Fender has great potential in emerging markets where some billions of people are just learning to play western style guitar music.
Fender gutted it's domestic market by systematically extorting the smaller dealers with threats of yanking dealerships to favor the relationship it had with Guitar Center.
I don't know how it is today, but a few years back Fender required that dealers join the network by paying a large "fee" up front as the cost of entry to any particular segment of their product line. You could buy into the privilege to sell particular subsets of what Fender made. After they extorted that money from the smaller dealers then they would then offer the product at the highest whole sale price while reserving whole sale discounts and floor plan financing for quantity vendors. The quantity discounting and financing seems to make perfect sense until you learn what a system like that evolves in to. Fender has ended up with a legacy of bitter and angry small shop dealers that resent the fact that Fender strong armed them into or out of the Fender business. Instead of a network of happy profitable dealers it is left with a mega chain holding a bloat of floor planned inventory that it doesn't know how to sell.
To be sure there are many independent Fender dealers making great business. But these are remarkable businessmen who enjoy special circumstances such as easy access to capital or great access to a thriving market.
Here's one of my favorites:
http://www.wildwoodguitars.com/ These guys sell boat loads of hi priced Fender gear... some how they have convinced Fender that they will not be burdened with all the extra low end junk that Fender seems to think it can force on most dealers. I think it is because they are so good at what they do that Fender lets them buy what they want without aggravation.
The small shops that get hurt worst by Fender are the ones that pay the sign up fee, buy the Fender product at level 1 pricing so that they can't price it competitively at retail without a blood letting discount, and accept the fate of buying all the other low end junk as conditional to getting the guitars. They usually get burned and what we have seen so often in the past decade is that they end up loosing the dealership and hating Fender (and all the other Fender family brands). That's a lose-lose. Fender makes real good stuff and the dealers miss a great opportunity to represent good product once this cycle is started. Fender loses as well.
The very best dealers, the ones that give such great service that even the Manufacturers envy their operations, are the ones that have some chance to make the best of it. Many dealers don't know it but they can negotiate a fortuitous deal with companies like Fender.
So, it is a two way relationship but Fender is making it a high stakes game. Only the best and most aggressive small shop dealers are finding balance. The smartest ones are demonstrating that their partnership with Fender is good for Fender and they are negotiating to endure less and less of the strong arming.
If Fender wants to move forward it will open up more opportunity for small shops to select or cherry pick from the Fender line with pricing that allows them to be competitive with less discounting pressure from the mega chains. Fender can do that by simply minimizing the quantity discounts to mega chains so as to level the playing field and re build a solid network of dealers.
It's a great irony in retail that Musicians Friend etc. can sell a Fender Product for so much less than a small music instrument shop while actually making more profit off the sale. That may be good for the customer hunting a particular SKU at a price point but it's bad for the overall business and the easiest way to minimize the damage is too simply stop selling the stuff so cheaply to the big quantity discounters.
In this case Fender gave great discounts to Guitar Center. Fender floor planned them out the yin tang with financing. It's hard to see how that was a good idea.
Music stores can thrive but they need to able to match what they can buy to the interests of their market. They can not suffer extortion by way of being forced to stock a bunch of junk just for the privilege of having access to the good stuff at premium pricing. The stores need access to what's good for them and their customers. All the crazy schemes dreamed up by suppliers just stifle the market where the market actually happens. Unfortunately, it seems as if it is up to the dealers to grasp this and push back and make requests and demands on suppliers like Fender. Too often I see the dealers surrender and begin stocking B or C grade lines as an alternative. When this happens the shops become stigmatized as second tier outlets which further encourages a price point discounting mentality with both customers and staff. This trend runs counter to an interest in excellence of both service and quality of product and it leaves communities without good connections to good manufacturers.
It seems complicated. As a consumer the best we can do is try to identify, appreciate, and do business with the few small shops that have figured out how to make the best of circumstances such as these. Personally, I hope that the shops will thrive and provide the community with full service for generations to come.
best regards,
mike