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Geonetta is in what Albertson calls "the dream phase." According to Albertson, a former sound engineer who worked his way up to co-CEO from Guitar Center's sales floor, "becoming a musician is all about dreaming. The longer we can extend the dream phase, the better." In the past several years, the dream phase got a boost from advances in digital recording technology. Artists like Geonetta who don't have a record-label contract used to have to pay tens of thousands of dollars for studio time plus distribution costs. But now amateurs can produce CDs with their home...
Music retailing has traditionally been a fragmented industry of mom-and-pop stores. Guitar Center, however, is following the lead of retail giants like Wal-Mart. After raising $101 million in a 1997 IPO, Albertson and his co-CEO, Larry Thomas (himself a frustrated rock guitarist), went on an expansion run that included opening new stores at the rate of one or two a month and acquiring, in 1999, the Musician's Friend catalog for $48 million. In 2001 the company purchased a 19-store chain catering to schoolkids and beginners called American Music, and last year it opened...
...Guitar Center has been able to expand in part because of weak competition. The country's next biggest music-store chain, privately held Sam Ash, has 40 stores concentrated on the East Coast. A 79-year-old family-owned business, Sam Ash doesn't have the capital to grow at Guitar Center's pace, says William Blair & Co. analyst Zackfia, nor can it match the big chain's massive catalog and online sales. Another national retailer, Mars Music, went under last fall...
...Guitar Center hopes to avoid the growing pains that often plague expanding businesses. Albertson says he expects a bump in his customer base in the near future. After dropping for decades, the population of men ages 15 to 29, the chain's prime customers, is projected to rise 6% by 2010. The company is expanding its pro-audio selection and is exploring opening stores in Canada and Britain...
...tough part will be maintaining the chain's hard-won brand cachet. That means keeping service levels high and stocking a $125,000 guitar that may take years to sell but gives shoppers something to drool over. "You'd never see Wal-Mart keep around merchandise just to help customers daydream," says Zackfia. But for Guitar Center, the very best customer is the one who's lost in the music...