XCHANGE president Ray Williams recently got an opportunity to talk with Richard Ash, former CEO of Sam Ash regarding his take on the state and the direction of the MI Industry as he sees it after the recent sale of Sam Ash after 100 years of business. The company, founded in 1924, weathered nearly a century of economic fluctuations, technological changes, and shifts in consumer behavior. However, the convergence of the COVID-19 pandemic and challenges in the financial sector ultimately led to its downfall. In a candid conversation, Richard Ash offers insights into the factors that influenced the closure and provides a sobering analysis of the current state of the music retail industry.

 

Richard’s reflections are not just a recounting of personal experiences but a testament to the dynamic changes that have shaped the music retail landscape. Richard recalls the early '90s as a particularly vibrant period when Sam Ash's flagship store on 48th Street was a bustling hub for musicians. This era, devoid of the internet, saw customers lining up around the block, eager to get their hands on cutting-edge gear. It was a time when the physical presence and customer service of a music store held unparalleled importance.

Our conversation dives deep into the challenges faced by the music retail industry in 2024, especially with the rise of e-commerce and the increasing dominance of platforms like Amazon, Temu, and large players like Guitar Center and Sweetwater. Richard discusses the history of Sam Ash, the evolution of the industry, and how the market landscape has dramatically changed from the heyday of brick-and-mortar stores to the current era where online sales dominate.

 

Key Takeaways:

• - The shift from physical stores to e-commerce, where 65% of the industry operates.

• - The significant market share of companies like Sweetwater, Guitar Center, and Amazon.

• - The challenges posed by low-cost products from China, often sold directly through platforms like Amazon and Temu, which undercut traditional retailers.

• - The financial pressures faced by large retail stores, particularly in high-rent areas like Manhattan, and how this has led to closures and financial strain.

• - The difficulty of maintaining a comprehensive product selection in physical stores competing with the vast inventory available online.

• - The tension between traditional retail operations and the e-commerce landscape, emphasizes the tough decisions businesses like Sam Ash must make to adapt or face decline.

Sam Ash Music Stores, a name synonymous with musical instruments and gear, began its journey in 1924. Initially focused on band and orchestra instruments, the company transitioned in the 1960s to cater to the growing demand for electric guitars and combo instruments. By the 1990s, Sam Ash expanded its reach across America, embracing the digital age with SamAsh.com and the establishment of megastores.

 

Richard Ash reflects on the early 1990s, a time when 48th Street in New York City was the epicentre of the music retail industry. "Those were good times," he recalls, reminiscing about the bustling atmosphere and the excitement surrounding new gear. Sam Ash and Manny’s Music were the two dominant stores in the area, with customers lining up around the block for the latest instruments.

 

At that time, the industry was vastly different. There was no internet, and the competition was limited to a handful of stores on the East Coast, with Guitar Center having just a few locations on the West Coast. The introduction of groundbreaking products like the Emulator sampler, the LinnDrum, and the Prophet-5 synthesizer revolutionized the industry, with customers eagerly awaiting the arrival of these new technologies.

Richard also highlights the contributions of industry pioneers like Roger Linn, Tom Oberheim, and Keith Barr. These innovators brought to market products that not only changed the way music was made but also influenced the sound of records. From the first affordable digital reverb units to groundbreaking synthesizers, these products were made in the United States and set the standard for the industry.

COVID-19 was an unprecedented event that reshaped the retail landscape across various industries, and the music retail sector was no exception. Initially, the pandemic spurred an unexpected surge in demand for musical instruments and equipment. As people stayed home, many turned to music as a creative outlet, leading to a run on studio monitors, keyboards, and other gear. Richard Ash recalls, "You couldn't keep a keyboard in the store, and you couldn't keep anything. We were sold out of everything." However, this boom was short-lived.

The pandemic's initial surge in demand quickly led to supply chain issues, as vendors were caught off guard. "The vendors were completely caught by surprise," Ash notes, highlighting how many manufacturers struggled to keep up with orders due to production delays, especially since much of the manufacturing was based in China. The supply chain disruptions were exacerbated by the closure of Sam Ash's 44 stores for nearly two months during the height of the pandemic, leading to a significant drop in sales.

One of the most significant and lasting impacts of the pandemic on the music retail industry was the accelerated shift towards online shopping. "COVID taught the customer that buying online is the way to go," Ash observes. This shift was a critical blow to Sam Ash, which, like many traditional retailers, was heavily invested in its physical stores.

 

As the years progressed, the music retail industry underwent significant changes. By March 2024, the landscape had shifted dramatically, with 65% of the industry’s sales occurring through e-commerce channels. Richard notes that major players like Sweetwater, Guitar Center, and Amazon now dominate the market, each holding about 25% of the industry’s share.

Amazon’s impact is particularly noteworthy. With its vast selection of products, often sold directly from Chinese manufacturers at a fraction of the cost, Amazon has made a significant dent in the traditional music retail market. This shift has forced retailers like Sam Ash to adapt to a new reality where online sales are the primary driver of revenue.

Despite efforts to adapt, including investing millions into an online platform, Sam Ash struggled to compete with e-commerce giants like Sweetwater, which had either anticipated the shift or were better equipped to handle it. The post-pandemic reality was stark: "Our stores started sinking, and we were seeing precipitous drops in sales in many of our stores," Ash recalls. Customers who once valued the in-store experience became disillusioned by the lack of inventory and the convenience of online shopping, leading to a decline that proved difficult to reverse.

 

For smaller, independent music stores, the rise of e-commerce presents both challenges and opportunities. Richard believes that while large retailers with expensive real estate are struggling, smaller mom-and-pop stores may have a better chance of surviving by keeping their costs down. He explains how the high cost of labor, rising interest rates, and the burden of expensive leases have made it difficult for larger stores to remain profitable.

 

Sam Ash, once a dominant force with 44 retail locations, faced the harsh reality of needing to close stores that were no longer viable. The company’s flagship store in Manhattan, which once thrived on tourist traffic, became a financial burden due to its $1.4 million annual rent. The inability to compete with the vast selection and convenience of online shopping led to declining sales and the eventual closure of multiple locations.

Another challenge XCHANGE president Ray Williams identifies is the oversaturation of products in the market, driven by the investment-driven growth strategies of major manufacturers. "Do we need 700 different types of microphone brands?" Williams questions, criticizing the relentless push for new product introductions that often lack genuine market demand. This glut of products creates a burden for retailers, who are pressured to stock a wide variety of items, many of which fail to sell and ultimately become financial liabilities.

 

Williams argues that this model is unsustainable and detrimental to both retailers and consumers. He advocates for a more thoughtful approach to product development and inventory management, where manufacturers and retailers work together to ensure that new products meet actual consumer needs and do not simply add to the clutter.

While the pandemic dealt a significant blow to Sam Ash, Richard Ash points to financial challenges and predatory lending practices as the final nails in the coffin. Sam Ash had long relied on asset-based loans from Wells Fargo, which provided funding based on the company's inventory. However, after two difficult years in 2022 and 2023, Wells Fargo grew uncomfortable with the arrangement and encouraged Sam Ash to find another lender.

The new lender, according to Ash, was less interested in supporting the business and more focused on liquidating it. "They found some loophole in the language of the 80-page document... and decided they had the right to liquidate your company," Ash explains. The lender's decision to stop funding vendors and push for liquidation left Sam Ash in a precarious position, ultimately leading to the company's insolvency. "The bankruptcy was a scam," Ash asserts, lamenting that the process primarily benefited lawyers and bankers at the expense of vendors and the company itself.

Reflecting on the broader implications for the music retail industry, Richard Ash sees a need for a new model. The traditional brick-and-mortar store, once the cornerstone of the music retail experience, is increasingly challenged by the dominance of e-commerce. However, Ash believes there is still value in physical stores, particularly as experience centers where customers can interact with products before making a purchase.

 

"Stores could be the last mile for vendors," Ash suggests, envisioning a future where stores serve as local experience centers and pickup locations rather than mere inventory warehouses. This model could relieve some of the financial pressures on retailers by shifting inventory management to centralized logistics centers while allowing customers to touch and feel the products in-store.

Despite the challenges, Richard remains optimistic about the future of the industry. He believes that innovation, both in terms of products and business models, will continue to drive the industry forward. The demand for high-quality musical instruments remains strong, and those who can adapt to the changing landscape will find new growth opportunities. While the convenience and pricing offered by online giants like Amazon and Temu are hard to beat, there remains a place for smaller, specialized stores that can offer personalized service and expertise.

Richard Ash’s insights provide a sobering look at the current state of the music retail industry. The rise of e-commerce has fundamentally changed the way consumers shop for musical instruments, and traditional physical retailers must adapt to survive. The pandemic accelerated trends that were already in motion, including the shift to online shopping and the oversaturation of the market. While the closure of Sam Ash is a significant loss for the industry, Ash's reflections provide valuable lessons for other retailers and manufacturers navigating this rapidly changing landscape.

Nowadays, customers anticipate being able to browse products, buy, and interact with companies from the comfort of their homes, and XCHANGE Marketplace provides an unmatched opportunity to connect with a worldwide audience. Businesses that avoid the online market run the danger of losing out on enormous consumer bases, insightful data, and the possibility of large growth. Adopting e-commerce and digital marketing techniques is not an option—rather, it is a must for being competitive and relevant. By joining XCHANGE and embracing this sustainable source of revenue, businesses can continue to see profits while the landscape of the physical music store changes. XCHANGE understands the challenges of running a successful music store and offers solutions for a more streamlined way of fulfilling your customers’ purchases. Join XCHANGE today.

You can visit the video link below for our full conversation with Richard Ash (with some minor edits).