More Harmony Restored The music products industry had been reduced to a mere whimper during 2009 when retail sales were only $5.8 billion; however, every year since has recorded an increase, with 2014 reaching $7.0 billion, or a 3.3% increase. Fretted instruments, portable keyboards and general accessories recorded the greatest gains in the largest categories (see Page 2). School music, pianos, general accessories, recording products, DJ-related products and karaoke all increased. Experiencing declines were printed music, percussion, electronic music and organs. The decline in electronic music has been attributed to the general trend of microprocessors doubly their capacity every two years and costing less to manufacture.

2015 Even More in Tune Following a retail sales increase of 3.5% for Q4 2014, which is when musical products retailers generate approximately 35% of an entire year’s revenue, Q1 2015 recorded a 3.0% increase, despite and maybe because of the severe winter. The industry maintained that pace with another 3.0% increase in retail sales for Q2 2015, or a total of $1.298 billion, compared to $1.260 billion for Q2 2014. The leading categories for Q1 2015 were accessories, 7.3%; fretted instruments, 5.2%; and digital pianos, 4.2%. For Q2 2015, they were accessories, 8.1%, and fretted instruments and sound reinforcement products, 5.9% each.

Profitable Products According to a June 2015 poll of music store retailers, general accessories (classified as all musical products that sell for less than $100) generated 22% of total revenue and 31% of gross profit dollars. The poll also revealed that stands, cables, straps, tuners and care kits contributed 50% or more of stores’ gross margins; strings, drumsticks, reeds, cases and capos, 40+%; and headphones, drumheads, harmonicas, picks and effects, 30+%. Fretted instruments is another category where music stores have been making money, with significant double-digit increases for acoustic guitars of $500 or more; acoustic electrics of $1,500 or more; and electrics, $601 to $2,000.

Sound Suppliers The top-100 music products suppliers generated $9.9 billion in total 2014 revenues, a 21.1% increase from 2013; however, much of this significant increase was attributed to major acquisitions by Gibson Brands and Harmon Professional. Of the top 100, 62 are products manufacturers and accounted for 73.3% of the $9.9 billion in 2014 revenues. Of the other 38, 21 were distribution subsidiaries, 17.1%; 14 were distributors, 6.9%; and 3 were print publishers, 2.6%. The top-five product categories of the top-100 music products suppliers were fretted instruments, 22 companies; audio, 21 companies; distributor, 11 companies; electronic music, 10 companies; and accessories, 8 companies.

Discordant Undertones Despite a 3.4% increase in 2014 total sales and a record-setting 74.4% market share, the top-200 music product retailers still suffer from a “recession hangover,” as they remain very cautious about the future health of the industry. Total 2014 sales for the group was $5.21 billion and storefront count increased from 976 during 2013 to 1,020 for 2014, which reduced sales-per-location by a miniscule 0.006%. With 282 fewer total employees, sales-per-employee increased 6.0%. Another metric revealed that Internet musical product stores had the largest average sales gain at 12.8%, compared to 8.9% for home keyboard, 4.0% for school music and 1.2% for brick-and-mortar musical instruments stores.

Advertising Strategies With better employment and disposal income than Q4 2014, music products retailers can continue to generate excellent to good revenues during Q4 2015 with the use of television to reach families with children and teens and younger adults who want to make music. Recommend that retailers create different discounted accessories bundles for designated October, November and December weekend promotions, and advertise with a combination of TV and social media. Suggest that music products retailers use TV during Q4 2015 to promote a monthly hands-on seminar for individuals and families totally new to music with special discounts on teaching aids and beginner instruments.

Social Media Strategies Music products retailers should use videos liberally on their social media sites: a clip of a lesson, employees providing overviews of instruments, current customers/students explaining their progress on their instrument, videos of local bands and performers, etc. With sales-per-employee such an important metric, stores should create blogs where employees upload posts on a rotating schedule to reveal their expertise on specific instruments, playing ability, recent concerts attended and other relevant, engaging content. Live streaming video via Periscope or Meerkat is a perfect venue for music products stores to attract young adults and promote the value and fun of becoming a musician. The live stream could include interviews with customers, product introductions and live music.