Guitar Center celebrates 40 years of rolling out rock
Four decades later, Guitar Center is the nation's biggest purveyor of music equipment in a $7 billion industry in which most of its rivals are still mom-and-pop stores or small regional chains.
The company has thrived with its big-box approach, using its size and buying power to offer more variety and lower prices than its rivals. Such a strategy has allowed other retailers, like Wal-Mart, to dominate their retail sectors.
The Westlake Village, Calif.-based company operates 124 Guitar Center stores including locations in Kirkland, Lynnwood, Seattle, Tacoma and Tukwila. Its customers range from professional musicians to baby-boomer hobbyists with plenty of disposable income and an urge to relive their rock 'n' roll days.
"It's like a shrine," said Steve Hammond, 49, a San Francisco guitar collector, as he surveyed a back room at the 30,000-square-foot store in Hollywood.
Designed like an Old West saloon, it contains scores of vintage guitars. A cream-colored, 1958 Fender Stratocaster was selling for $39,950. A Fender Squier was going for $99.
Elsewhere in the store, old and young patrons browsed rows of amplifiers, keyboards and drums. Guitars in myriad colors and shapes lined the walls. Among them were a pink bass shaped like a daisy and black guitars that seemed fit for death-metal music.
A muffled jumble of noise filled the store as customers in glassed-in chambers tried out instruments. Some spend hours in the rooms without buying anything, but that's not a problem.
Outside, Rian Barton of Pasadena, beamed after saving $200 on his new Gibson Les Paul electric guitar. "This is the best place for guitars I've ever seen," the 14-year-old said.
Since going public in 1997, Guitar Center has succeeded with investors; its stock is within 10 percent of its 52-week high of $37.10. Yesterday, it closed at $33.83.
Profit for the fourth quarter was $19.7 million, a 47.1 percent increase from a year earlier. Fed by five straight quarters of sales growth, profit for the year jumped 45.9 percent to $36.9 million on sales of $1.3 billion.
"They beat the competition on selection, they beat the competition on service, and they beat them on price, the three legs of the stool that really drive store choice," said Richard Nelson, an analyst with Stephens Inc. in Chicago.
Like other big-box retailers, Guitar Center has forced smaller competitors to quickly change how they do business.
Retailer Rob DeKarr has been battling Guitar Center since October 2002, when the chain opened a 22,000-square-foot store in Pasadena, down the block from DeKarr Music.
"It was hellacious," DeKarr said. "What your customer base does is go down there and check it out. Heck, I went down there and checked it out. They've got one of everything."
DeKarr has lured back some customers by nearly doubling the size of his store to 9,000 square feet.
And like other independent operators, he's stressing personalized service, repairs and classes.
"Their sales people don't have the same amount of training, they don't have the same amount of product knowledge," DeKarr said of his large rival.
At times, DeKarr and other small retailers have had no choice but to lower prices. Sometimes, however, Guitar Center's price on an instrument appears lower because it doesn't include a case.
"They take the case out of the mix, then they reduce the price," DeKarr said. "In order to survive, you have to be aware of those kinds of things."
Guitar Center is rapidly expanding, opening new stores in Manhattan and Nashville, Tenn., in late 2003. In all, the chain added 14 stores last year.
At least four more will open from Florida to Wisconsin in the first quarter of this year.
"Guys are walking into the stores in their 50s ... buying Martin guitars and wanting to get into garage bands," said Larry Thomas, chairman and co-chief executive of Guitar Center.