Guitar chain’s
arrival creates discord
among independents
California-based Guitar Center
has plans for two 'big box'
stores in HawaiiSee also: What Price Paradise?
From staff and wire reportsFAIRFAX, Va. -- To owners of small music shops, the recent arrival of a Guitar Center chain store was like an earsplitting Jimi Hendrix solo. It was impossible to ignore.
Russell Craig, owner of Classic Axe in the nearby Washington suburb of Manassas, stopped by to see the new threat to his business. He did not like what he saw.
"Guitars are a passion for me," Craig said. "Those big places, they would be selling nails if they thought they could make money."
Craig is on the front lines of the Guitar Wars, where national "category killer" retail chains -- of which Guitar Center Inc. is the biggest -- are trying to use their buying power and massive selections to lure customers. Just as Home Depot Inc. or Circuit City Stores have crowded out small hardware and electronics stores, Guitar Center wants to use its muscle to outsell mom and pop instrument shops.
In the Washington area, Guitar Center opened two stores this summer, and company executives have said they plan to open two more in the region."Sixty-two locations nationwide and more to come!" blared a flier at the Fairfax store. The chain hopes to have nearly 70 stores by the end of 1999.
And the Agoura Hills, Calif.-based company's plans include Hawaii.
Bruce Ross, the company's chief financial officer, said yesterday that Guitar Center hopes to open two stores in Hawaii in 2001. The company will not start scouting locations until June or July, he said, but one store will be in Honolulu while the other may be at another Oahu location or on Maui.
Ross called the Hawaii market "underserved" and pointed to the local entertainment industry and Japanese tourists as two lucrative potential markets.
"There's a lot of live music going on in Hawaii, such as all the shows in Waikiki," he said.
Ross said any Hawaii stores would likely be in the 10,000-to-12,000 square-foot range.
Guitar Center, meanwhile, has stores in nearly every major East Coast market. It is opening for the first time in New Orleans, Las Vegas and Salt Lake City.
"It's scary, them being there," said Kevin Landes, manager at Foxes Music in Falls Church. "They have a lot of money. We can't afford to advertise the way they do."
Guitar Center began as a single store on Sunset Boulevard in Beverly Hills in 1964 and expanded over the years until it went public in 1997.
Besides independent stores, it has competition from two other chains, second-largest Sam Ash Music and No. 3 Mars. Sam Ash has 29 stores, and Mars, which added 10 stores in 1998, has 26.
While independent music store owners are concerned about the chains, it's unclear whether the so-called "big box" stores will kill the corner music shops or go bust themselves in their race to expand. "I just wonder where they think all these guitar players are going to come from," Landes said.
Expansion may have had a role in a $149,000 loss the Guitar Center reported for its second quarter. The company said the loss was due in part to softness in demand for high-tech equipment, but the retailer also attributed its performance to competition in some markets where it has opened additional stores.
The retail musical instrument sector has grown about 7 percent annually for the last six years, according to Richard Davis, an analyst with Tucker Cleary in Boston. He feels the biggest threat to the traditional music stores is not companies like Guitar Center, but the Internet.
"You will see a lot of marginal players get crushed by the Internet," Davis said. "It offers massive selection and good prices."
Guitar Center, cognizant of the growing power of online retailing, is moving onto the Internet itself, agreeing in June to buy the Musician's Friend, a catalog and Web retailer, for $50 million.
Paul Majeski, publisher of Music Trades, a trade magazine based in Englewood, N.J., said it's way too early for independent shops to worry -- as long as they provide expert service. A customer will pay extra to buy a guitar from a shop where the salesmen are knowledgeable and not pushy, he said.
"It's one of the few retail industries where a small dealer really can make it," Majeski said.
Even so, a published analysis by Majeski showed revenues of the big chains grew faster than the industry average in 1998. Overall, the top 200 retailers had sales of $2.8 billion last year, according to Majeski. That figure includes other instruments, sheet music and equipment, not just guitars.
He pointed to Knut Koupee Music of Minneapolis and the Drum Shop in Houston as examples of established regional retailers that may have failed due to competition from Guitar Center.
In Boston, E.U. Wurlitzer, founded in 1890, tried to rapidly increase its inventory and renovate when Guitar Center opened in the city. The strategy failed, and Wurlitzer declared bankruptcy in 1997, according to Majeski.
Craig at Classic Axe said he is not worried about Guitar Center's arrival in Washington. His customers are loyal and trust him, Craig said.
A friend, however, decided to close his Centreville guitar shop after the two Guitar Center stores opened nearby. "He just said, "I'm tired,'" Craig said.
