Fair enough. Let's say +/-10%.

But the difference between pianos and most items, including cars (re invoice), is the lack of transparent pricing for pianos. Otherwise, a consistent +/- range wouldn't matter much: consumers could simply compare prices, take service and convenience into personal account, and make their decisions accordingly.

As others have suggested, cost-conscious consumers have no direct reason to be especially concerned about any particular dealer's pricing factors. Nor is it clear how these numerous factors are so different for pianos in a way that rationalizes non-transparent piano pricing as an exception.

I understand why the pricing status quo for pianos is supposed to benefit dealers/manufacturers. I don't understand why ordinary consumers are supposed to feel at ease with this status quo.

I think a pretty high percentage of dealers fall within a 20% range of eachother. It would be interesting to know exatly what % that is, but I doubt anyone will be interested enough to find out. A 20% range also relates to the 10-30% off SMP Fine suggests.


I'm sure they're not concerned and most are completely unaware, but I don't think that's the same as denying that the factors exist and expecting consistency.


But, at least according to one poster on this thread, bargaining is still the norm for cars. I've never bought a big ticket item other than a piano, but I suspect bargaining is not so unusual for other big ticket items. I've read articles about bargaining for furniture even before the economic crisis.

Perhaps I can shed light on the problem. There are so many variables in piano retailing that a narrow price range simply does't work. Here are some of the factors that vary from dealership to dealership:

Rent (varies considerably - from high-end mall operations to bare-bones warehouse dealerships)
Interest expense (flooring (adds 4%-6% to average sale or owned)
Payroll (varies widely)
Return on owners investment (we could bank the monay and have no risk)
Prep (or lack thereof)

Add to that the fact that some dealerships are able to buy in quantity and get a substantial discount on their purchase. Also, manufacturers often discount overstocked models, so one dealer may pay 5%-20% more than another if they buy at different times and in different quantities.

The current system, with all is downside, has evolved over the years out of necessity. I have been a very active poster here for 8 years and have over 7000 posts. This topic has been debated literally dozens of times. Always to no avail.

You are right that shoppers are often ill at ease with the status quo, but there is no better alternative.

If I remember correctly there are two regular members on this Forum who have taken the plunge in the past 18 months or so and opened new B&M store fronts. I cannot remember their names or business names. Maybe others can help. I would be great to hear from them on their outlook on this bold move in this climate.

The cost of inventory and attendant flooring closts is one of the biggest controllable expenses a piano retailer faces. The cost of traditional flooring is tyically a point or three higher than the cost of money. That is what the retailer might earn on medium risk investments instead of paying cash for his merchandise, assuming he has the cash. It is a material consideration.

Several of the stores I have been associated with carried in the neighborhood of $350-$450k worth of inventory at wholesale cost, not including any tier 1 instruments. Now picture a multi-store chain and a warehouse. Many will argue this is outragiously excessive. Why not just stock the models and colors that realy realy sell? Not as easy as it appears with demand shifts, seasonal sales, manufacturer/distributor demands to "represent the line", digitals comming into and out of currency etc. A constant chess game shooting for just in time inventory. Some large chains employ a full time salaried specialist to perform only this function. I know. I was one.

Its a wierd little spread sheet, the projection analysis is. Monkey with sales, margins, and expenses, they are magically interrelated. We know demand is at best static, probably shrinking. We know that margins are shrinking from the reported selling prices we read and see on our own sales logs. Perhaps private label stencils? Used Piano World? Ah ha, well then get to those expenses. Hence my original post. How much can you throw out without the baby?

All good retailers are contantly analysing (rethinking) their business model. Outside sales events were a bonanza in the 1980s and 90s now show marked diminishing returns. Warehouse roadshow events are in their nadir, IMO. At one time the parking lot sale was king. Regional shopping mall satellite locations rocked in the 70s and early 80s. Bare bones warehouse style stores were thought to be the answer. Roll player pianos: 1930s, 1980s. Digital keyboards (yes, gag, yes)! At one time, life-time free lessons was though to be the answer. Lifetime warranties anyone? Ebay sales? These ideas go though life cycles somewhat independant of current economics. Of course in these current economics even great ideas that might ordinarily win, might fail. Piano retailers haven't stopped thinking, analysing, and trying new ideas. The notion they they are mostly dullards is naive.

Most of the complaints I read on the Forum relate to bad service, rudeness, deception, and misrepresentation. These are not as a result of the "model" but as a result of bad people and ultimately bad store/company leadership. No excuses for this. Angst about not being able to get prices over the phone or over the internet are "model" driven, but beyond the scope of the retailer. They are proscribed by most dealer agreements. Please don't blaim the retailer for this. When are retailer baits shoppers into the store with vague committments on pricing, that is not good business, and IMO, a violation of ethical retailing not matter what the product.

Getting manufacturers/distributors and retailers together to agree on consistent and transparent uniform pricing is a violation of antitrust (federal). It is a scary thing, lately, for distributors to hold dealer meetings to discuss anything.

Welcome to our world!


If selling pianos was so easy, Sears,Roebuck and Co. would still be selling pianos without sales people.
Mcdonalds..... would be taking your order, One piano please... and a side order of Fries.

Kurtman,
You seem to be sincere and speaking from the heart. Clearly I have not communicated with you in my posts. I am not looking for sympathy. I have presented a perspect about dealerships in general.

You represent ten lines of product. "One or two models of a given product are enought to sell it." The Kawai line has dozens of skus in it acoustic line alone. Are you telling me you only stock two Kawai pianos? And, Kawai lets you get away with that? Have you never had a customer who wants to buy a new Kawai RX-3 complain to you that he would like to have another or three to play to make a selection from?

Are you saying that you spend little or no money/time preparing your RX grands, Bluthner grands, Steinberg grands, Shigerus. You just show them right out of the box with just a tuning? Boy, your high end buyers much have a lot lower expectations than ours do.

"We don't sell pianos for retail prices". You mean MSRP list? Who does? Nobody does.

I don't believe there are any pianos that require lying to sell.

I am glad your company's policies and procedures seem to be working for you. You missed my original point entirely. We don't let the industry set up anything for us. My point was that the need for these things come from consumer demand. What happens in our neck of the woods is clearly not the same as yours. This does illuminate regional differences in demands on piano retailers.

The company I work for has five locations and has been doing this for 27 years or so. We are the largest Yamaha dealer in the U.S. We are doing ok.

Please excuse my confusing post. While I was responding to a rather lengthy post by Kurtman he edited his down to five line completely irrelevant to his original. Sorry.

That's why you quote the people you reply to . .



Turandot:

My perspective on floor financing is irrelevant because I don't supply $$ to finance pianos, nor am I a banker with any working knowledge of what the correct interest rates and risk assessments would be for such a venture.

That being said, maybe you should direct this question at Ori, or Kieran Wells, both of whom just opened up new locations and may have an interesting take on this.

Perhaps the disappearance of flooring and financing in the piano industry was a small indicator of the larger economic problem; Over extending individual credit and lenders not being able to reap any further benefits from the over tilled soil. Is it gone for good? Not yet, I don't think. It will be some time before any real meaty financial companies get in this game again.

If the buying power of retail stores continues to be as dismal as it has been, manufacturers are going to have no choice but to get creative with the ways they sell their inventory.

Seems to me what many customers and others fail to take into consideration is this. While it may seem daunting to pay $15,000 as an example for a piano, that same instrument if well taken care of will be around for 30-50 years or more in some cases. Basically a life time for many. Divide the amount paid for the piano up in the years that you'll have it and the price is not really all that bad with that taken into consideration.

Paying $15,000 for a car, or, $450 a month to lease it for some reason, is not as daunting but seems to be more expected in many ways yet, 3-5 years later, you will pay another $15,000 or will lease yet another car for maybe more. Plus, you still have the routine maintenance that cars require. Buy a computer or any other electronic gadget and within a few years that also needs replacement and/or repairs and/or both.

Yet, people do not want to pay the price for a good quality instrument, something that will almost last them a lifetime let alone pay for the routine maintenance that goes along with owning a piano. The logic here seems somewhat skewed.

Hi Jerry,

Long time no see (which is not a bad thing in terms of your avatar )

One problem is that car prices begin at around 15k. If you need wheels, that's the starting point for new ones. A new piano can be had for $2.5k. It takes a lot of time and self-education to get to the point where you are self-assured that sufficient value is present in a piano of 15k.

I know unemployment is severe in Michigan. We just nudged over 12% in California. Purchasing power is way down. The immediate outlook is not reassuring. It takes guts to lay out 15 - 30k, especially if you're betting on a child's progress and dedication over several years to justify the payments over several years.

For most people, at least in the US, a car is a necessity. Yes, they are expensive, but we need them to get to work, get to the store, etc. There's no real way around that, unless you're fortunate to live in one of the few places with good public transportation or where everything is walkable. Most people in the US have to rely on a car.

A piano is not a necessity unless someone is making a career out of it. That is a lot of money for pure enjoyment. In addition, for many people buying a first piano, they aren't even certain yet if it's something they want.

Yeah, he's a cute lil guy isn't he? (avatar)

My point wasn't that either were required. It was the comparison of longevity between the two along with maintenance requirements and expenses.

Well, 'cute' wasn't exactly the word I was thinking, but no matter.

Yes, Jerry. If you can see your way past a 15 to 30k outlay in this economy and be relatively sure that the piano will be in regular use, I won't argue with you at all. Pianos in that price range still offer good value for money spent IMO, especially if one shops carefully.

I'm laughing here because I still remember Mike (Durango) writing that if your avatar came to the door to tune his piano, he would pay it (you) to leave! I don't know if you remember that exchange, but it still cracks me up.

Have a great holiday season Jerry!

Yeah, I do remember that one! It was funny. I chose that avatar just to make people smile when they looked it and and hopefully, enjoy a sense of humor or three! It doesn't appear to be showing up now for some reason is it?

I gotta run to work, see you in the funny papers. OH, that's right, I live there!

Jer

Jeff,

I wasn't assuming that you personally bankrolled the financing of floor inventory, and I'm not sure I want to ask Ori and Kieran where they get their money.

I was just curious if the withdrawal of financing from the big providers who traditionally served piano retail adds a fatal flaw to the existing model. As I posted before, the way the traditional model has been explained to me on many occasions is that the piano biz is sustained by smaller fish getting into the swim with a chance to grow and prosper without becoming a meal for the larger fish. The territorial restrictions of price disclosure and advertising are defended as a way of protecting these smaller (and often younger) fish.

Withdrawal of financing seems to put a significant barrier to entry on the existing model. I know there are a few members here like Furt and Kieran who have gotten into the swim recently, but in each case they have been congratulated for their courage more than their business acumen. I believe that Kieran was asked if he was crazy by the traditional model's most steadfast defender here.

Maybe I should just throw open the question to the industry veterans who have posted on this thread: Marty, Steve C, and Craig Smith, or any other. It just seems to me that something has to give between the flooring requirements of manufacturers, high cost of inventory, slow turn on product due to low demand, and problems in obtaining credit. But I'm not in the biz, so I would be happy to be enlightened.

Turandot, I think the answer to this is pretty clear: if the money isn't available, either via bank loan, investor, or personal funds, the only option a store owner has is to limit floor stock & inventory to what is affordable.

I don't think this spells doom for the new smaller independent store - it just means that store can't open with the latest/greatest & most highly rated products available. This is nothing new, and in fact is how many piano stores start out: by carrying less popular lines where the floor terms are more generous to start, and finding a supply of inexpensive used pianos to fill in the spaces.

As the piano store grows roots, and a bank account, things can grow - lines can improve, space can get larger, etc. . .

Posted by Jeff Bauer:




Jeff,

It’s nice to see you posting again.
Unfortunately, I have little experience with floor planning companies, since I never used any of them for my business.
I started with a very modest inventory investment, and my piano inventory grew slowly over the years.

Usually, after selling an instrument, I replaced it with another and forwarded additional money from the gross profit to increase inventory.

Since our new showroom is not a ‘new store’, but rather a new location and an expansion, located only a few miles down the road from our other showroom, new inventory did not represent an issue.

We were bursting at the seams prior to the new location, and although the new one is considerably larger, I was preparing to stock it for a couple of years prior in various ways, including by setting aside the necessary funds for inventory.

I do believe that floor planning is expansive, and will leave those who are heavily relying on it at a disadvantage, so I never went this route.

However, for less established dealerships, or when dealerships aim to substantially grow in a short period of time, it may be an option worth considering, within reason.

I guess the problems with floor planning start when dealers take on more inventory than they can handle, and at a certain point must ‘dump’ the piano in order to pay for it…sometime at little or no profit, only to replace it with another which the can floor again for awhile.

Perhaps an angle that wasn’t explored before regarding the affect that the disappearing financing have on the piano market.

Hopefully, it may contribute to pricing stability, and lessen the erratic price differences/changes that seem to confuse and frustrate many consumers.

William,

This thread has certainly taken some interesting turns. Perhaps you have heard the old cliche "Do you know how to make a million dollars in the piano business? Start with four (million)!" At no time in my forty years' in this industry has that been such an accurate statement. You have identified a key factor in the serious challenge facing nearly every piano dealer in the country right now- the lack of any reasonable inventory financing. Last year at this time, Textron bailed out of the market of providing floor planning to piano dealers (along with RV's, spas and other big-ticket discretionary products). Now GE is the last remaining provider of inventory financing and there has been rumors of them also exiting the music industry. Local banks have seriously cutback available credit for floor planning and even consumer financing, which is another serious issue that piano dealers face. Allegro Acceptance (the consumer financing arm of Sherman Clay) is the last remaining source of consumer credit for the piano industry, but with so fewer pianos being sold during the last couple years, they have also become more selective on who they approve and many of the dealer incentives (six month's same-as-cash, zero down payment or zero percent interest for the first year, etc.) have disappeared. The reality is that many would-be piano buyers are sitting on the sidelines, due to the economy and putting their purchase on hold for better times down the road. The few pianos that are being sold are often high-end grands that are not financed; in other words, to wealthy clients that are able to pay cash.

We have seen a few large piano dealers close this year, as well as some smaller independent dealers in markets across the country. I personally know of three good-size cities in the midwest, where the local Yamaha piano dealersip has closed or is going out of business at the present time. Time will tell, but there doesn't seem to be any new dealers coming out of the woodwork to buy those dealerships or open their own new venture. Kieran Wells and Ric Overton are to be commended for their courage (or hopefully financed by a wealthy relative), in order to survive in this climate.

I have worked in the piano business since my college days (back in the late 60's) and for the past twenty-three years as a wholesale district/regional sales manager for major manufacturers. Several times over the years I have considered opening my own retail business, as I believe I have the sales ability and experience not to repeat the mistakes that I have seen others make. However, in the current economy and state of the piano industry (for the other reasons mentioned in this thread), it would be financial suicide to open a piano store (even with the best lines), unless I had the three or four million in working capital available to lose, before possibly turning a profit. Even now, that I am currently unemployed and have few prospects of finding another job as a wholesale rep (along with several friends and colleagues in this industry, that have been laid off due to cutbacks and not their ability or track record), we need to seek employment outside the music industry. In my case, since I have maintained my status as a professional musician over the years, I can go out and play piano gigs in restaurants or as a church organist; maybe I will even try working as a musician on cruise ships.

Borrow against the equity in my house to open a piano store in 2010? I don't think so!