MI Pro

Of the three stories that dominated the MI trade in 2008, one of them – Fender’s takeover of the multitude of Kaman brands – has arguably had the greatest impact on the greatest number of retailers.

While the dust has (largely) settled following the collapse of Sound Control and the takeover of Harman Pro UK by Sound Technology has gone pretty seamlessly, the ramifications of the Fender acquisition are still being felt. And then, to top it all, came the news that Taylor Guitars had appointed Fender its European distributor – sticking a prize cherry on top of a mix that already included an embarrassment of riches: Fender, Guild, Takamine, Ovation, Gretsch and Tacoma.

The man charged with working out how to handle this profusion of brands is former Arbiter veteran Graeme Mathieson, Fender GBI’s general manager, an affable Geordie with a rapid wit and, as soon becomes apparent, an encyclopaedic knowledge of the UK trade. MI Pro met up with Mathieson and the Fender Europe team at the company’s European HQ in East Grinstead.

Mathieson recognises the size of the task he is up against and understands the initial caution expressed by some retailers. To them it looked like a takeover too far, resulting in too many of the world’s top guitar, amp, drum and, particularly, acoustic guitar brands concentrated in the hands of one distributor. So how is Fender handling so many of the industry’s blue chip brands? And have the worried dealers been satisfied?

We begin with the sheer number of brands currently under the Fender umbrella. Critics say no one owner can possibly give equal attention to them all. How does Mathieson feel about that claim? “If you look at Gretsch now, it’s stronger than it has been for a long, long while. That’s an example of what Fender is very good at: it keeps the lines separate and distinct and not just in terms of marketing, because it applies to production, too. If that’s how a Gretsch is made or that’s how a Jackson is made, then Fender doesn’t change it to Fender’s way of doing things.”

In the five years since Fender GBI was established, growth has been on the extraordinary side of rapid and for all Mathieson can point to successes like Gretsch, surely some brands must get, if not trampled, then surely a little bruised in the rush? For example, what about Charvel and Jackson, once the kings of the pointy headstock market? “Jackson’s actually one of our biggest success stories and until the Kaman acquisition it was the brand that we all thought was going to be our second biggest.

Most of the problems that we’ve had with Jackson have been supply problems, as opposed to a lack of demand. Charvel is different, but we’re just about to re-launch Charvel and I think it’s going to become a fantastic line for us.”

Mathieson opts to play his Charvel cards close to his chest but does say: “There’s going to be a limited number of Charvels built, but they are going to be very special with no more than forty or fifty dealers in the whole of Europe. There are nine in the UK so far – and they will get a limited number of US handbuilt guitars, selling for around about the same money as an American Standard Strat, so what will happen is that we will get a good demand from a handful of dealers – and sometimes that’s the best way to be.”

So how is Fender GBI’s organisation managing to cope with taking on so many brands at once? Was there no danger of indigestion? “We bought Kaman for a number of reasons but you have to realise we didn’t take it on to do less business. So if you have a dealer who was buying from one of the previous incumbents, the fact is that he was buying and the only difference now is that all that money is going into one pot.”

But isn’t that the very essence of the problem – that, rightly or wrongly, dealers have traditionally robbed Peter to pay Paul and if they owed money to, say, Korg, for Takamines, they could previously have bought some Ovations or Guilds, while they juggled their credit? Now, with a huge chunk of acoustic sales with one distributor, that makes the retailer far more dependent on Fender, with less room for fancy footwork.

“We had a thorough credit review of all our accounts and the approach we took was to say: ‘Okay, this person has a good record. He’s paying his bills and he’s got a £10,000 credit limit, so he’s got to be good for £15,000 or £20,000,’ and that’s the view that we’ve taken. I think we have a very straightforward way of dealing with people and we’re always happy to look at putting credit limits up. We’ve increased the cash discount for dealers who pay early, but if a dealer doesn’t want that and would rather have terms, we’re happy to look at that. I think we’ve been pretty fair.

“Having said that, I can understand where all the concerns were coming from. It’s just that we’ve gone from being a big player to being a very big player.”

There is no getting away from the fact that the Kaman takeover put a few industry noses out of joint. Several distributors felt they had been badly treated (only ever off the record, of course) and it left Fender with some odd overlaps and awkward corners.

For example, Genz-Benz amplification, which Sutherland had been quietly establishing as a useful niche brand in the UK, or Hamer, which Go To Guitars had begun to do good business with as a plug to fill the ‘Gibson Gap’. How has Fender GBI found these two brands sitting with all their others? “There’s no doubt that some of the distributors we took those lines off were doing a pretty good job and I can understand why they might have been upset, but I can put my hand on my heart and say that we haven’t had any issues with previous distributors – it’s all been very amicable.

As for dealers, it’s been a mixed bag. Some dealers thought it was a good thing as we already had a good relationship and they just saw it as a way to buy more from us, which makes things a bit simpler for them, but other dealers have concerns about spending that much money with one distributor, as we’ve just said. But once you’ve got the first couple of months out of the way, it really doesn’t make that much difference.”

With the two brands in question, Mathieson says both Genz-Benz and Hamer have been going from strength to strength.

Logistically, Mathieson and his team had to think fast to make sure Fender’s reps weren’t competing with themselves, or trying to cover too many brands in any one call. The answer was to stratify (sorry!) the sales team.

“For the first quarter this year, it was all about taking on staff. We just had to go out there and recruit as many people as necessary. As a result, we now have one sales force that does Fender, Squier and Guild, another that does Taylor, Gretsch and SWR and then a Kaman sales force that does the remainder of the Fender lines, like Jackson and the other brands like Takamine, Ovation and so on.

“But that’s just guitars – we have a separate drum and percussion sales force now and then there’s Simon Jacob who does Custom Shop products for us – so some dealers could actually see five people and we think we need to do that, to achieve separation.”

It must be an expensive operation as it means Fender has 15 people on the road in the UK and the Republic of Ireland alone.

“Yes, but we feel it’s necessary. I’ve done it when I was a rep – you go in with a huge catalogue, but a dealer only has a limited amount of time to see you and after the first 15 minutes he’s starting to feel he’s spent too much money with you, or his attention is starting to wander.”

If Fender’s Kaman takeover had been a surprise, gaining Taylor was a complete shock. No one could have criticised Sound Technology’s sterling work taking the brand from relatively humble beginnings to the point where it was doing exceptional levels of business and this was, let it not be forgotten, not a consequence of Taylor having sold-out to Fender – it hadn’t – it was simply a switch of distribution. What had precipitated it? “The thing you have to remember was that this wasn’t just a UK decision – it was Europe-wide and that’s something we can offer.

It’s not 20 different sales forces, it’s not however many marketing departments, it’s one company. We can offer a dedicated sales force in every
area, a marketing department that puts out one concise message and one warehouse, so that they can see exactly what’s happening.”

And yet, some rumours in the trade suggest that Taylor supplies have not been all that they might have been in recent months. What has been happening there? “I wouldn’t say that’s a problem at all. We do have problems from time to time, everyone does, but we haven’t really had an issue with Taylor – in fact we’re very pleased with the way it’s gone and the back orders with Taylor are minimal.

“Gretsch has been a problem, I would have said, because we’ve been making bigger orders than the factory has been able to cope with, but not Taylor. And of course part of that reflects the fact that we’ve got Gretsch quality to a far higher level than it’s been for a long while and there has been such a huge Gretsch community growing out there.”

For all Fender GBI’s impressively calm absorption of perhaps the biggest meal in MI history, the signs are that things are shifting around within Fender globally, as it tries to come to terms with what it is becoming. For example, Guild, which word on the street suggested had languished after its move from Rhode Island, but which was brought back to life following the purchase of Tacoma, is now being moved to the Ovation plant in Connecticut, while Tacoma production in the USA is being discontinued and the brand moved to Far East manufacture.

Clearly, there is much going on with Fender globally and MI Pro is looking to talk to Fender USA about its global strategy and what this could mean for some of our industry’s most iconic brands.

Meanwhile, in the UK, the Fender GBI operation is getting into its stride with its five-fold sales team, Mathieson says. But if Fender is changing, how about retail? “The big change that we’re seeing is that the end user now wants every aspect of the sale to be thorough and professional. He’s so much better informed for a start, thanks to the web, but it’s a very cold and impersonal way of buying things.

“It’s a valid route to market but it’s only one way and by our figures only one in five guitars gets sold that way. That means four out of five people still want to go into a shop to buy a guitar.”

Mathieson believes this is particularly important for the future of MI retail and cites Hamer and SWR as examples where potential buyers are likely to be extremely clued-up before they walk into a store and will expect a retailer to be as passionate and enthusiastic as they are, if they are to make a purchase.

This is a point of view, which, increasingly, we are hearing from distributors and manufacturers. While Gibson has chosen to plough its own distinctive furrow, others are rumoured to be considering similar approaches and even those that, like Fender, are out there in the market offering their products to anyone who is willing to do a professional job selling them, are starting to suggest that specialisation is the key to future success. Which is all well and good, but teetering on the brink of recession, how does Mathieson feel that translates to reality for hard-pressed retailers? To be blunt, does he feel there is the business to be had, whatever they do? “Without being unduly optimistic, we are in a very good business. Music is popular and uplifting. But yes, it’s a very odd time and it’s hard to know what is happening. Just last week, for example, I visited two dealers – one a web business who told me his sales are well up, the other a bricks and mortar retailer who has been in business for over 100 years and he says he is up, too. There is a feeling of uncertainty out there, I know. But people will still buy musical instruments.

“At the end of the day, if you’re a chap who wants to buy a Gretsch White Falcon, you’re going to want to buy it from somebody who has it in stock and really knows what they are talking about and who will empathise with you and enthuse with you about it. That’s the dealer who will do well. For us, it’s all about finding our who your customer is, who is buying into that lifestyle, getting the message out to him and driving him into the dealer who can give the customer the experience he wants.  

“Fender – all manufacturers – need retail stores. If we thought the internet was the be-all and end-all, we could do that ourselves, but it isn’t. What is crucial for us is the ability to compare and contrast – that’s why we offer so many models. And in my experience if somebody’s got £500, they’ve got £600 and if they have £100 for a pedal, they can just as easily spend £130 and getting him to spend that extra is the retailer’s job. I think the end-user, looking at how he buys into brands, is looking for a specialist – a higher level of service.

“What we can do is provide a level playing field, with uniform pricing across Europe. We don’t do deals – it’s very transparent, so if you’re a dealer you buy with confidence from us, knowing you are getting the correct price. It’s up to you then to get as much margin as you can and you do that best by providing service and experience.”

Like other suppliers, Fender sees the best future for retailers coming from increased specialisation. With Best Buy on the horizon (Mathieson was unwilling to speculate about its arrival here) it’s hard not to conclude that it is the way for individual shops to thrive. And with Fender GBI’s basket of icons, where
better from which to pick and choose the rock n roll legends on which that future will be based?
FENDER GBI: 01342 331700