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Friday, 31 Oct 2014

Not Your Average Chain Store Strategy

Adding locations doesn’t mean “going corporate” for Springfield Music, where each store keeps its distinctive character

However the name “Funky Munky Music” strikes you, this much is certain: It doesn’t sound like part of a chain. Technically, it is now—though you wouldn’t know when you walk in the door. Greater Kansas City’s Funky Munky Music was acquired in late 2012 by Springfield Music, becoming the third store under the Missouri retailer’s umbrella. Just three months later, St. Louis-based Fazio’s Frets became the fourth. Behind the scenes at Springfield Music, the sudden expansion set off a period of controlled chaos and some tough decisions about what the new blended family would look like. As the dust settled, however, the company recorded a 27% sales increase over 2011 while hamming out its own brand of multi-store retail. The SpringfieldMusic team decided that rather than trying to standardize its four stores, it wanted each to keep its own identity— which is why the name Funky Munky Music and the image of an ape with a guitar are still on the wall in KansasCity. “Each of our stores has a different culture and a different personality,” says Donovan Bankhead, vice president of Springfield Music. “And we just decided—let’s leave it that way. We’re not trying to be the next big-box chain. We just want to operate high-quality local music stores. I felt that if we kept the original names and personalities, and just built on that with what we can contribute, it would be a recipe for success. And so far that’s come true.”

The story of how Springfield Music went from two stores to four stores in three months is part strategy and part circumstance. Since 1961,the retailer’s flagship store has served the greater Springfield area as a source for band and orchestra rentals, guitars and m.i. gear, sheet music,sound reinforcement, and a standout lessons program. The company added its second location in 2002, acquiring Ernie Williamson Music 75miles away in Joplin.By 2012, the Springfield Music team was eyeing a location in Kansas City, which would give it three stores forming a neat triangular territory over much of western Missouri. Known for its fun vibe,thriving lessons program, and full calendar of clinics and events, Funky Munky Music made an ideal prospect—though at first owners Pat Redd and John Kluiter weren’t interested in selling. Given a few weeks to think about it, they reconsidered, and the sale was finalized by the end of the year. “This was a store with a wonderful model that we could build around,” says Bankhead. “That was our plan.”

The part Springfield Music hadn’t planned on was opening a store in St. Louis, clear across the state of Missouri from the other stores.In January 2013, however, a manufacturer’s rep called up to say that guitar specialist Fazio’s Frets was due to be liquidated if it couldn’t find a buyer. A St. Louis mainstay since 1978, Fazio’s had been something of a friendly competitor to Springfield Music for years. “Some years they would be Missouri’s Taylor dealer of the year, and some years we would,” says Bankhead. “But we had a lot of respect for them— they’re one of the top guitar shops in the Midwest—and to see that go away didn’t seem right.”

Rapidly, questions started to fly over whether the sale would be workable.The first set concerned Fazio’s itself: Would Springfield Music get to keep the name and existing staff? Fazio’s agreed on those points, and a tentative agreement came together quickly. Probably more difficult were the big-picture questions for Springfield Music, which was still working to integrate its previous acquisition. Bankhead arranged an impromptu conference call with his management team,some of whom were on the road in KansasCity, and asked them all whether they were onboard. “They each said they wanted to do it,” says Bankhead. “They said it would be a lot of work, but it would be worth it.”

Suddenly in charge of four stores, Springfield Music needed a strategy, and the answers weren’t obvious. Funky Munky Music’s signature tone was fun, family-friendly, and slightly irreverent. Fazio’s Frets’ was cool, polished, and serious about guitars. Springfield Music management soon realized it would be wrong to try to homogenize them,though it might have been the easier option. It’s easy to mock chain stores that all look alike, but that strategy serves a purpose: a unified image, compatible logistics, and saved money and labor in marketing. In SpringfieldMusic’s case, however, a full time marketing director was hired to promote a unique image for each store. “A campaign that works great for Funky Munky that’s kind of funny and off-the wall probably won’t fly over in St.Louis with Fazio’s,” says Bankhead. “So we have to do different creative work for each store. At the store level, no one feels like they work for a big company—they feel like it’s their store. Ifwe changed the stores and called them all ‘Missouri Music’ or something, they wouldn’t feel that way. And that’s just not what we wanted to do.”

On a business level,the expansion posed other complications as Springfield Music’s ledgers were flooded with new inventory and accounting data.Always a believer in business metrics, Bankhead took a analytical approach to the numbers crunch,instituting “open to buy” software that calculates a budget and works dynamically with sales and turn rates to tell the staff what it needs to order and when. The company is also using AIMsi software from Tri-Technical Systems that lets management pull up real-time financial statements at any moment. “I think one of our keys has been the ability to know our numbers, set goals, and work to achieve them,” says Bankhead. “When you don’t know where you stand,it’s easy to become overstocked and hard to know which pieces you should have and which you shouldn’t have.Having this information at our fingertips has given us the confidence to expand into new markets. We let the information work for us.”

The events of late 2012 and early 2013 gave Springfield Music a presence in Joplin, KansasCity, St. Louis, andSpringfield itself—though for the most part, not online. While the company does a small volume of e-commerce and eBay sales,the best part of its efforts are still in traditional local retail. Between the multiplying competitors and the pricing advantages of selling on the web, how can a brick and mortar retailer compete? “If everything else is equal,it’s going to come down to price,” says Bankhead. “So what you try to do is make things not equal.Your customers need to identify with and believe in what you believe in.It would help if we could get internet sales tax reform in place because otherwise we can usually meet any legitimate online price.But ultimately the customers have to know you have a good selection and great shopping environment—that you’re passionate about what you do and not one of those grumpy people who should’ve retired years ago.BecauseAmazon is never grumpy.”

Now almost five months after the addition of Fazio’s Frets, having four stores with four personalities is more complementary than confusing for Springfield Music.Just having multiple locations has opened up volume discounts the company never had before, says Bankhead. Fazio’s, as Springfield Music’s high-end guitar specialist, has elevated the level of fretted instrument expertise companywide. And with four stores in four cities catering to different customer bases, the retailer is able to shift inventory from a location where it’s not moving to another where it has a better chance. All in all, Bankhead says, the company is striking the balance it needs between the four things it has always tried to succeed in: retail,rentals, lessons, and service.

“You’ve got to do all those things well,” says Bankhead. “And if you do, and your marketplace is big enough, I think you can be successful.Bringing this business together has meant a few months of operating on very little sleep and rising to the occasion. But our entire team has been onboard, which is frankly fun. When you’re being pushed by the people around you to be even better, you know you’re involved in something special.” 

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