Is it time to start showing some of the big brands the door?
MIN’s editor wonders if the tide is turning
Amazon’s recent ‘Prime Day’ day wasn’t a very edifying spectacle. As far as I could see many of the products it and the daily newspapers had made such a fuss about were no-brand items pegged at high SSPs and ‘reduced’ for the occasion. Endless Bluetooth knick-knacks, countless other gimmicky electronic gadgets, cheap jewellery, legions of action camera clones – but it did, however, get me thinking. If it proved anything, Amazon was demonstrating that you don’t need to slap a big brand name on a product to sell it. Take the keyboards in the promotion (and there were several) – not a Korg, a Casio, a Roland or a Yamaha among them. Good, you might think as you eye your shop floor. Then again, you can bet they sold a few and did so because the customers believed they were getting a good deal and knew they could take advantage of Amazon’s generous returns policies if they didn’t like their purchases.
I’m not suggesting you should sell your Nike or Burberry shares just yet, but it seems to me that what Amazon has done (and they’re welcome to correct me if I am wrong) is go for margin over prestige. Yes, they had some Fender earbuds up for grabs and discounts on big brand cameras from Sony and Canon but page after page after page of their promotion was stuffed with unrecognisable Chinese brand names on which, you can be sure, the mark-up would have been finger licking good.
I was still musing about this when a music retailer mentioned the latest audacious move by one of his suppliers. A careful perusal of its price list revealed that the SSP of one product was actually lower than the trade price. Assuming he had been mistaken he pursued it with the company, No, it wasn’t a mistake. Apparently he had wandered into the land of ‘support’ where you don’t know what you’ve made till, it’s gone, as Joni Mitchell almost once put it. For the ‘privilege’ of selling this brand’s product, he was supposed to, as one of our MPs recently advised Parliament, ‘suck it up’. There may have been the possibility of some kind of margin support and extra discounts here or there in the future but it was all very complicated and the bottom line was… let’s just say somewhat intangible.
This state of affairs comes on the heels, of course, of the CMA’s investigations, so everyone is even more reluctant than usual to discuss the situation but it is real enough, I am assured, and not unprecedented.
It also follows the news that three of the UK’s largest retailers (Anderton’s, PMT and Guitar Guitar, have banded together to form a buying alliance which they are calling GAP. This is a story we had intended to bring you a couple of weeks ago, and would have done if the participants had been willing to talk about it. Whatever GAP could be about, one thing that it definitelyis about is margin – an attempt to push retail margins back to a level where a retailer can stay in business. If that means building ‘own brands’ in accessories, or taking on exclusive lines (GAP has taken on Alvarez and, if rumour is true, G&L guitars) who can blame them? Especially if the alternative is to sell ‘big brand’ products either a loss or, at best, with a promise that there may be a few points in it for you sometime later, if you’re good and eat up your spinach!
Which brings us back to the brands. If Brand X, Y or Z really does believe it is Coca Cola and that you have to sell it just to stay in business, is it correct? In the overwhelming majority of cases, I have my doubts. And as for the implicit threat of ‘going direct’ – really? That’s Kool Aid,. not Coca Cola territory.
Let’s look at some examples. Gibson set the ball rolling by cutting back the number of its dealers to those who willing to meet some fairly stringent conditions before allowing them to continue selling it and its sibling Epiphone’s products. The jury is still out about the long term effects of this policy. Some who signed-up have since left the scheme, others say it has worked well for them but whatever the case, Gibson is Gibson and Rock and Roll has the brand in its veins. Perhaps more to the point. the majority of music retailers who didn’t take Gibson’s offer stayed in business, selling other people’s guitars instead. So, no, Gibson is not indispensable.,
That other half of the guitar world’s Tweedle Dee and Tweedle Dum, Fender, is also an integral part of the cultural ocean in which we swim, though, like Gibson, while it can sell some of its famous models easily, it has ambitions in product areas where it, too, needs to slog it out – and that means it needs at least some dealer support.
Once you get beyond Gibson and Fender, however, who else can really stake a claim to being indispensable? I would argue that no drum brand qualifies and nor do those attached to any amplifiers or effects. Keyboards? Well, you have fewer makers to choose from but you do have a choice. In fact if you look around the industry, that seems to be the rule – there’s almost always a choice. Some brands appear not to realise this, perhaps having believed their own PR for rather too long but the reality is there are vanishingly few that you couldn’t do without.
It’s true that making this kind of choice means dealing with what you might call second division brands, but even that has its advantages. Smaller brands and smaller distributors often try harder, even if only because they have to to survive, and while customers do often show brand loyalty, a good salesman can often swing a sale in another direction and do both himself and the customer a favour by offering a better and/or cheaper product on which he makes a sensible margin.
There is also an argument (and I have a hunch that Amazon is counting on this) that many younger buyers may not be quite as hung-up on brands as marketing people like to believe. They know Apple products are made in Chinese factories and they know that a knock-off action camera is likely to be as at least almost good as GoPro at a fraction of the price.
There is also, the advantage to be gained from being known as the shop that sells out of the ordinary products. From a buyer’s point of view, it can be very frustrating to read a review of something and not be able to find anyone who stocks it.
To get back to Amazon, clearly it now feels able to sell a lot of products that don’t have big brand names on them because its customers trust the Amazon brand and the experience of buying from it. That enables it to make healthy margins without having to compete with, say, John Lewis or Curry’s on the latest Sony or Panasonic. Could the MI trade learn from this? Not wishing to minimise all the advantages Amazon has created for itself, I believe it could. After all, a good music shop is a brand, too, and a salesman face to face with a customer and able to demonstrate a product is at a very great advantage over a page on a mobile phone or a laptop.
Most retailers (most distributors too, of course) understand that if we are to keep anything like the already greatly reduced number of music shops in this country, then they need to be able to make a living. So is now the time to start saying ‘no’ if some of the big guys start getting a bit too big for their boots? I’d like to think so.
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