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Making Sense of Supply & Demand Imbalances in the Musical Instrument Trade

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cargo ships docking at a busy port with a large city in the background

For the past several months, you haven’t been able to avoid the headlines. “Container ship stuck in the Suez Canal”, “Chip shortage worsens due to factory fire” or “China’s third largest port closed due to COVID lock-down.” Chances are, if you’re reading this blog the issues surrounding the supply chain have directly or indirectly affected your livelihood, complicated your business, or otherwise been a thorn in your side. And at least for now and the foreseeable future, the delivery delays and price hikes from factories and shippers have become the “new normal.” How does a Musical Instrument and Pro Audio industry participant make sense of all this madness?

False Sense of Security?

Prices at many levels of the supply chain have gone up, but so have backorders. It’s not uncommon that when supply is scarce, purchasing agents order more than required, hoping to stack the allocation deck in their favor. This is understandable but may mask an underlying waning of demand. At some point, the end user will become tapped out, or feel satisfied with what they have in the face of significant cost increases. Inflation is ultimately passed on to the consumer, who inevitably votes with their pocketbook as to the revised price/value relationship of whatever product they are considering. This sets the stage for an equally upsetting supply glut at some point in the future, and today’s situation may have lulled some notable vendors into a false sense of security.

Avoiding a Hard Landing

On the highway recently I noticed a sign warning “accident ahead,” and I see flashing lights as it pertains to this topic. Manufacturers today may be getting a false read on true demand, and there will be a tipping point in this equation when the containers finally start arriving en masse. Without product on the shelf, speculation takes over as to the longevity of any rally, especially the current one happening in the guitar arena. The optimist can buy into a scenario where stretched factory capacity itself may mitigate the equivalent of an economic hard landing, with continuing scarcity of goods avoiding an abundance of gear and a rapid reversal of the supply imbalance. But the pessimist, or perhaps the realist in me has seen this movie before and is bracing for the consequences to an industry that has been whipsawed by these and other serious challenges over the past 18 months.

Staying Engaged with all Constituents

John F. Kennedy is quoted as saying, “The time to repair the roof is when the sun is shining.” This holds true now more than ever among manufacturers of fretted instruments that have seen their backorders balloon. If circumstances are good in that regard for you, slow deliveries notwithstanding, it’s a great time to address any weaknesses or inefficiencies in your organization. Put more effort into working with your dealers and rep firms, arming them with the tools to succeed in any environment. Seize the opportunity and double-down on creating awareness and brand affinity among the buying public, so that when demand eventually weakens (trust me it will), you’ll be better positioned to weather that storm. No matter what happens, expect to get wet, and rest assured there’s always a rainbow after that for our wonderful industry, regardless of when the tide turns on supply and demand. Hopefully those of us old enough to remember the past won’t repeat the same mistakes.

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Filed Under: B2B, Business Intelligence, Dealers, Sales, Strategic Planning

About Doug Nestler

Sales Consultant | Author | Player
Doug is the author of Sound Marketing: Helping Music Brands Be Heard, and has been involved in the musical instrument and pro audio business for nearly four decades. His expertise is in sales & marketing strategy, key account management, product roll-outs and overall channel management.

Comments

  1. Gordy Wilcher says

    August 24, 2021 at 5:34 pm

    Great take on this Doug. I agree that caution to avoid excess inventory once the containers arrive. As always thanks for sharing.

    Reply
  2. Leslie Butts says

    August 25, 2021 at 12:32 pm

    Well put as always Sir.
    Hope youre healing quickly!
    Les
    PS Congrats on the n
    ew arrivals?

    Reply
  3. Leslie Butts says

    August 25, 2021 at 12:32 pm

    Well put as always Sir.
    Hope youre healing quickly!
    Les
    PS Congrats on the
    new arrivals?

    Reply
  4. John Anning says

    September 10, 2021 at 2:36 am

    An apt warning, thanks Doug

    Reply

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Welcome to the show.

Sound Marketing sits at the intersection of music, sales & marketing. We explore how insightful strategy, focused tactics, and organizational change will help manufacturers be heard over all the noise in the musical instrument marketplace.

My name is Doug Nestler, and I’ve spent 40 years—still going strong—in sales & marketing. My resume includes roles in all areas of channel management and distribution, and Sound Marketing is a way to share my expertise with you.

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