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Guitar Center Was Once on a Precipice. Now It’s Growing Faster Than Ever

Instruments retailer Guitar Center just spent $5 million renovating its flagship store and vows things will be different going forward

A section of Guitar Center's remodeled Hollywood flagship store.

Guitar Center/Ryan Hunter

Over the weekend, rapper Anderson .Paak gave a surprise performance at perhaps an even more surprising choice of venue: a Guitar Center store in southern California.

Anderson, joined by radio host Zane Lowe, DJ A-Trak and a number of other performers and personalities, was there to help publicize the renovation of the store on Sunset Boulevard in Hollywood — a flagship space that Guitar Center has just spent $5 million renovating, more than three decades after it first opened. At 30,000 square feet, the upgraded store houses a 15-feet-long interactive pedal display, a room of rare and vintage instruments and memorabilia including Eric Clapton’s “Blackie” Fender Stratocaster, alongside DJ equipment, pro audio tools and consumer electronics. But the day of flashy celebrity cameos wasn’t a promotion of the refreshed store alone — it’s meant to signal Guitar Center’s aggressive plan to retake its place in the music world at large, after being rumored to be on death’s doorstep.

Anderson .Paak performs outside Guitar Center’s flagship Hollywood store. (Hadas)

As recently as April of this year, reports indicated that Guitar Center was on the verge of bankruptcy, having amassed more than $1 billion in outstanding loans and seen its sales tumble from consumers’ apparent lack of interest in buying musical instruments in the digital age.

Ron Japinga, who took over Guitar Center in 2016 as its sixth CEO in roughly as many years, tells Rolling Stone that the company’s impending doom was exaggerated because of general public skepticism about the future of physical retail. (It didn’t help that Toys R Us, one of the most visible big-box companies in the U.S., closed up shop around the same time.) But Japinga admits that the company failed to innovate as much as it should have.

“I think that Guitar Center had quite a few years where it was just kind of going sideways,” Japinga says. “It didn’t have a vision in what it — we — wanted to do.” In the last year, the executive team has rallied around one main idea, so simple that it should’ve been obvious: helping people make music, in any way, shape or form. “We’ve renovated our stores around that mission. We got a clearer vision of what we’re here for and just completed our fourth positive comp [sales] quarter as a result,” Japinga says, adding that the company has “really started to turn the corner” after refinancing and managing to restore a positive cash flow a few months ago, even in a tough time for the broader retail market.

The Hollywood store refurbishment — complete with a massive Jimi Hendrix outdoor mural designed by several street artists and visible from afar — is only one project. Guitar Center plans to renovate other locations and open seven more new stores by the end of 2018, bringing its total number of stores in the U.S. to around 290. At a time when many retailers are shying away from brick-and-mortar stores because of high overhead costs and the relative cheapness of selling things over the Internet, Guitar Center is adamant on swelling its physical footprint.

That’s partly because it must. While other products like clothes and toys can be sold online with ease, musical instruments are trickier. Many people looking to buy a new keyboard will want to see it in person, especially if they’re a professional musician — to touch their hands to the keys, feel the weight of it and talk through maintenance and repair requests with an actual human. Guitar Center is now betting on what it calls an “omnichannel” approach: hooking customers both online and in person, including from experiential channels such as on-site music lessons, which the company started adding to its stores a few years ago.

The be-everywhere-at-once strategy “Amazon-proofs us,” Japinga says. By competing in multiple spaces, Guitar Center runs a lesser risk of being beat out by a giant single-space player like Amazon. Japinga adds: “It’s so important to understand that you can walk into one of our stores and somebody will start playing a song on a guitar, and a drummer might add to it, and a keyboard adds to it, and somebody starts singing — and all of a sudden you have a flash mob in a store. That’s a powerful experience. People want to be able to experience that when they shop. We recognize that and we really are the local community music store.”

Carlos Delgado/Invision for Guitar Center, Inc./AP Images

A major criticism of the company in the past, though, has been its unfriendliness to people who don’t fit the bill of the stereotypical rocker. Many Guitar Center stores have been laid out in tight, clustered spaces, and its sales associates have something of a reputation amongst mall-goers of being rude to certain kinds of customers — such as women, who, it turns out, are now making up half the market of novice guitar players. Guitar Center is making aggressive efforts to step up its customer service, which means boosting the staff in its phone support center, opening up floor plans as it has done in the Hollywood store and training employees to be more hospitable. “I wouldn’t say we’re all the way there, but it’s a dramatic change from where we were before,” Japinga says. “It used to be that you’d only go into a guitar store if you were a pro. We’re trying to help people wherever they are in their journey.”

According to research firm IBISWorld, which tracks manufacturing and retail industries across the U.S., Guitar Center currently has a 34.8 percent share of the musical instruments market — but the industry at large has been “out of tune” over the last five years, with revenue falling 3.7 percent a year. “Decreasing time spent on leisure and sports, as well as increased digitization, has led consumers to shift away from industry products and services,” IBISWorld researchers wrote in their last update to the market earlier in 2018. “Aside from its largest player, Guitar Center, this industry is highly fragmented due to the large number of independent operators running traditional family-owned retail outlets in local or regional areas.”

That fragmentation could be an opportunity, though only if the cards are played right. Guitar Center CMO Jeannine D’Addario says company is open to any possible ways to entice people into the music ecosystem — such as offering classes for seniors (a “second-life opportunity” demographic) as well as all-women lessons or classes on professional entertainment marketing if demand exists. “We’re in a big push to expand interactive opportunities, and to make sure people know we’re there to service and support,” D’Addario says.

But another, much thornier, problem plaguing the company has been its namesake attachment to an instrument that’s seen no small amount of skepticism in the news. As the old-school genre of rock and roll retires from the charts, so does the era of Hendrix-esque guitar gods — which has brought about speculation that the popularity of the electric guitar might fizzle out entirely. That’s not happened yet, and guitar manufacturers have actually been seeing growth in the last five years. The negative perception still clouds Guitar Center, however, forcing it to make a marketing push highlighting other instruments and catering to those whose interests lie beyond rock. (It also explains Paak’s appearance at its store.)

“We’ve innovated in a lot of different ways and are at the beginning of our journey moving the company forward,” Japinga says. The keyword is still “beginning.” IBISWorld analyst Daniel Cook tells Rolling Stone that “Guitar Center remains heavily leveraged with debt, which is due over the next five years or so, which makes the expansion plans dangerous,” though its recent refinancing has given it “more leeway for the new stores to be built” and its strategy of physical retail combined with hands-on services and online marketing seem to be paying off. In the streaming-driven age of rapidly shifting consumer trends and ever-updating technology in music, Guitar Center’s next challenge is making sure it stays ahead of the industry — rather than being in a state of constant refurbishment.

 

In This Article: Guitar, music industry

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