BurningSkies
CRAZY BALDHEAD
- Feb 20, 2005
- 27,956
- 20,348
- Disclosures
- Endorsing artist: Dingwall Guitars
Fender would be a better business if they'd just make the bass models and colors I like and forget the rest.
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Fender - a new company model that would work
- Thread starter buldog5151bass
- Start date
As long as they keep making 4 string, MIA Fender Jazzes, I don't give a rat's ass what else they make.
I don't think the variations and options are an issue at all. Precisely the opposite. Fender sees consumers moving to the big online web dealers in droves. Why are consumers buying there? Because those big online stores stock every one of those model variations, in every trim level and in every color combination. Ten years ago you had to buy whatever was in stock at you local dealers. Back then it was almost an advantage that there were fewer choices as the customer was less likely to be left pining for something they couldn't find in the store.
Why let MF, Sweetwater, GC.com, etc reap all the reward for this trend? Fender is perfectly capable of running a web store where all the models, all the options, and all the colors are available. Might as well cut out the middle man and pocket the full MSRP yourself.
Why let MF, Sweetwater, GC.com, etc reap all the reward for this trend? Fender is perfectly capable of running a web store where all the models, all the options, and all the colors are available. Might as well cut out the middle man and pocket the full MSRP yourself.
I think Fender should run on whatever business model they choose and prosper or perish accordingly.
I haven't bought a new Fender guitar or bass since...oh wait. NEVER. I can get a used MIA off CL or eBay for almost the same price as a new MIM or MIM roadworn or whatever other expensive-as-hell MIM they have. Mind you, I still get parts and stuff from Fender...you kinda can only get those new anyways. Like my new maple neck for my jazz bass was new; I was praying it would be crafted well and it was.
Drop the prices of their Geddy Lee bass and maybe I'll consider buying one.
I kinda like the idea of having a Squier, Standard, American Standard, and Custom Shop line only. The other deluxe or special models can branch under either of those "Big Four". I also would love the idea of having to choose to have block inlays and bindings installed with an upcharge (no problem with that). I'm tired of having to get special signature models just for the neck. Give me more choices, Fender.
Drop the prices of their Geddy Lee bass and maybe I'll consider buying one.
I kinda like the idea of having a Squier, Standard, American Standard, and Custom Shop line only. The other deluxe or special models can branch under either of those "Big Four". I also would love the idea of having to choose to have block inlays and bindings installed with an upcharge (no problem with that). I'm tired of having to get special signature models just for the neck. Give me more choices, Fender.
Sure seems to work for the Musicman diehards!
That Ps and Js are the best known and popular bass models? Your point about "boutique" companies making mostly P and J clones illustrates that the marketplace WANTS variety. Fender is simply providing what the market dictates at every price point, so every player can afford their product.
Yeah it seems like the Op doesn't realize that their scaling and overhead issues are due simply to overall volume of sales. If they sold 1 million basses total last year, they'll want to sell 1 or 1.1 this year.
To really improve quality the way he wants they'd need to downsize and let go of market share.
Honestly feels like the Op watched an episode of Restaurant Impossible while noodling on a Fender and had an epiphany he needed to share. Fender isn't cooking burgers though, so that philosophy isn't going to gain you much.
Did anyone else realize Fender got rid of the MSRP pricing on their website on all their models? (I think it's on all their models...not sure about CS or Squier).
BurningSkies
CRAZY BALDHEAD
- Feb 20, 2005
- 27,956
- 20,348
- Disclosures
- Endorsing artist: Dingwall Guitars
I would guess that at least some if not much of their 'business precariousness' may come from places like GC/MF who demand huge discount rates then also demand a company like Fender float much of the product without payment, leaving Fender cash poor from having to advance so much to deadbeat companies.
Exactly. In the online sales paradigm, the instrument business has evolved into, all these companies really bring to the table is warehouse fulfillment and web development. Why put up with their crap and give up that margin?
You know what would be an awesome business model to follow as long as we're all speculating? I almost guarantee some facets of this have been mentioned already...
A-la-carte, and nothing else.
The market is flooded. Fender doesn't NEED to saturate it further for the sake of brand visibility, they're already well known.
The market to which they are central is in need of a reset. Fender has enough cachet that they could take a more bespoke approach even (potentially) on every price level...or even just start with the US models. True customs. The ONLY true factor then would be customer's patience levels.
Eventually everything they've put to market will be consumed and a roll-in, loosely based on the Carvin model would / could be a shoe-in.
Where they would be greater benefit from this in comparison to Carvin is their brand loyalty combined with their history.
They have decades upon decades of sales stats and trend watches that they could have pick bins and Kan-Ban tracking for every pick item, and the infrastructure to have quick turn around.
Premake neck with specs x,y,t,r,d x ____ min qty, and repeat for each variable.
Same with bodies / woods / colors.
Pickups and other things are non-issues as they are getting made or pickbin items anyway.
Keep your supply chain efficient, and you'd rarely if ever run out, even on optimized inventory levels.
I've assembled a full guitar, set it up and good to play in a few hours.
Scale that up against orders and build the workforce accordingly.
Now do it for MIM, maybe.
Now do it for Squier, maybe.
Promise a 2 week turnaround on a truly custom built Fender. 3 for a custom finish (heck, they use UV cured finish, it's ready to assemble from spray in 20 minutes.)
Rake in the cash while lowering idiotic amounts of overhead. You know the potential bonus? The quality can go up because they're not rushing and pissing out 3000 necks and bodies a day to fill Guitar Centers shelves.
A-la-carte, and nothing else.
The market is flooded. Fender doesn't NEED to saturate it further for the sake of brand visibility, they're already well known.
The market to which they are central is in need of a reset. Fender has enough cachet that they could take a more bespoke approach even (potentially) on every price level...or even just start with the US models. True customs. The ONLY true factor then would be customer's patience levels.
Eventually everything they've put to market will be consumed and a roll-in, loosely based on the Carvin model would / could be a shoe-in.
Where they would be greater benefit from this in comparison to Carvin is their brand loyalty combined with their history.
They have decades upon decades of sales stats and trend watches that they could have pick bins and Kan-Ban tracking for every pick item, and the infrastructure to have quick turn around.
Premake neck with specs x,y,t,r,d x ____ min qty, and repeat for each variable.
Same with bodies / woods / colors.
Pickups and other things are non-issues as they are getting made or pickbin items anyway.
Keep your supply chain efficient, and you'd rarely if ever run out, even on optimized inventory levels.
I've assembled a full guitar, set it up and good to play in a few hours.
Scale that up against orders and build the workforce accordingly.
Now do it for MIM, maybe.
Now do it for Squier, maybe.
Promise a 2 week turnaround on a truly custom built Fender. 3 for a custom finish (heck, they use UV cured finish, it's ready to assemble from spray in 20 minutes.)
Rake in the cash while lowering idiotic amounts of overhead. You know the potential bonus? The quality can go up because they're not rushing and pissing out 3000 necks and bodies a day to fill Guitar Centers shelves.
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BurningSkies
CRAZY BALDHEAD
- Feb 20, 2005
- 27,956
- 20,348
- Disclosures
- Endorsing artist: Dingwall Guitars
Well, it's stupid not to. Low overhead and direct to customer maximizes profits at retail level within the company.
Roland GR 88
Commercial User
Fender has been playing catch-up to smaller companies building better products for almost 50 years. The Paul Rivera era was the lone bright spot and he didn't build guitars. The P & J will always hold their place along with the Strat and Tele but with so many more choices in the market for great guitars & amps they've had to offer every color, wood, p/u & electronic option that everyone else does. Geez, you can even get a Minnesota Twins Strat these days. A $6k slab bass and $6k acoustics with Strat necks are signs of wobbly times ahead IMO.
Back in 2012 when Fender filed an S-1 for their IPO, they addressed a lot of these issues. Under Risk Factors they say:
If we do not develop new or innovative products that meet evolving market needs, or if our new products do not achieve market acceptance, our business and results of operations will suffer.
We believe our long-term success will depend in part on our ability to continue to introduce new products that appeal to consumers and on our ability to develop new and innovative products that employ developing technologies and address evolving market needs. A significant portion of our sales in any year is from new or modified products that we have introduced in that year. For example, in fiscal 2011, 10.8% of our gross sales before discounts and allowances were attributable to products introduced in that year. In addition, modern technologies, such as digital signal processing technologies, are offering opportunities to develop instruments and guitar amplifiers that can address the needs of musicians in a wide variety of musical styles, and developments in technology offer opportunities to develop instruments and guitar amplifiers that provide higher sound quality at a lower cost. We have devoted, and continue to devote, significant resources to research and development. Our research and development expenses totaled $10.2 million in fiscal 2011. Our business and results of operations will, however, suffer if we are unable to develop innovative new products that achieve market acceptance.
The artists who play our instruments are an important aspect of our brands’ images. The loss of the support of artists for our products or the inability to attract new artists may harm our business.
If our products are not used by current or future artists and famous musicians, our brands could lose value and our net sales could decline. Similarly, our Signature Artist program is a significant component of our marketing program. Through this program, famous musicians provide specifications for instruments bearing their signature, endorse their signature instrument and permit us to use their images in selected advertisements or on our websites, typically in exchange for royalties based on sales of their signature instruments. We do not have long-term contracts with any of these musicians, and these musicians are not restricted from endorsing our competitors’ products or required to use our products exclusively. If we are unable to maintain our current relationships with these artists, if these artists are no longer popular or if we are unable to continue to attract the endorsement of new artists in the future, the value of our brands and our net sales could decline.
We are subject to credit risk associated with our largest customer.
Historically, a significant portion of our domestic net sales has been generated by our largest customer. As a result, we experience some concentration of credit risk in our accounts receivable, with Guitar Center and its affiliates representing an aggregate of $8.7 million, or approximately 13.8%, of our accounts receivable as of January 1, 2012. In November 2010, Moody’s Investors Service downgraded Guitar Center’s corporate family rating and probability of default rating to Caa2 (which Moody’s defines as “poor standing and subject to very high credit risk”) from Caa1, citing Guitar Center’s highly leveraged capital structure and heavy interest burden. Moody’s
affirmed Guitar Center’s Caa2 rating on February 29, 2012. These factors make Guitar Center more vulnerable to any deterioration in its financial performance, whether as a result of adverse economic conditions or otherwise. A substantial majority of our accounts receivable, including all of our accounts receivable from Guitar Center and its subsidiaries, are not covered by collateral or credit insurance.
If one or more of our significant customers were to experience serious financial difficulty, as a result of weak economic conditions or otherwise, and were to reduce its inventory in one or more of our products or limit or cease operations, our business and results of operations would be significantly harmed. Consolidation of our customers in the future or additional concentration of market share among our customers may also increase the concentration of our credit risk.
We participate in floor plan financing arrangements for many of our independent dealers under which a third party finances, or “floors,” the purchase of products from us. Under these arrangements, we are subject to credit risk in the event that the independent dealers do not repay amounts owed under these arrangements. In particular, under those floor plan arrangements that are recourse, we would be obligated to reimburse the third party financing sources either in full or in part in the event the independent dealers default on their obligations. Any failure of these independent dealers to satisfy their obligations, either as a result of deterioration in their financial condition or otherwise, could cause our bad debt expense to increase. In addition, one of the primary third party financing sources that finances floor plan arrangements ceased providing these arrangements in the United Kingdom in 2009, and any further reduction in the availability of floor plan financing may prevent dealers from carrying an adequate inventory of our products, which could reduce demand and reduce our net sales.
If we do not develop new or innovative products that meet evolving market needs, or if our new products do not achieve market acceptance, our business and results of operations will suffer.
We believe our long-term success will depend in part on our ability to continue to introduce new products that appeal to consumers and on our ability to develop new and innovative products that employ developing technologies and address evolving market needs. A significant portion of our sales in any year is from new or modified products that we have introduced in that year. For example, in fiscal 2011, 10.8% of our gross sales before discounts and allowances were attributable to products introduced in that year. In addition, modern technologies, such as digital signal processing technologies, are offering opportunities to develop instruments and guitar amplifiers that can address the needs of musicians in a wide variety of musical styles, and developments in technology offer opportunities to develop instruments and guitar amplifiers that provide higher sound quality at a lower cost. We have devoted, and continue to devote, significant resources to research and development. Our research and development expenses totaled $10.2 million in fiscal 2011. Our business and results of operations will, however, suffer if we are unable to develop innovative new products that achieve market acceptance.
The artists who play our instruments are an important aspect of our brands’ images. The loss of the support of artists for our products or the inability to attract new artists may harm our business.
If our products are not used by current or future artists and famous musicians, our brands could lose value and our net sales could decline. Similarly, our Signature Artist program is a significant component of our marketing program. Through this program, famous musicians provide specifications for instruments bearing their signature, endorse their signature instrument and permit us to use their images in selected advertisements or on our websites, typically in exchange for royalties based on sales of their signature instruments. We do not have long-term contracts with any of these musicians, and these musicians are not restricted from endorsing our competitors’ products or required to use our products exclusively. If we are unable to maintain our current relationships with these artists, if these artists are no longer popular or if we are unable to continue to attract the endorsement of new artists in the future, the value of our brands and our net sales could decline.
We are subject to credit risk associated with our largest customer.
Historically, a significant portion of our domestic net sales has been generated by our largest customer. As a result, we experience some concentration of credit risk in our accounts receivable, with Guitar Center and its affiliates representing an aggregate of $8.7 million, or approximately 13.8%, of our accounts receivable as of January 1, 2012. In November 2010, Moody’s Investors Service downgraded Guitar Center’s corporate family rating and probability of default rating to Caa2 (which Moody’s defines as “poor standing and subject to very high credit risk”) from Caa1, citing Guitar Center’s highly leveraged capital structure and heavy interest burden. Moody’s
affirmed Guitar Center’s Caa2 rating on February 29, 2012. These factors make Guitar Center more vulnerable to any deterioration in its financial performance, whether as a result of adverse economic conditions or otherwise. A substantial majority of our accounts receivable, including all of our accounts receivable from Guitar Center and its subsidiaries, are not covered by collateral or credit insurance.
If one or more of our significant customers were to experience serious financial difficulty, as a result of weak economic conditions or otherwise, and were to reduce its inventory in one or more of our products or limit or cease operations, our business and results of operations would be significantly harmed. Consolidation of our customers in the future or additional concentration of market share among our customers may also increase the concentration of our credit risk.
We participate in floor plan financing arrangements for many of our independent dealers under which a third party finances, or “floors,” the purchase of products from us. Under these arrangements, we are subject to credit risk in the event that the independent dealers do not repay amounts owed under these arrangements. In particular, under those floor plan arrangements that are recourse, we would be obligated to reimburse the third party financing sources either in full or in part in the event the independent dealers default on their obligations. Any failure of these independent dealers to satisfy their obligations, either as a result of deterioration in their financial condition or otherwise, could cause our bad debt expense to increase. In addition, one of the primary third party financing sources that finances floor plan arrangements ceased providing these arrangements in the United Kingdom in 2009, and any further reduction in the availability of floor plan financing may prevent dealers from carrying an adequate inventory of our products, which could reduce demand and reduce our net sales.
I don't think that would work. Coke and McDonald's also have loads of brand visibility already. Yet they spend enormously on advertising and promotion. That kind of visibility has to be aggressively maintained or it fades fast into the "where are they now?" column. Anyone still drinking TAB?
Revenue figures are hard to find, since most of these companies are privately held and I'm no expert on digging up financials, but it looks like Gibson's revenues are ten times what Carvin's are and I'm sure Fender is at least in the same ballpark if not bigger. Organizing that quantity of product to custom-built would be next to impossible. Actually, making each instrument to order is already available - it's what the Custom Shop does, and we know what those cost. I don't think you're going to get $300 or $600 built-to-order instruments, even if you do it in China, and you're not going to get it in two weeks. It might take that long for the actual instrument to get built, but each order is going to have to wait its turn in line to get there. Unless they hire thousands and thousands of new staff to do all the assembling, which brings us back to the cost issue. Not to mention customer service staff to take all those orders (even it means vetting the output from an online options menu, like Carvin has), and inspect each one to make sure that it got all the right components.
Meanwhile it means the company ceases having a whole wall of every Guitar Center filled with their offerings. And remember, we're not just talking basses, we're talking strats and teles for the guitarists too.
Oh yeah, it's true, I was just thinking aloud alongside the talks to the eventual demise of big-box music retail is all.
And to the custom-built thing, I was talking have the parts made already. then you could pick-bin / kit the order and assemble. I was speaking to a way of eliminating the need to build up massive amounts of inventory just to fill shelves, and just keep the already-made parts in-house, at regulated quantities. The same price points could be met, potentially at every tier, because the only variable that truly changes is to as-ordered final assembly.
And to the custom-built thing, I was talking have the parts made already. then you could pick-bin / kit the order and assemble. I was speaking to a way of eliminating the need to build up massive amounts of inventory just to fill shelves, and just keep the already-made parts in-house, at regulated quantities. The same price points could be met, potentially at every tier, because the only variable that truly changes is to as-ordered final assembly.
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I think Fender's biggest competition problem is all the other Fenders that they've sold over the years and pop up on ebay, TGP, TB, craigslist.
Yep.
The consumers they are marketing to don't have enough money to buy all the stuff that Fender is putting out. This is due to lots of different factors, of which, the exit of manufacturing jobs is but one (for example, all the instruments Fender made used to be made in the USA, and also marketed mainly towards people in the USA, and other developed countries, while these days, Fenders are made all sorts of places, but still only really marketed to the developed world... this is rather typical of consumer products in general).
