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ROCK ON

From jazz age to New Age, music instrument supplier Sam Ash still going and growing

BY JESSICA ROE

Every kid has a favorite playground, right? Well, Anne Blum’s “play” ground is Sam Ash Music.

“You can just go in and play a guitar and then leave,” said the 15-year-old guitarist and passionate fan of the rock group Metallica. “They have guitars lining the walls. And we’re talking really big walls.”

Blum likes to play at the Sam Ash megastore in Edison, N.J., on Route 27 near the PNC Bank Arts Center. That’s where she bought her first solid-body electric guitar — a maroon ESP F50 that’s a heavy-metal rock musician’s dream. The store offers a complete selection of musical instruments and accessories.

Sam Ash Music, founded in 1924, was destination retail long before the term was coined. The brand’s mystique has grown through the big-name musicians who have visited for decades. In recent years Bette Midler, Britney Spears, Bruce Springsteen and Stevie Wonder, among others, have been spotted shopping in the chain’s stores in such entertainment meccas as New York City, Nashville, Las Vegas and Hollywood.

It’s been that way since the beginning, when a young Austrian-born violinist named Sam Ash (from Ashkynase) who had come to the United States in 1907 quit touring to get married. He and his wife, Rose, decided to open a music store. They started with a storefront in Brooklyn, N.Y., for which they acquired the $400 down payment by pawning Rose’s engagement ring. The store quickly became a favorite among musicians. Eventually, the couple moved to Manhattan and began expanding, one storefront at a time.

Today Sam Ash’s sons — Paul, who is president, and Jerry, who is chairman — manage the business. Joining them are several members of the next generation, including Richard, the CEO, who runs the online business, and Sammy, executive vice president, who oversees site selection.

Hicksville, N.Y.-based Sam Ash is currently the No. 2 retailer in the $6.9 billion U.S. musical instrument segment. In many ways, the business is run like a tight jazz ensemble, mixing masterful execution with a dose of improvisation, especially in regards to site selection. “If we fall in love with a location, it doesn’t matter what kind of center,” Paul Ash said. “We’re in strip malls. We’re in two enclosed malls with entrances to the street. In some places, we’re even downtown. We pick a city we want to be in and find a space that we like.”

The company currently operates 45 stores in 14 states, almost triple the number it had six years ago. In the 1990s the retailer decided to expand its store footprint, usually in the 9,000-to-26,000-square-foot range, to a big-box format. These new megastores average between 30,000 and 35,000 square feet.

Sam Ash’s two main competitors, Guitar Center and Mars Music, made the big-box move at about the same time, with very different results. Guitar Center went public in 1997 and became the segment’s No. 1 retailer, while Mars went bust, liquidating its assets in 2002.

Take five
The Sam Ash megastores are inspired by the flagship, which actually comprises five separate storefronts along West 48th Street just off Broadway in New York City. Each of the stores, which sit on both sides of the block, is dedicated to specific product categories. There’s Sam Ash Professional (and Pro Parts), Sam Ash Sheet Music (which also carries brass and woodwind instruments), Sam Ash Drums and Percussion, Sam Ash Guitars and the main store, which contains keyboard, DJ, audio-recording, sound-lighting and computer-software departments.

In the megastores, these categories are in separate areas beneath one roof. Like the Manhattan store grouping, the megastores are often located near performing arts and entertainment centers to keep them accessible to professional musicians, a key demographic, to be sure, though not the chain’s only one. In Orlando, Fla., for example, the Sam Ash store is near Disney World, Sea World and Universal Studios, while the one in Cerritos, Calif., sits minutes away from the Cerritos Performing Arts Center. The Las Vegas Sam Ash is located two blocks east of the Strip.

The megastores are also usually located in high-traffic areas. “They like a heavily traveled road with good access to major highways and freeways, since the stores are more regional,” said Bob P. Fetterolf, a sales and leasing broker in Divaris Real Estate’s Charlotte, N.C., office.

Fetterolf represented Sam Ash in lease negotiations for four megastore sites, in Charlotte and Raleigh, N.C., Cincinnati and Indianapolis. Each location was a former Mars Music site. “All of these stores were music stores, so it was easy for Sam Ash to transition. They didn’t require any major retrofit of the space,” said Fetterolf.

Consolidation among nationwide chains has benefited Sam Ash, allowing it to move into competitors’ shut stores and grab market share. In 1999 the chain acquired the Tennessee and Florida stores of the five-unit Thoroughbred Music chain. In New Haven, Conn., it took over the site of Brian Music, a large local player that had operated for 21 years before shutting down in the late ‘90s.

Most notably, Sam Ash acquired longtime rival Manny’s Music in 1999. Like Sam Ash, Manny’s was a family-run business located on West 48th Street. But Manny’s, which is as legendary among musicians as Sam Ash, continues to operate under its own name, unlike other Sam Ash acquisitions.

Only 10 percent of the American public buys instruments, but the industry is healthy. U.S. sales topped $6.9 billion last year, according to the National Association of Music Merchandisers. On the school market front, music education suffered double-digit cuts for several years in the late 1990s and into 2000, with some schools losing entire programs. But program funding recovered about 8 percent last year, according to The Instrumentalist, a trade publication. Music retailers hope the uptick indicates a return to the spending levels of six years ago.

The importance of school music programs underscores the fact that professional musicians are only part of the customer base. “We appeal to a lot of different segments of the public,” said Paul Ash. “There are families with young kids, teens and young adults, piano teachers, schools, DJs and seniors who are going back to music.” The chain even does a nice business selling speakers, microphones and other sound equipment to non-music-related organizations.

As a private company, Sam Ash isn’t required to disclose financials, but according to business information provider Hoovers, annual sales reached $350 million last year, up 7.7 percent from 2002.

The company has no definite timetable for future store openings. “It’s a family business, so we can be flexible,” said Paul Ash. “We don’t have to account to anybody and say, ‘We’re going to open 12 stores a year.’”

Lead guitar
But doubtless there’s some pressure coming from the opposition. Between 1999 and 2003 Guitar Center expanded its portfolio of retail stores to 1.9 million square feet from 794,000 square feet. The chain operates 130 Guitar Center stores and 20 American Music stores and posted $1.3 billion in sales last year, up 15.8 percent from 2002.

This year Guitar Center opened 18 new stores, and it plans to open an additional 20 units or so next year. The two chains currently compete in several markets, including New York City, Las Vegas and Nashville. But Guitar Center’s robust growth doesn’t scare him, Paul Ash says. “We can stand up to any of our competition.”

Even as Sam Ash and Guitar Center expand across the country, the musical instruments sector remains the dominion of mom-and-pop operators. Despite Guitar Center’s No. 1 rank, for example, it controls only 19 percent of the market. Sam Ash’s share is 5 percent.

But that will surely change, observers say. In time these big players will make inroads into the remaining three-quarters of this market.

“In a lot of other retail sectors you get one or a number of big-box players who come in to dominate the market,” said William Armstrong, vice president of research at Albany, N.Y.-based equity research firm CL King & Associates. “Music instrument retailers have been slow to move in that direction. But it’s definitely making an impact. The more volume they do the better pricing they get. They have more leverage over suppliers. That makes it tougher for small independents.”

But it’s good news for Anne Blum, the 15-year-old Metallica fan in New Jersey, who might welcome the prospect of expanding playgrounds and shrinking prices.