Guitar Center Going Under????

Manjha · **Posted:** Tue Aug 18, 2009 10:25 am

and still people wonder how so many '54 fakes could be sold....*looks at some of the post above*...i think i know how.

WoodyTone · **Joined:** Mon Jul 06, 2009 11:15 am **Posts:** 22

I think BigJay has this topic nailed. The same rumor could be spread about pretty much every retailer right now.

Fenderseeker09 · **Posted:** Tue Aug 18, 2009 2:34 pm

WoodyTone wrote:

I think BigJay has this topic nailed. The same rumor could be spread about pretty much every retailer right now.

+1

Martian · **Posted:** Tue Aug 18, 2009 5:54 pm

I surely bow to BigJay's learned analysis and readily admit, my head just isn't wired for 'big time' economics.

All I know is that if there's a local shop which you have a good rapport with and said shop does the right thing by you, this is where the great deals were, are and will still be had; life will continue to go on.

cvilleira · **Posted:** Tue Aug 18, 2009 7:53 pm

I was there tonight picking up some recording equipment that My Son was getting and the place showed no evidence of closing. Checked on some business stuff from them and that was nil they been quite slow that way. Did get a little from one of my regulars though.

Martian · **Posted:** Wed Aug 19, 2009 5:52 am

BigJay wrote:

...GC...their business has been slow, yes? If that's correct...What type of luthier work does GC normally perform? Mostly setting up new guitars they sell? How much of their shop business is related to repairs on gear they didn't sell?

Did the inventory appear different? Lots of really low priced stuff? Or no really low priced stuff? Inventory maybe Too full? Or too thin?

Jay,

FYI: The one by me (in Central NJ) seems to be choking on high end PRSs, Fenders, Gibsons and Gretschs but is blowing out all the lower end stuff like it's going out of style.

Nothing is setup when sold unless the customer requires it. They won't even throw in a new set of strings with the purchase of a guitar. And, they will only cut 'deals' on SOME of the used pieces.

Anything beyond basic setups and pickup changes are farmed out via bids. From what I gather, there are 5 guys who are regularly in the running for this stuff. However, I've often heard it said while there, "Oh, THIS will have to go back to the factory but you'll have to pay for the shipping". So apparently, these jobbers by me aren't much better than the sales staff who ALL claim to be techs.

SlapChop · **Joined:** Tue Jan 27, 2009 3:41 pm **Posts:** 1257

WHat Martian describes is "bidness as usual" at GC.

They always have high-end guitars that sit for months, and run low-buck guitars out the door like crazy (a quick perusal of "NGD" posts on this forum will show why).

They never set anything up unless you demand it, they always farm guitar work out to a group of local "luthiers" (and I use the term loosely), and they will not make a discounted-price deal on a vintage piece because those prices are set by Hollywood (but they WILL throw in store credit if they want to unload the piece).

There is no indication in the business press (which is currently watching all e-businesses like a hawk) that Guitar Center is in trouble. For example, everybody knew that Eddie Bauer was getting killed by their decision to go brick-and-mortar for a year and a half before they declared bankruptcy... don't you think there would be SOME indication outside the Misinformation MIll that is guitar forums?

I'll go out on a limb and say this is obviously baseless rumor, and that GC is not feeling any more pinch than any other retailer, and possibly less.

bruno690 · **Posted:** Wed Aug 19, 2009 6:16 am

alainlafrance wrote:

And increase prices...

Not necesarially. There are entire Business School Thesis written on this subject but It would make sense for them to actaully lower prices in order to: liquidate inventory, increase cash and make pricing another barrier to entry for their competition.

If they were to file Bakruptcy or even undergo a minimal restructuring, there cost should decrease. That is really the point of a restructuring, to get out of some debt and other obligations.

If their cost strucure is low, they have more profit built into the pricing and therefore can sell at a lower price and make the same gross profit.

bluesguitar65 · **Joined:** Tue Nov 27, 2007 8:56 am **Posts:** 1277

This is interesting:

Quote:

Who's at risk?: Credit rating agency Moody's Investors service said earlier this month that credit conditions will worsen for sellers in the coming months.

The agency said in a report that it currently rates about 20% of retailers at "Caa1" or lower, "indicating our view that the number of defaults in the retail industry will rise in the next 12 months as the recession deepens."

Barneys, Blockbuster (BBI, Fortune 500), Eddie Bauer (EBHI), Claire's Stores, Guitar Center, Michael's Stores and Rite Aid (RAD, Fortune 500) are among the retailers that Moody's has rated "Caa1" or lower.

Goel said this serious cash crunch will force more sellers into bankruptcy and subsequent liquidation.

Quote taken from CNN.

http://money.cnn.com/2009/05/22/news/economy/retail_creditrisk/index.htm?postversion=2009052211

Martian · **Posted:** Wed Aug 19, 2009 7:00 am

BigJay wrote:

Interesting, Martian. Choking on high price-point stuff isnt surprising. Suddenly everybody is very bugdet conscious, after all. All too often those $1500+ guitars and gear is sold on a financing package too. That credit is no longer available to most and those that can get it arent using it. So the big ticket items just sit there. The story gets worse as retailers are often required to take down minimal amounts of gear over some period of time. So, GC may be taking in more high end inventory with ability to sell it. Its not a straw breaking the camels back, its a brick or a lead weight.

Blowing out the low end stuff is easier, but the effect is not necessarily supportive. They might have a 40% gross profit margin on average across all guitars. Thats an $800 gross profit on a $2000 guitar, but only $120 on a $300 guitar. Obviously, they would need to sell 6 or 7 low end guitars to match the total gross profit from a single high end axe. Of course, they make A LOT of profit on the financing packages for those high end instruments, which is gone now. Importantly, the "gross profit" is what companies use to pay their employees, pay rent, utilities, taxes, etc. So its not hard to see how a company like GC could be in dire straights right now. Revenue is way down, profitability is down, costs remain constant. Again, if GC has debt with a balloon payment on the horizon, they might be in real trouble. Its all speculation, obviously.

Regarding the services, I wonder if that's a new policy or if they have always behaved that way. If it marks a change, I'd say its clear they are reacting to bad economics. They may have reduced their support staff in an effort to cut costs.

I'll tell you what....If youre in the market for a high end instrument....here is what you should do.....

Go to GC.....Ask to talk to manager....tell him/her you are ready to buy this or that guitar.....offer the manager 75% of the listed or sale price. You might just get it. Or, if your not too picky, tell the manager you want his "best price" on whatever highend guitar he needs to blow out now. See what price he comes back with.

Some serious info here!

I wish I could go to the manager for a, "best price". Unfortunately, I'm certainly not in a financial position to do so. Luckily though, I do have an independent dealer near me who would surely give me this, should I ever have the cash in hand.

SlapChop · **Joined:** Tue Jan 27, 2009 3:41 pm **Posts:** 1257

bluesguitar65 wrote:

Quote taken from CNN.

http://money.cnn.com/2009/05/22/news/economy/retail_creditrisk/index.htm?postversion=2009052211

Finally... actual information. Thanks, bluesguitar65.

Of course, this Moody's rating doesn't mean "out of business:" it will only spell disaster for retailers who can't figure out how to continue without additional credit, or can't demonstrate a workable plan to lenders. But that's the first time I've seen the Guitar Center name in doomsday print.

soothme · **Joined:** Sun Oct 28, 2007 2:54 am **Posts:** 38

If GC dropped out and it actually benefitted the local shops then all the better. every small shop i've been to i have been able to learn about the makers, details, and have more room for haggleing and dealing (like change the strings for me, i like hybrids, and you have an extra guitar stand in the back you'd like to throw in?) I'd rather deal with a professional adult who will respect my reasonabl haggling and will remmeber me if i come back in with compliments of the instrument or help me when i can't figure out something, or can't find an allen wrench in the right size ect. I like to build a buisness relationship, i can learn alot, and get alot of free advice. I bought a highway1 from a local shop in 03 (the owner died and it closed) my dad knew the owner and he was extra helpful. you don't get this from GC andyou definitly wont get a deal when you've been buying from them regularly. Also, do you want to suppot corporate or the locals?

I really hate guitar center for the following reasons

-loud music, flashinglights, head achey epilileptic shopping experience

-sales staff are mostly unknowledgeable young adults who seemed to qualify for job based on peircings and tatoos rather than knowledge of mechandise. I know alot of the the people who have worked at GC over the years and i dont know how they got the job.

-everytime i cross into another department (from guitars to digital recording, and back again) some pimple faced brat asks me if he can help me. I humored him one time and asked if purchase of guitar comes with free set up, to wich he replied "all of our guitars are allready set up"

-which brings me to my next point. I know it's difficult to keep all their insturments in perfect shape all the time, but for chrissake im not paying 1000+ for a guitar that comes with a 2 hour set up when i get it home. I go in there to try out the lates installment of american strats every year to tempt myself to buy one (every year it costs me and regret it the following year lol) and i can't remember picking one up that had the action,flex/intonation even close.

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