Musical Equipment Retail Industry Trends

Industry Concentration Rises

The four largest musical instrument firms generate over 30 percent of the total industry revenue; in 1997, they generated only 15 percent. For decades, many regional and independent full-line stores were the only music store in town. Now these stores face direct competition from expanding chains – most often Guitar Center, the so-called “Wal-Mart of music retail.”

Declining Retail Prices

Typical instrument prices have dropped 10 to 50 percent in the past 10 years due to low-priced imports from China, competition from big-box retailers, and a lack of interest in instruments among American youth. Retailers must move more inventory to simply maintain historical revenue figures.

Declining Employment, Wages

Jobs at musical instrument stores have fallen nearly 10 percent in the past five years, while jobs at the retail level as a whole have remained flat. Regional chains are struggling to stay afloat, and many have closed or have been acquired. Salaries and commissions paid to full-line employees declined 25 percent from 2005 to 2006, according to the International Music Products Association (NAMM). Employers responding to decreased customer demand and flat revenues have cut operating expenses; controlling labor costs is one of the first actions many dealers take.

Advances in Internet Storefronts

National full-line dealers are exploring how to reach new and attract repeat customers through online sales. Larger companies with an established online presence are offering advanced technologies including one-to-one marketing, comparison shopping, and sophisticated internal search functions. Several online stores offer limited international shipping.

Online Auctions

Specialty retailers are discovering the power of eBay. Online auctions have become a great resource for small dealers to sell excess inventory, slightly damaged merchandise, and used instruments. Some small specialty stores have completely abandoned a physical storefront in favor of an Internet-only presence.