Sales declines show signs of stabilizing.(Market Intelligence)

ESCALATING JOB WORRIES, the lack of government stimulus checks, and rainy weather dampened shoppers' appetites for buying music and sound gear during the second quarter according to dealers responding to The Music Trades' quarterly sales survey. Sales for the three-month period ended June 30 declined 10.1%, slightly more than the previous quarter, which saw a drop of 8.8%. On a regional basis, the sales declines tie-in closely with unemployment rates, with retailers in states like California reporting steeper declines than their peers in Texas. When adjusted for unusual weather conditions that kept customers at home, and the lack of government stimulus checks that filled retail cash registers in June 2008, the latest quarterly figures point to a market that is showing signs of stabilizing.

Music dealers have seen sales declines accelerate since September of 2008, a trend that is in line with other retailers of discretionary goods. Sales of every category tracked in the column weakened during the quarter. During this latest three-month period, Fretted Instrument sales declined 12%, Sound Reinforcement Products fell 11%, and most other m.i. categories registered declines from 5-10%. "My state has an unemployment rate of 13% and my customers didn't have the big stimulus checks that were handed out by the Bush administration. Given that, my 11% sales decline looks pretty good," noted a dealer from Raleigh, North Carolina.

Although music retailer sales reports show that weakness cut across all sectors, declines in the grand, vertical, and digital piano segments were smaller this quarter than in the previous two. Grand Piano sales dropped 12.4% compared to 18.6 % in the first quarter and 19% in the fourth quarter of 2008. Similar trends occurred in all home keyboard categories. "I never thought I would get excited about a 15% drop in sales, but compared to what I've seen since January of 2008, the business is showing signs of bottoming out," said a piano store owner in San Diego, California.

The economy is clearly having an impact on the industry at many different levels, according to dealers. Discounting and big sales events are what keep customers coming in, said one dealer in Spokane, Washington: "We don't see store traffic unless we offer big discounts." Discussing trends in the percussion business, a dealer from Miami, Florida, related, "Entry-level and accessory sales in percussion have not changed at all in the last three years. Traffic is good, sales are strong. The high end, basically everything selling for over $1,000, is unbelievably tough. 100% of our declines have come in that area." A noticeable change has happened with buying habits of guitarists, said a dealer in Manhattan. "$3,000 for a Gibson Les Paul Standard was never a big deal. People still love the instrument and want to try it but are scared by the price. $600 seems to be the number. Products over it are very slow; those under it are doing just fine."

Historically, the second quarter is the smallest, accounting for only 18% of the industry's annual sales volume. The end of this quarter ushers in the all-important back-to-school season, a six-week time period that accounts for almost 20% of the industry's total sales volume. "Early indications point to a decent season," said a dealer from Indianapolis, Indiana. "Spring rentals were strong and the phone is ringing."

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