Music Wholesale-Distribution

Why is inventory management important?  Like all other business owners, executives and managers, music retailers have the inherent responsibility of carefully managing operating revenues, expenses and cash expenditures in an effort to preserve and maintain cash flow. But music retailers have the additional responsibility of managing inventory levels—the largest ongoing cash expenditure of any typical retailing business.

How much inventory should I be buying for a store the size of mine?  Buying inventory is easy—buying the right amount of inventory at the right time is a bigger challenge. It’s no secret that retailers in the music products industry often suffer from having too much inventory on hand. There a variety of reasons for this situation, ranging from the vast number of stock keeping units (SKUs), to vendor purchase requirements for coveted product lines. But most high inventory levels result from both a retailer’s love of product and a lack of understanding of the key tools and measurements used in effective inventory management.

What is Gross Profit and how much should I be earning?  Gross profit is a financial term referring to the direct result of sales performance and impacted by a few different variables.  While the sales price you earn and related cost you pay for a particular product chiefly determine the gross profit you achieve, there are other related variables that determine the gross profit you are earning.

The Variables

In simple terms, "inventory turns" refers to the number of times you sell your entire inventory, in dollars, over a 12-month period. Your inventory turnover is calculated by dividing your cost of goods sold by the amount of average dollars invested in inventory over the same 12-month period. This inventory management indicator is becoming an even bigger issue in music retailing because of the immediacy of product offered to online shoppers. Trying to stock all things for everyone is not only nearly impossible, it causes inventory turns to decrease which, in turn, hinders the vital cash flow needed to run the business.

The Value of Understanding Inventory Turns

Tim Angell grew up interested in the craft of woodworking. As a teenager he became interested in stringed instruments. With little woodworking opportunities in New Jersey, Tom and his wife moved to Connecticut where Tim found a job at Ovations Guitar. He worked his way through many departments learning all of the stages of guitar building and participating in design and general modifications. Fascinated with computers and databases he kept track of serial numbers and statistics of the assembly and output of the shop. The parent company, Kaman, was impressed with his research and offered him a job at the headquarters up the road in Bloomfield.

Charlotte Atkinson is an organist extraordinaire! Showing an aptitude for music early on, Charlotte continued with formal education earning Bachelor and Masters degrees in music. At San Diego State University she first met her husband, William, in Howard Brubeck's theory class. In her junior year at SDSU she and William (Bill) were married and spent the next several decades touring as the Atkinson Duo with Charlotte on piano, organ and harpsichord and Bill on flute and choir directing. They were organist and music directors of several churches and were actively involved in many service and musical organizations. They were mostly involved locally with the Army and Navy Academy in Carlsbad and the First Presbyterian Church in Oceanside.

Leonardo Balducci is the President of EMD Music, Inc., a European music wholesaler and distributor that specialize in guitars, drums and percussion instruments, wind instruments, cymbals and accessories. EMD is located in Brussels and sells products to more than 2500 music retailers via two subsidiaries, two branches and 27 exclusive sales representatives. This client base covers the majority of European territory in the sector, namely the UK, France, Germany, the Netherlands, Belgium, Luxembourg and Austria.
 

Bruce Bannister is the current president of Samuel Music in Effingham, Illinois. The store was formed in the 1940s by Lowell Samuel, the band director turned music industry pioneer. Bruce was interviewed in the store and recalled working closely with Lowell as well as Dean Samuel, Lowell’s son and the company’s CEO. Bruce began working with the store in the early 1970s at the height of the home organ boom and provided his thoughts as to the great growth of the product as well as its steep and sudden decline a decade later. Bruce attributes the success of Samuel Music to their dedicated staff and strong focus on customer service.

Emile Baran began a music retail business that led to the opportunity for expanding into the music wholesale business. Emile formed DeKalb Music Supply, a music retail store in Decatur, Georgia in 1958. Several years later he expanded into the wholesale business, thanks in large part to his understanding of the school music market. Upon the milestone of his 50th year in business, Emile was presented with an award from NAMM and exclaimed, “That was easy. Let’s go for another 50 years!” 

Tom Beckman opened a music store with his band director while still in college in 1958. The relationships he created in the store lead to a road salesman job with C. Bruno. He traveled the country for nearly a decade before establishing his own distribution company, Beckman Musical. He later began a long association with Roland Corporation. Tom’s interview included a review of the changes he has witnessed in the industry over the past 50 years, including the growth of the NAMM show.