the transmission. The service manager of the dealership tells Andy that the problem is in the programming of the computer that sets the shift points (which Andy already knew) but they dont have anyone who can reflash the computer (and won't let him have access to the program to do it himself) and tells him to drive it until it breaks then they will replace the transmission. This is the same dealship where I had no luck getting my stepdaughters Jeep repaired and got the old "Let's replace parts until it stops being broke" response. You can have the greatest product in the world and sell it cheap but if you have service like this you are going in the toilet quick. Would you buy a guitar that had great potential except that you had to replace half the hardware to make it play properly and then couldn't be sure you could get service from the dealer?

 

[Brad Little]

Interestingly, I had a similar thought for Chrysler...so, if mere mortals like us could work that out, what happened with their BODs...???

>Well, Bob Nardelli, Chrysler CEO, was previously at Home Depot, where despite some increase in profits, stock stayed steady and Lowe's outpaced them in sales. He took a $210 million dollar buyout and went to Chrysler as CEO. I spent about 20 years in low-level retail management-I had daily interaction with customers. I learned very quickly that the farther management got from the selling floor, the more they were sure they knew what the customers wanted. Yeah, right.<

Digressing further, my grandmother was a young girl from Hamden...back in the early '80's I took her back for a drive around, her family home was still there and we walked about a small roadside cemetary where some were at rest...her family name was Jewett.

Although I'm from the area, I'm not a Hamden native, only been here for 20 years or so. I did grow up in a nearby town (Ansonia) with a somewhat main street named Jewett Street that dates from colonial times (the street, not necessarily the name), so it might have been a common name in the area.

Brad

 

[Brad Little]

has a shifting problem with the transmission. The service manager of the dealership tells Andy that the problem is in the programming of the computer that sets the shift points (which Andy already knew) but they dont have anyone who can reflash the computer (and won't let him have access to the program to do it himself)

Well, if the Jeep had a Chrysler transmission, there's a simple way to solve the problem. Disconnect the battery, then reconnect, this defaults the computer. Then, find a relatively untravelled road somewhere, fairly straight, and starting at 0 MPH, go through all the gears manually 3 or 4 times and the shift points are reset. Of course, it might be different with different years, but it works with my '94 Voyager.

Brad

 

[guildzilla]

Many good replies here.

Just one point to make at the moment. When FMIC closed Tacoma and made the plan to move Guild to Connecticut, there was not even a clue that the economy was headed into crisis. It was the last thing they expected to happen, and a recession of this magnitude was the worst thing that could happen for USA Guild in a time of transition.

I'll be honest. I figured FMIC would pull the plug, especially after the news that DV-4 and DV-6 production had been moved to Mexico.

The small music store scene is a frigging wasteland here in Columbus, Ohio, compared to what it was 20 years ago. We got our Sam Ash and our Guitar Center in the 90's. Most of the older stores are dead. Those that are left have to be among the most vulnerable retail categories out there in a recession like this. I hope it's better elsewhere around the country, but I suspect otherwise.

It's simpler for FMIC when it comes to Strats and Teles, but the same tactics and strategies won't work for a Guild restart. They need to nurture and rebuild the dealer network. At the same time, they could apply their muscle to get Sam Ash and GC to stock the new USA Guilds.

 

[Brad Little]

We got our Sam Ash and our Guitar Center in the 90's. Most of the older stores are dead.....They need to nurture and rebuild the dealer network. At the same time, they could apply their muscle to get Sam Ash and GC to stock the new USA Guilds.

FWIW, Sam Ash is still a family owned business. I don't remember if the current heads are brothers or cousins, but they are direct descendants from Sam and Rose Ashkynase.

Brad

 

[bluesypicky]

I think when you have the product (which Guild definitely does), you need a good marketing campaign aimed at everybody concerned: Dealers and end customers.
The problem is Guild suffers the walmart like approach enforced by Fender that does not do anything to help present Guild to the public and dealers as what it is: One of the top acoustic guitar maker.
Guild is good enough to make a selection among the dealers and keep the ones that know the product (and therefore want it if they have an iota of common sense), and in turn, customers will want it. I worked in a store for years and I remember that I was pretty much able to sell any guitar I wanted (within the allocated budget) to any undecided customer.
Once this is all met, I agree that the 50 bucks or so difference on the price tag will have no impact on any eventual buyer.

 

[Dr. Spivey]

A lot of good input from everyone here. Here's my take:

The price increase has put Guild in line with Gibson, Martin, Taylor, Larrivee and others of similar quality. It was bound to happen, and the timing was indeed bad. The price increase alone would in no way stop me from buying a new Guild. The reasons for the price hike are a different matter. I'm not an MBA, nor am I fluent in Yuppiecorporatedoublespeak, but I do understand money and commerce, as well as common sense. Guild needed to update production methods and locate in a modern facility to remain competitive in the market, long term. This would require an influx of capital, some of which would be passed on to the consumer. This could all have been accomplished in a short time without leaving Westerly. Moving three times in 7 years generated a NET LOSS. Buying Tacoma Guitars, a company that never made money and was not a serious competitor, then shutting that line down was another NET LOSS. Ovation guitars are a fad that peaked years ago, and their market share is shrinking. Hamer? C'mon, kids, what's the future in that? FMIC has made some real stupid moves that have had a wide range of negative effects and left them in a bad position market wise.

That being said, corporate execs are human and make bad decisions as we all do. The Guild brand is a great hole card for FMIC. We know they can build great guitars, in spite of the mess they've made. The situation is at critical mass right now, and could go either way. I really think Guild is a brand that can survive all this.

Stocking minimums? What are the numbers? I don't know. Retail can be a tough game, and it's not a game for those without money and guts these days. I stated in a previous thread that Guild has lost dealers here in Wisconsin. Two of those dealers needed to be dropped. How or why they became ex-Guild, I don't know, but I bid them good riddance. I will not shop at Guitar Center or patronize any of their online businesses. I have no use for a little shop that only stocks 2-3 Guilds and wants 14 bucks for a 6 dollar set of strings. I like places that are somewhere in between. I'm willing to travel a reasonable distance to do that.

In closing, let me say this: If anyone from Fender is reading, you guys need to show me you've got game to get my money. 8)

 

[marcellis]

I've never seen a Guild in a GC. I've seen Fender electrics & acoustics. I've seen Gretsch electrics. I've never seen
a Guild acoustic in a GC - not even a GAD.

 

[jazzmang]

I've never seen a Guild in a GC. I've seen Fender electrics & acoustics. I've seen Gretsch electrics. I've never seen
a Guild acoustic in a GC - not even a GAD.

Same here. I've only recently seen some used Guilds in the Guitar Centers around here. I can't recall a time that GC ever carried new Guilds.

They are Martin and Taylor freaks.

 

[Dr. Spivey]

I don't know what GC sells, I was just using them as an example of a large retailer. I should have made that clear.

 

[adorshki]

HI Marc and Jazzman: I actually bought my D25 in the Guitar Center in San Jose CA back in '97. At that time there was (and still is) an outfit in town known as Guitar Showcase. When I went to Guitar Center they had more of a "for the working musician" ambience than Showcase. Showcase had more of a reputation of stocking the latest fad items for the wannabes. In any case, I was shopping for a Guild and GC had the line IN STOCK. Interestingly, a couple of years later GC had "lost the line" and Showcase had it. Showcase had at that time a much larger local warehousing capability building than GC. Wonder if that had something to do with it. It was also coincidental with the closing of Westerly and Showcase is where I actually bought both the F65 and D40. They had at least 15 different Guilds including electrics on display at that time and the atmospheres between the competitors had almost completely reversed.
So, a couple of weeks ago I stopped at Showcase for strings. They had one domestic Guild on display in the acoustic room. :shock: LOTS of Fender acoustics in the "second tier" area. Whassup with that? OR DID YOU stop there on a shopping spree and clean 'em out when you were in town, Marc? :lol: Or maybe they're waiting for Hartfords and ran out of Tacomas? Seems to point up the whole issue of how a dealer is supposed to divvy up their stocking dollars. The attempt to up the minimum stocking requirement may also have an intended collateral effect of lowering the competitor's presence, ie, more money spent on Fender means less money for Martin and Gibson. :twisted:
I know it's a large strategic factor in my business. 8) What really scares me is selling instruments in BEST BUY? Was that for real? Might as well be Walmart or Target. What the h--l are they gonna know about guitars?