The Economics of Music Retail Today

I have been selling musical instruments since 1980, from my first retail store position at Medley Music to owning and operating businesses today including a manufacturer’s rep firm, distribution company, import venture and unique “arts experience” storefront. All told, that’s 44 years of ups and downs, good markets and bad, recessions and wars, and several boom and bust cycles. I thought I had seen it all until the early 2020 arrival of COVID-19 upended our collective world. Unlike any event we have seen before, the aftermath of the pandemic has outlasted most expectations, with wild swings in supply and demand dynamics, consumer behavior and overall upheaval economically, exacerbated by inflation and a level of overall uncertainty I have not experienced prior.

Post Covid Third Wave Imbalances

The repercussions of “COVID-omics” continue to ripple through the musical instrument and pro audio business, long after industry observers thought things would go back to normal. We may have even hoped for a return to the mean, where 2024 would be comping favorably with 2019, thus throwing out the in-between years distorted by the pandemic, along with the inflation-stoking stimulus meant to keep the economy afloat during this period. We are in a third wave of imbalance, whereby our core base of aspirational customers has limited disposable income, and overall demand has waned. Typically, our rep firm has experienced decoupling between various product categories and market verticals, whereby one sector could be down, but offset by another being up. Going into this sweltering summer, I have noticed an across-the-board slowdown, one that belies the fact that most everyone is working, but consumers are now spending more on vacations and within the service sector than on discretionary purchases of musical instruments.

Cash Flow Woes for Retailers

I regularly speak with retailers, and reports of a used gear glut and high number of trade-ins have had a negative effect on cash flow. People who purchased instruments during the pandemic are selling or using instruments as currency towards a new purchase. This combined with slack demand has left stores in disarray, unable to pay invoices promptly, closing their doors permanently or cutting back on new inventory purchases. In years past these “summer doldrums” would come and go, and in a way the peak years of COVID-19 were a major head fake in this regard and have propelled further the secular migration towards online consumer purchasing.

The Wild West of the Web

Suppliers are pursuing Direct-to-Consumer solutions, monetizing their corporate websites, managing Amazon stores, or working through proxy distributors. DTC has not been a panacea, and certain companies have made questionable decisions that alienate their longtime retail partners. We see ample evidence of non-authorized resellers active on third-party marketplaces, and goods shipped in from overseas. Manufacturers are struggling to deal with this phenomenon, and buyers continue to increase their e-commerce purchasing based on convenience, unlimited selection, and expectation of best pricing. Today’s bricks & mortar retailers must reinvent themselves, not just adding value and being service oriented, but by creating an experience worth visiting. I have been a believer that “all things must pass,” but the recent economic environment has even the most optimistic among us questioning that premise. Let’s work together to get to the other side of this current mess and remember the importance of partnership and kindness, which appears to be under assault recently.