Music Go Round

music go round

History of Music Go Round

Music Go Round was originally founded in 1986 by Bill Shell, an entrepreneur from South Minneapolis, Minnesota. The original store, Hi-Tech Consignment, posted healthy revenues, which caught the attention of franchise giant, Winmark Corporation. In 1993, Shell sold the company and franchise rights to Winmark and the store was rebranded to Music Go Round.

Since then, Music Go Round has grown from its first franchise, opened in 1995 in Alpharetta, Georgia, to 33 locations across the US. It continues its plans for geographic expansion; in 2017 Winmark secured the rights to begin opening franchises in Canada with plans to continue expansion into

Key Takeaways

  • Students and Instructors make up the industry’s largest customer segment at 39.8%
  • Music Go Round expects a 2.0% annual decline in growth as big-box stores offer more competitive prices now
  • Average gross profits for a Music Go Round franchise store is 48.5% with top quartile stores boasting average sales of $1.5 million

Musical Instrument and Supplies Stores Industry

Over the past five years, the Musical Instrument and Supplies Stores industry experienced an annual 2.0% decline in growth[1]. This was driven by many factors including a declining adolescent population, increasing competition with other activities for a share of decreasing leisure time, competition from big box stores, and digitization of value-added services.

Students and Instructors make up the industry’s largest customer segment at 39.8%[2]. With the adolescent demographic declining, this is shrinking the number of potential customers. A reported decrease in leisure time and an increase in new types of activities is providing this customer segment with a plethora of options. With musical instruments, individuals have to invest a significant amount of money and time before they become proficient. This is a deterrent for customers who are looking for new hobbies but who are limited in funds and time. These factors compound together to drive the decrease in growth in the industry.

Additionally, big-box competitors, such as Walmart and Best Buy, have started adding musical instruments to their product offerings. These stores achieve cost savings through economies of scale by importing large quantities of instruments from low-cost producers. They pass these savings to customers by offering a lower price.

Digitalization has also contributed to shrinking growth by making value-add services, such as music lessons, available online. This provides convenience for customers and can potentially lower costs, which is beneficial for those who are deciding whether to take up an instrument. Ultimately this eliminates many face-to-face services and the revenues they bring in.

Looking forward to 2024, the industry is expected to continue to decline in growth, however at a slower pace[3]. An increase in consumer confidence and spending will drive hobbyists, the market’s second-largest customer segment, to purchase new instruments for leisure.

 

Industry Customers and Competitors

The industry’s customer is unique how they purchase and their customer journey. The lifetime value of a customer is highly dependent on the customer’s first experience with an instrument. The initial music learning experience will dictate whether the customer stays on as a student and graduates as a hobbyist. Most customers who are starting their musical journey are students in the adolescent demographic; given the uncertainty and financial constraints, this customer segment will seek lower price options for instruments either through second-hand retailers or big box stores. If companies can capture a student’s interests, they will continue to repurchase instruments as they grow more proficient and become hobbyists as they move into the adult demographic. These two customer segments, Student and Instructors, and Hobbyists make up more than 50% of the industry’s revenues[4]. Therefore, it is imperative for the industry to continue nurturing new students in order to grow the overall potential customer market.

Competitors in this industry are also unique in that 64.7% of the industry is composed of nonemployer businesses. These are businesses that are operated by the owner or as a partnership and employ no other staff. While they make up a large chunk of the overall stores, they generate 7.1% of the industry’s revenue. The largest players make up 32.4% of the market, with Guitar Center being the leader followed by Sam Ash Music. It’s important to note that Music Go Round competes in a subsegment of this market since it sells used musical instruments. With that, its biggest competitor is Reverb, which is an online-only musical instrument reseller that is a subsidiary of Etsy.

 

Music Go Round Business Model

Music Go Round is a franchise brand owned by Winmark Corporation. Franchisees buy and sell high-quality musical instruments and new and used accessories. Their products are available both in-store as well as on Music Go Round’s e-commerce site. Music Go Round’s customers want and understand the value of high-quality music products but cannot afford the brand-new retail price. The brand also offers customers the opportunity to own beautiful musical instruments at a fraction of the price. Lower prices also attract customers who are looking to learn a new instrument as these tend not to want to spend money on their first instrument.

The franchise’s e-commerce platform aggregates instruments from across all Music Go Round stores, providing customers with access to the full selection, large inventory, and convenience while breaking down geographic barriers for franchisees. This helps drive sales across each franchise by making all inventory available and driving foot traffic into stores. As a result, the average gross profits for a Music Go Round franchise store is 48.5% with top quartile stores boasting average sales of $1.5 million[5].

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Success Factors

Music Go Round’s aggregated e-commerce platform is the key success factor and serves the franchisees in three ways. First, where traditional music resale is bound by its geography, an e-commerce platform allows for customers from any location to purchase from any Music Go Round franchisee. This widens the customer base for any single franchisee and allows for an efficient marketplace for the products. Second, aggregating the inventory across all stores creates a larger pool for customers to select from, which can provide the right variety and drive inventory turnaround. Finally, the platform allows for the collecting of data that provides valuable insight into customer trends, customer geography, and pricing data.

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Music Go Round – Looking Ahead

With the Musical Instrument and Supplies Stores industry continuing to decline, it will be important for Music Go Round to redefine how it provides value for their existing customers and how they can build a stronger pipeline to increase the number of potential customers.

Music Go Round should focus on building customer loyalty within the hobbyists by building a localized strategy. This means engaging customers who are passionate about music and within a certain distance from a store. Community events such as hosting concerts, jam nights, and or workshops are opportunities to connect with hobbyists and build a following.

To grow the group of potential customers, Music Go Round will need to find ways to build a pipeline to students who will then turn into hobbyists. Finding ways to lower the barriers to music such as recreating the music curriculum to match the interests of adolescents will help build interest in instruments. Growing the adolescent interest in music will contribute to a larger hobbyist demographic in the future.

[1] Cecilia Fernandez, “Musical Instrument & Supplies Stores in the US,” IBISWorld, November 2019

[2] Cecilia Fernandez, “Musical Instrument & Supplies Stores in the US,” IBISWorld, November 2019

[3] Cecilia Fernandez, “Musical Instrument & Supplies Stores in the US,” IBISWorld, November 2019

[4] Cecilia Fernandez, “Musical Instrument & Supplies Stores in the US,” IBISWorld, November 2019

[5] Winmark Franchise Partners, “The Story Behind Music Go Round,” Winmark Franchise Partners, January 15, 2018, accessed April 8, 2020

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