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By Chris Thomas
Guitar Center(GC) began as a small organ and appliance store in the 1960s,
and has grown to over 200 stores nationwide, including ownership of Musicians Friend and Music & Arts Center. Throughout GC’s history, quality instrument sales and customer service were both paramount to the company’s growth and success. GC used typical capitalistic methods to provide customers with quality gear at affordable and competitive prices. Today, Guitar Center has grown to such a level of dominance that it no longer needs to stay “price competitive” because it has demolished every level of competition in a legal way that most consumers do not understand. What was once a family owned business has become a company with the Wal-Mart mentality, effectively shafting hard working employees while simultaneously giving the finger to loyal customers.
Guitar Center has had a viral expansion for years due to its ability to infiltrate a market and demolish the competition, using overwhelming purchasing power and established capital that lets them edge out their competition. And they are ruthless and upfront about their abilities to do so. “Guitar Center opened up right next door to us around 1999. We basically shared a parking lot,” says one former employee of Gordon Miller Music, formerly located in Towson, MD. Within two years of GC opening its doors, Gordon Miller was closing up shop because of an inability to compete with GC’s low prices. Kellen Tyburski recalls “I was shopping for an acoustic guitar, and Guitar Center had an unbeatable price, almost 25% less than the local store. There was no reason for me not to buy it there.” Guitar Center’s ability to offer such low prices, and the corporate support given to recently opened stores allows new GC locations to offer prices that are sometimes below the purchasing cost that other smaller retailers pay.
“People were buying Fender Strats from GC for only ten dollars more than we bought them for. We couldn’t compete with that,” says the former Gordon Miller Music employee. Unless the smaller stores want to take a hit to keep the customer, they are not able to compete with GCs incredibly low prices. GC assumes that their new locations will not make much of a profit in the first few years, but understands that the stores will return a substantial profit in the long run, once the majority of local, “mom and pop” competitors are out of business. Once the competition is gone, GC cuts the sweet deals and starts charging what they call “GLP,” which stands for “Guaranteed Lowest Price.”
Every time GC buys a product, they buy enough of it to outfit all of their stores and support their online music suppliers, resulting in a huge bulk discount. When smaller, “mom and pop” stores purchase the same gear; they are not getting the same wholesale discount that GC gets. Some manufactures sell so much gear to GC that they have developed a “GC” line, sold exclusively at Guitar Center. Much of this gear is actually of considerably lower quality, but is touted as an “exclusive” line. There is a particular brand of PA speakers that uses a higher end enclosure with third party speakers and drivers, and markets this low quality product as a technologically equal version of their flagship line. The reality is that GC pays less for the product, and “gyps,” or profits, more overall on an inferior product.
For a newbie sales guy working on commission, this is a great deal. For the audio professional who trusts GC’s “pro audio” department, this is a disastrous purchase. “I purchased the GC line of [a well known speaker manufacture] and was told that it had identical specs to the non-GC line. During a show, one of the speakers failed and actually caught fire. I figured I had purchased a faulty unit, and was told by the Pro Audio department that it was my fault that the speaker failed. The department manager gave me a new speaker, and that one failed as well. I took the back off the enclosure and found out that the specs were not the same; that the speaker was rated for well under what the Pro Audio department had told me,” says Jeff Fairbanks, Regional Production Coordinator for Boston Entertainment Group. “When it came time to buy more gear, I was forced to find another vendor because of GC’s unreliability.”
When questioned about the discrepancies in the speaker rating versus the advertised rating, a guitar center employee in the Boston store wasn’t quite sure how to respond. “Let me take your number, I’ll do some research, and I’ll get back to you about it,” was the response from the unnamed employee. GC requires its employees to take 5 “ups,” or contact numbers, a day, and it was plainly obvious that no research would actually be done and that the call served simply as one of the employee’s “ups” for the day.
Recently, GC moved to a “fixed pricing” standard that no longer allows employees to make discounts. The only way a piece of gear’s price can be reduced is if it is discontinued or damaged. This illustrates the amount of power that GC holds on the market, as they no longer need to offer flexible pricing in order to retain business. They have created a grocery market shopping experience for buying expensive and intricate gear.
Consumers are not the only victims of GC’s corporate office. The GC salesperson is also at the mercy of the mighty corporate giant. Turnover rates are high at GC for a reason; GC undervalues its employees. Instead of paying fair commission, GC tries to entice the sales force with cash or gear incentives. Sell enough Sure microphones and get a free SM58! Sounds like a great deal, but at the end of the day, these incentives don’t add up to the lack of money being paid to the employee. Many stores operate on commission, so it would seem that the less the salespeople drop the price, the more money they should make. The problem with GC’s commission structure is that it doesn’t tell the employee the true amount of profit they are generating. If GC buys a Fender Strat for 50 dollars and sells it for 100 dollars, the salesman has made the store 50 dollars. From those 50 dollars of profit, the salesman would get a percentage; say 10%, or 5 dollars. They would also get a percentage of the gross sale; let’s say 3%, so another 3 dollars for a total of 8 dollars of commission on the 100 dollar sale. That is a standard commission structure, so no problems there. The issue arises when the actual amount GC paid for the guitar is revealed. It turns out that GC actually bought the guitar for 40 dollars, but says that the guitar cost GC another 10 dollars in “ad pack,” which they claim to be the average cost to keep the power and phone bills paid, liability insurance, advertising, promotion, etc. This is where the structure looses integrity. “Ad pack” lowers the amount of profit that the salesperson can claim. While “ad pack” may include legitimate expenses for the company, they are passing the cost of business off to the salesperson. While not completely unethical, this is a shady way for GC to raise its own profit without having to share with the people who actually made the sale.
Unfortunately for consumers, GC’s turnover rate cripples the quality of service from the sales team. Instead of familiar faces, people are greeted by new employees who are shaky on their understanding of the gear. While this may not faze a lot of customers, the level of service is inevitably decreased as the new employees try to bullshit their way through selling gear that they’ve never actually used, heard or seen before. This lack of service results in a high level of returns, which then creates a high level of “resells,” or returned items being sold as new items. Many times customers go home with a new product only to find that it has been opened, used, or even registered. GC returns items at will. Their 30-day return policy is a farce; this author personally witnessed a GC store manager returning an item over a year after it was purchased to help broker a more profitable deal. The store manager authorized the return of a Fender guitar that a customer had purchased the previous year, and applied the credit to a used guitar of a similar price. While the gross sale was similar in numbers, the used item profited around 60% due to how much the store had bought it for, while the original purchase had only profited about 15%.
Luckily for consumers, there are other options. While GC may have run many of the full service music stores out of town, specialty stores seem to be in abundance these days. When a customer needs better service than GC provides, they can become a client of one of these boutique stores. Most of these stores will go out of their way to help their clients, and while the price of their gear may be a little higher, most people will welcome the attention to detail and honesty that they receive. Some of these stores are actually just a few people operating out of a warehouse; they don’t need the flash and glam that GC does to make the sale. A surprising number of people do not like to get hit in the eye with a strobe light when they walk into a store looking for a guitar. The real beauty of these specialty stores, however, is that they typically don’t sell every item under the sun. A shop like Mercenary Audio in Foxboro only sells the gear that they’ve used personally, and they vouch for it with superb policies like not having a restocking fee and doubling the manufacturer’s warranty. Cambridge Music in Porter Square sticks to selling mostly guitars and amps, ergo the staff is very knowledgeable about guitars and amps…they don’t waste their time trying to learn everything about every item on the market and instead have an educated sales team.
Guitar Center isn’t going anywhere, but that doesn’t mean that the informed public must continue to be pillaged by the corporate behemoth any longer. If well-informed people spread the word, Guitar Center’s customer base can be reduced to the newbie shredders, their parents, and bands whose bass player’s trust fund just matured.
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