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Summer NAMM Regains Momentum

...a riveting performance on the veranda of the sparkling Music City Center; hourly educational sessions at the Idea Center drew rave reviews from all who attended; and an opening “Retail Summit” provided a detailed look at how online shopping is reshaping the distribution network. Based on the numbers, the efforts paid off. 14,055 industry professionals registered for the event, a 1% increase over 2015 and a 14% gain over 2014. International attendance also saw an upswing, advancing 12% over 2015, and 59% from 2014, making for the largest number of international participants at Summer NAMM in over a decade. In the decade since NAMM relocated the summer show to Indianapolis, a large and vocal industry contingent predicted its demise. This year, the show regained much of its former luster, putting much of the criticsm to rest.

This renewed momentum was also reflected in increased exhibitor participation. NAMM reported 517 exhibitors at the show, a gain of 5% over last year. More significant, though, was the number of prominent companies that returned after a lengthy absence, including Fender, Ernie Ball, Dunlop Manufacturing, Ovation, and Pearl Drums. Fender Senior Vice President Richard McDonald endorsed the show, stating, “We’re glad to be back. It’s been a valuable opportunity to meet with dealers and showcase products and programs.”

“We are proud of our NAMM members who came to Nashville eager to learn, to make new business connections, and to build deeper connections with their current partners, all in an effort to proactively plan for a strong fall and holiday season,” said Joe Lamond, NAMM president and CEO. “The industry continues to change rapidly, and in my opinion, the clues to success were available to forward-thinking members on the show floor this year in Nashville.”

A disparate group of exhibitors with different objectives makes generalizations about the Summer Show problematic. For Dave Chiappetta of accessory maker Tone Gear, the show was “fantastic,” providing an opportunity to showcase a new string cleaning device for violins. More mature companies with established distribution networks offered a positive, if somewhat less exuberant endorsement. Tim O’Neil, vice president of marketing at Taylor Guitars, said, “We experienced a lot of encouraging feedback from our dealers on our new products.” Alongside the positive assessments were the exhibitors who complained that there “weren’t enough retailers,” or noted that “you really have to set up appointments in advance if you want to have a successful show.” True observations no doubt, but also ones that have been made at every trade show for the past two decades, if not longer.

What retailers and suppliers from all segments seem to agree on is that industry revenues are flat, and could use some type of catalyst to stimulate growth. The consensus, based on numerous conversations, was that there were no products on the show floor that would provide that catalyst. From a price value standpoint, the industry’s product offering has never been better. However, among aisles full of high-quality, high value goods, with thoughtful refinements, there didn’t seem to be anything that might drive incremental sales. As one retailer put it, “A new reissue guitar model, a different finish for a drum kit, or a keyboard with a few more features isn’t going to drive a wave of customers to your store.”

Although the industry’s top line remains static, more than 100 fledgling businesses exhibited in Nashville for the first time. There were new percussion accessories and a handful of custom guitars builders, but most of the NAMM “newbies” were exhibiting effects pedals. Klon, Alexander Pedals, and Walrus Audio were among a legion of manufacturers offering variants on classic reverb, overdrive, and distortion. The increase in the number of pedal makers is due to guitarists’ nearly insatiable demand for new effects, and the relative ease in getting them manufactured. One larger pedal manufacturer complained, “The barrier to entry to the market has become so low, guys operating in garages are driving the profit out of the business.”

Longstanding m.i. retailers may be a bit disappointed with the current pace of R&D, but it hasn’t stopped outsiders from exploring the industry’s potential. As in past years, buyers and management from Amazon.com were making the rounds of the show floor, securing product lines and encouraging retailers to sell on their marketplace platform. A contingent of Wal-Mart buyers was also at the show. The world’s largest retailer had limited success selling m.i. products at its stores a decade ago, but is apparently re-considering the category as it steps up its online efforts. Representatives from Overstock.com, the site that specializes in “flash sales” of closeout merchandise, were also exploring the show, although they received a less than enthusiastic welcome. As one supplier put it, “I don’t think their business model, with closeout sales on select items, is well suited for this industry, where a lot of top selling items have been available for decades.”

The presence of these online giants was a source of anxiety, reflecting a distribution channel that is in a state of flux. How music retail will evolve was one of the most widely discussed topics on the show floor. Online sales are growing, but no one seems to think they will eradicate brick-and-mortar. Furthermore, enterprising merchants are developing new “omni-channel” formats, either with their own websites or platforms like eBay and Reverb.com. While the change can be discomforting, the best advice in dealing with a shifting market was offered up by Mark Terry, president of KMC Music. “In a $7.0 billion industry, there is a lot of room for people to build good businesses,” he said. “You can’t get too hung up on macro trends; you have to focus on your customer.” Based on activity on the show floor, the dealers in attendance have apparently internalized Terry’s advice.

Educational sessions at NAMM’s Idea Center attracted capacity crowds. “This is my 35th year in business, and most of my total education on retailing has come from NAMM through NAMM U,” said David Schmidt of Schmidt’s Music in Pensacola, Florida. “It’s been great for me.” In addition to course offerings on merchandising, social media, and financial controls, NAMM has addressed audio engineers with an expanded technical curriculum under the TEC Track banner.

More Than Just Guitars
The Nashville NAMM event has often been described as a “guitar show,” and the label isn’t entirely inaccurate. The convention center is steps away from the Country Music Museum, Nashville has one of the highest per-capita concentrations of pickers in the nation, and there were guitars and guitarists in abundance on the show floor. However, in recent years, the Summer Show has also attracted a growing school music presence. Gary Winder, vice president of sales at DANSR, the U.S. distributor for Vandoren products, said, “It’s been a great opportunity for us to meet with our dealers. I’m pleasantly surprised by the turnout.” Sheryl Laukat of Cannonball saxophones expressed a similar sentiment. “This is a useful event for us,” she said. So close to the beginning of the school rental season, Summer NAMM is too late for a school music dealer to make any meaningful buying decisions. But, as Fred Schiff of All County Music remarked, “It’s still a great venue for meeting with vendors, and you can have better conversations here than at Winter NAMM.”

The future is inherently uncertain, but it’s rare that you are confronted with so many conflicting signals at once. In the 30 days leading up to the NAMM show, news stories reported an uptick in housing starts, but disappointing first quarter retail sales; improving consumer confidence, but gloom settling over corporate purchasing managers; stronger personal balance sheets, but a rising default rate at the major credit card companies. The confusion was only amplified on Thursday night, when British voters surprised the pollsters and opted to leave the European Union. What impact the decision would have on the music market 4,500 miles away was beyond uncertain—a catastrophe? Non-event like Y2K? The lack of clarity, however, didn’t stop people from tendering opinions.

And The Verdict Is...
NAMM shows serve a variety of functions. Manufacturers get to present new products, retailers can make stocking decisions, and everyone gets an opportunity to evaluate market conditions. The verdict coming out of Nashville? More of the same: a reasonably healthy market, with modest growth for the foreseeable future.

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