From bluesnote@msn.com Wed Dec 07 14:38:18 2005
Subject:Re: fair CX-3 price

Just wanted to chime in here. Each transaction (CX-3 owner sells to
retailer and retailer sells used CX-3) is a separate deal. The
person who sold the CX-3 to the retailer had several choices; ebay,
local classifieds, keep the organ or sell it to the local retailer.
Each of these has its merits and downfalls. In his case the merits
of selling it outweighed the obvious downfalls. Maybe he needed the
dough fast or had a gig that night and needed a new peice of gear
right away. Either way he felt that the $550 was appropriate for
the transaction. End of story.

Next chapter - retailer sells organ for the price that the market is
willing to bear. Can't blame the retailer. Can't blame the
buyer. It's a mutually beneficial transaction where each party
wins. Can't really say that one party benefited more than the
other. If we want to restrain the price a dealer can sell a peice
of gear for, then we would probably create a shortage of gear. Not
good for the musician who can't get the gear. Not good for the
retailer who can't extract the full value of the gear in the market
he serves. The end result? With restricted margins and restricted
availability of gear. No gear and no retialers. I for one don't
want a gear world like that. I prefer to let the market dictate
what it will pay and sell gear for.

That being said, what Guitar Center is really good at is managing
costs inventory turns and enjoying great margins. The average MI
retailer turns (sells through and replaces) their entire inventory
3.2 times a year. GC is trending up from 4.3 in '03 to 4.8 in '04.
In terms of margin they are making way above the industry average.
After ALL expenses (advertising, rent, payroll, etc.) are deducted
the MI retail industry average NET margins are ONLY 0.8%. GC gets
4.1%. Doesn't seem like much, but that's the reality of MI retail.

Hopefully this gives some perspective.

Thanks for letting me rant!

Albert