FINDING BUOYANCY IN A SEA OF INVENTORY
It wasn’t long ago that the supply of musical instruments, especially acoustic and electric guitars, was seemingly non-existent. COVID had driven everyone indoors and many turned to music, making the best use of the time spent quarantined. This extended to home recording equipment, and anything to do with setting up a live streaming event on Facebook. Meanwhile, the factories in Asia were either locked down themselves, or hard pressed to keep up with the burgeoning demand. Container prices skyrocketed, as did the delays trying to get product through the port of Los Angeles & Long Beach. Backorders for guitars ballooned, and suppliers were quoting months and, in some cases, more than a year lead time for new orders. The reaction for many dealers was to put more on order, creating what would eventually become today’s inventory glut.
I’ve Seen this Movie Before
Some months ago this blog post about supply and demand imbalances warned of the possibility of a “hard landing”. What was unknown at that time was the magnification effect that rising inflation would have on the switch from famine to feast in the guitar trade. Nor did anyone foresee that the nation’s largest retailers would be canceling orders previously committed to, and certain suppliers would be dumping mass amounts of guitars into the market. This all happened during what was the first somewhat normal summer since the beginning of the pandemic, with a typical slowdown in retail activity. The combination of aspirational musicians on stretched budgets with retailers suddenly squeezed for open-to-buy dollars has created a “perfect storm” of discontent. Those of us in the industry for decades have seen this scenario play out before, but perhaps not to this extreme.
The Bullwhip Effect
Overestimation of the product pipeline, rationing of product and “gaming” the system all contributed to the current situation as we head into the fourth quarter of 2022. And yet there are some sectors of the Musical Instrument and Pro Audio business where shortages still exist, further frustrating manufacturers, retailers, rep firms and end users. In the Contracting & Installed Sound arena, jobs cannot be completed due to lack of critical components, so by no means is every sector of our industry in the same battered boat. We see the cost of shipping goods into the United States via container almost back to previous levels, and it’s as if we forgot that having some reasonable supply on the shelf at a distributor is a good thing on balance. The gut-wrenching swings of supply / demand imbalances will gradually calm, and like the “before times” become more like the gentle waves of a bay versus a raging sea. At least that’s the hope, but the consumer still needs to show up to make this happen.
Get Creative and Differentiate
If you are a supplier, retailer or sales representative, some things should never change, regardless of the storms that occasionally surround us. Remain vigilant for opportunities, and differentiate yourself especially during these times as capable, friendly, and ready to assist. If needed, get creative and be proactive with special offers that will entice end users to purchase, which in turn will pull product out of the channel. It is incumbent upon brands to not just create awareness, but to clearly present offerings based on quality of outcome, feature set and post-purchase customer support. Don’t sit still and worry that you’ll be washed away by a tidal wave when you can get on your retail surfboard and ride it out. Be efficient, effective, empathetic, and most of all show kindness to your fellow industry cohorts. We are all in this together, and with some luck will achieve buoyancy by early next year.