New music instrument sole trader looking for advice

[ImpGit]

Hi there,

My partner (with my help) is setting up a business selling second-hand guitars and related accessories. The Big Plan is to eventually open a proper bricks and mortar shop, but at the moment she's looking to run a stall a few days a week and sell via eBay. We are both experienced in the music instrument trade and know the business well. However, one problem we did not anticipate was finding suppliers (of strings, plectrums, etc.) willing to work with us. Most are reluctant to supply to a business that is neither VAT-registered nor has its own premises. Some items we can find on eBay etc. at close to trade prices, but other things we're struggling to get hold of.

Wondering if there's a work-around as regards the shop address, and if it's worth, possibly, voluntarily registering for VAT in order to prove we're serious? Would appreciate hearing from other retailers who've struggled to find suppliers and how they coped!

Cheers!

 

[ImpGit]

Also, while I'm at it : if we were to become VAT registered and offered an instrument repair service--would we charge VAT on that?

 

[The Byre]

We are both experienced in the music instrument trade and know the business well. However, one problem we did not anticipate was finding suppliers (of strings, plectrums, etc.) willing to work with us. Most are reluctant to supply to a business that is neither VAT-registered nor has its own premises.

I hope you don't mind too much, if I point out that the first sentence does not tie in with the rest. You should know that MI suppliers will only supply to physical shops. Whether you are or are not VAT registered is no skin off their noses, but it does indicate to the main wholesalers that you are not really a proper shop - which is what they are looking for. They will also ask for fairly substantial first orders and the likes of Yamaha will ask for annual minimums.

The MI market is turning German right now, with Thomann's domination of the on-line market and the entry of Music Store with their buy-out of Dolphin, so there is room for good suppliers of niche products, but if you are hoping for being able to sell name brands, there really is not a way around opening a real shop. Once you are on their books, they usually will keep supplying, even if the shop has vanished, as long as you buy enough.

This is what you are up against -http://www.thomann.de/gb/index.html?sid=9323d66e45f922e5e362d0b640074c06

http://www.musicstore.de/en_EN/GBP/WelcomePage;pgid=dE7KQPm8kWBSR0Ssdggq2Md60000WF4NC4H7

 

[The Byre]

Also, while I'm at it : if we were to become VAT registered and offered an instrument repair service--would we charge VAT on that?

Musos everywhere are looking for good luthiers and usually prefer it if the luthier is not VAT registered. If I were you, I would set up a nice repair and SH workshop and display space and get a flyer out to every music shop in the area.

 

[ImpGit]

I hope you don't mind too much, if I point out that the first sentence does not tie in with the rest. You should know that MI suppliers will only supply to physical shops. Whether you are or are not VAT registered is no skin off their noses, but it does indicate to the main wholesalers that you are not really a proper shop - which is what they are looking for. They will also ask for fairly substantial first orders and the likes of Yamaha will ask for annual minimums.

The MI market is turning German right now, with Thomann's domination of the on-line market and the entry of Music Store with their buy-out of Dolphin, so there is room for good suppliers of niche products, but if you are hoping for being able to sell name brands, there really is not a way around opening a real shop. Once you are on their books, they usually will keep supplying, even if the shop has vanished, as long as you buy enough.

I'd hoped that a permanent, fixed stall would satisfy distributors particularly as we have already built up some decent relationships with them. Currently, we have no interest in selling new instruments; only accessories. We certainly have no interest in competing with any of the large chains/online guys like Thomann or GAK. Our focus will be on second-hand and vintage instruments, quality accessories plus bits to attract tourists. We have a superb central location for passing trade and are already well-known in the area by musicians. I'm an experienced guitar repairman, with a decent rep built up, and my partner has worked in MI for 6 years.

We have a grander scheme for the proper shop, but we want to dip our toes in the water before we invest everything we have! As I say, we have sourced a number of items online that we could still get a decent mark-up on, but we really want to do it right and start building relationships with suppliers.

 

[ImpGit]

Musos everywhere are looking for good luthiers and usually prefer it if the luthier is not VAT registered. If I were you, I would set up a nice repair and SH workshop and display space and get a flyer out to every music shop in the area.

Well, to some extent, that is the dream! But we're broke.

 

[The Byre]

Then you are going to have to start small and work up. Set aside one room for repair work and buy in your supplies (strings and mechanics, pick-ups and nuts etc.) off ebay or wherever they are cheapest.

The MI wholesalers are not really as cheap as you might think, usually 60% of RRP, so just 28% of RRP is mark-up.

I would not be too gung-ho about wanting to set up a bricks and mortar, as everywhere I look, MI shops that are trying to go head-to-head with Thomann and Music Store and all the others, are going belly-up - particularly the new entrants to the market. Remember, proportionate to turnover, the likes of Thomann have lower fixed costs than the small High Street trader!

As things stand, the suppliers are having a pretty lean time of things as well. The likes of Thomann just bypass the UK wholesalers and often buy from the manufacturer and also push on price so massively that small shops are unable to match their prices. It is not unusual to find that the Thomann price is at or even below UK wholesale!

There are two possibilities for you -

1. Import direct from places like Spain and Italy. Find small one-man, two-man operations that would be happy to supply you. To do this, you have to talk to local musos for tips and that means doing the Ryan Air thing and schlepping round back streets and attending local fairs.

2. Either build guitars yourself and to order, or customise (i.e. add decent pick-ups and strings, mechanics and other parts) to cheap Chinese guitars and sell them under your own brand. Some of these boxes are actually quite good and it only takes a few steps to make a huge difference!

And good luck BTW! Being skint, you'll need it!

 

[paulears]

I'm also not sure a market style stall works. I'd never buy anything other than a kids started guitar from a market stall - too many are fly by, never to return businesses. If you are interested in the budget end, then CPC have plenty of cheap musical instrument accessories - and you can open an account (which after spending serious money will attract discounted pricing) or pay with a credit card.

As most of your customers won't be VAT registered - unless your turnover dictates registration, I too would avoid it.

An on-line webshop is also useful, but a good friend of mine has a successful guitar only shop. Before this, he worked for an established music shop that sold everything, and strings, picks, capos, straps and music books rarely made much money. He now sells new and vintage guitars and is doing very well. Would you be able to constantly transport instruments safely? For things like guitars, a posh, prime site location is not needed, because that's not where musicians tend to hang out. My friends shop is small, and in the cheap and unfashionable end of the town. His rates are low for the first two years, the rent on the shop modest, and it's working.

 

[ImpGit]

An on-line webshop is also useful, but a good friend of mine has a successful guitar only shop. Before this, he worked for an established music shop that sold everything, and strings, picks, capos, straps and music books rarely made much money. He now sells new and vintage guitars and is doing very well. Would you be able to constantly transport instruments safely? For things like guitars, a posh, prime site location is not needed, because that's not where musicians tend to hang out. My friends shop is small, and in the cheap and unfashionable end of the town. His rates are low for the first two years, the rent on the shop modest, and it's working.

We think there is niche to exploit: quality second-hand, quirky and vintage. In addition, we're also talking to small guitar builders to see if we could take on some of their product and get it into a shop window and the hands of the public. It's something the likes of Thomann and the big chains don't offer.

We've been round a million music shops and found a couple doing similar things in small premises with relatively low overheads. That's our model, really: not the flash high street superstore. However, we will also want to keep in a stock of decent accessories so we've something at that much lower price point and to give us a more professional appearance, plus the cachet of holding good brand names like D'Addario, Ernie Ball and so on.

We're happy to start small--we've very little choice, but we still want to operate in the manner of a reliable, trustworthy and professional business, rather than just being a couple of chancers flogging tat on a stall.

 

[paulears]

Totally sensible - as in small shop, but mobile markets are just the wrong place to sell higher ticket items. Just keep in mind that strings and odds and ends are not income generators - selling guitar set ups at £40 plus strings might be, but again not from a market stall.

Would you buy expensive jewellery or leave your antique watch for repair at a market stall?

 

[Hoppimike]

Is it not possible to just be registered?

Wholesalers and suppliers do seem to vary greatly, and also many eBay sellers and smaller companies are more than happy to work out sometimes very cheap bulk pricing.

 

[paulears]

What do you mean? "Is it not possible to just be registered??"

The trouble is that buying from ebay to resell, rarely produces the possibility for margin. On a six pound retail item, making 50p, means you need to shift an awful lot? Your tag line states you can save up to half on gas and electricity. If you could save them 5% it wouldn't be very attractive? Selling a guitar for a 20% markup could be workable, but for a packet of strings, you would want what? 100%?

 

[Vision]

The reason there is very little in the way of quality used guitars in music shops now is they are all on ebay. . yes you might occasionally pick up a used strat or les paul you can move on and make a bit on but not very often. . . Trust Me!!

Mark

 

[ImpGit]

The reason there is very little in the way of quality used guitars in music shops now is they are all on ebay. . yes you might occasionally pick up a used strat or les paul you can move on and make a bit on but not very often. . . Trust Me!!

Mark

I'm not so sure. I know of vintage shops doing decent business. Currently, I work in a good-sized independent music shop and if I were to take the second-hand instruments that we currently turn down (not enough space, boss ain't keen) we would do alright. I think there's still a good market for folk who want to sell quickly face-to-face and folk who want to try before they buy. Ebay's bloody awful for guitars, tbh. Hugely overpriced the majority of the time, no chance to try, no PX, no backup, servicing, repair or warranty.

Well, that's what I hope, at least.

 

[Doodle-Noodle]

Good luck to you - my family have had a music shop for quite a long time (it's the 100th anniversary of the shop this year) and they're still going.
They don't really deal in 2nd hand generally but they do dabble.
I personally think 2nd hand instruments is a good idea and you could do well. You clearly have expertise on your side, and offering a restoration service would add credibility to your business.
Keep badgering suppliers that you want to use - if you were offering repairs/restoration as a business then you could easily be doing that from home or a cheap rented unit rather than a high street locations. They're probably just trying to keep away from bedroom sellers who offer their products well below the RRP on eBay and the like.
I don't think registering for VAT will be useful to you in the long term, speak to an accountant and get his/her advice as to how best to register your business (limited company, partnership etc) and go from there.
Good luck.

 

[ImpGit]

Quick update. After some sweet talking, we've managed to get deals with 3 large MI distributors, with a 4th on the way. Once we laid out our plans and talked to folk we know on the inside, things moved quickly. Orders have been placed. Stock's arrived and we're up and running.

 

[The Byre]

I think a 'well done' and a 'woohoo' is in order here! Once one lot see stuff moving, they all will - they are all hurting very badly right now and are hoping that somehow the coming Christmas season will make it all come right again!

Certain parts of the MI market have held up quite well and quality in particular has done better than the throw-away end. People are more prepared to invest their hard-earned cash in something good, than risk buying a Japanese or Chinese turkey.

Quality used stuff is doing OK.