Future of low cost Gibsons

[Kerry Brown]

What I'm going to say may sound like heresy but here's my theory of why Gibson is abandoning the less expensive models.

As much as many of us like the SGJs, LPJs, etc they have been a failure for Gibson. Many stores are still trying to get rid of 2013 models. One Canadian chain store has had ten 2013 SGJs in stock at $449 for months. They've recently lowered them to $429. During this time they are selling lots of other guitars at the same price point. I don't know why this is but it is. There can't be a lot of margin for Gibson or the retailer at ~$500 given the price of labour in the US. I'm betting Gibson lost a ton of money on the 2013 & 2014 J models. It was a gamble that didn't pay off. I think they are overreacting but in this day and age when shareholders seem only concerned with short term profits their decision to drop them is understandable. I don't like it but I understand it.

 

[cybermgk]

What I'm going to say may sound like heresy but here's my theory of why Gibson is abandoning the less expensive models.

As much as many of us like the SGJs, LPJs, etc they have been a failure for Gibson. Many stores are still trying to get rid of 2013 models. One Canadian chain store has had ten 2013 SGJs in stock at $449 for months. They've recently lowered them to $429. During this time they are selling lots of other guitars at the same price point. I don't know why this is but it is. There can't be a lot of margin for Gibson or the retailer at ~$500 given the price of labour in the US. I'm betting Gibson lost a ton of money on the 2013 & 2014 J models. It was a gamble that didn't pay off. I think they are overreacting but in this day and age when shareholders seem only concerned with short term profits their decision to drop them is understandable. I don't like it but I understand it.

Gibson only loses money on them if they are never bought by retailers. In these cases, Gibson lost nothing. RETAILERS may have, but not Gibson. Gibson already sold them.

IMHO Henry is trying to go Harley model, even after Harley modified that model because it was starting to fail a little. He wants to NOT be a Guitar company. He has said as much. Wants to be a multi music product conglomerate (see also all the various companies purchased). He just WANTS Gibson guitars to be only high-end luxury items (My opinion).

 

[Biddlin]

... There can't be a lot of margin for Gibson or the retailer at ~$500 given the price of labour in the US. I'm betting Gibson lost a ton of money on the 2013 & 2014 J models. It was a gamble that didn't pay off. I think they are overreacting but in this day and age when shareholders seem only concerned with short term profits their decision to drop them is understandable. I don't like it but I understand it.

... He wants to NOT be a Guitar company. He has said as much. Wants to be a multi music product conglomerate (see also all the various companies purchased). He just WANTS Gibson guitars to be only high-end luxury items (My opinion).

There ain't no shareholders, Kerry Brown. Henry and Dave, and Henry's on top. Two guys own the whole sh*ttin shebang! I think you are correct that there wasn't much meat on the bone with SGJ and LPJ models, even less with some of the Melody Makers. The "gamble" paid off handsomely, however, by snagging a new customer base that now may very well be moving up to higher priced models willingly.
cybermgk is right on the money. Henry has his eyes on making Gibson the Cartier of the music industry. He senses an uptick in the economy and is getting the jump. I hope he's right about the economy.
I think the smaller selection of models, in the production runs makes business sense and will make some of our "extinct" models a little more valuable.
I guess the fact that I knew this was coming (I'm pretty sure I warned you guys last year, but I'm not one to say I told you so) insulated me from the sticker shock some are expressing. That and the fact that so many of us were able to take advantage of the great prices of the last couple of years, make this a bit more palatable. Now, you newbs that got the taste can learn the joys of buying used.
Or maybe, like me, you've got plenty of Gibbo, for the time being!
;>)/

 

[LeadFinger]

With the SGJs I think the 2014s were more popular, better received, and therefore 2013s were left sitting on shelves. If this board is anything to go by. My guess is that Gibson built a crap-load of the SGJ, LPJ, MM and other low-end models this year.

If we had sales figures from the big retailers we'd know better, obviously.

 

[Kris Ford]

Tellin ya'll..the best way to sock it to that A hole Henry J is to NOT BUY HIS ****...hit 'em where it hurts..
So far, refusing to buy or own ANYTHING made in his regime is working out swimmingly for me!

 

[Biddlin]

"My guess is that Gibson built a crap-load of the SGJ, LPJ, MM and other low-end models this year."
Perhaps. Production capacity of the Nashville plant is about 80,000/yr. That's the entire run for the solid body USA line.(Semi-hollows and Customs are are made in Memphis, acoustics in Bozeman, MT.)
;>)/

 

[Kerry Brown]

I used to be in the consumer electronics industry. Had a couple of retail stores. When inventory doesn't move retailers don't restock with new models or at least not to the same inventory levels. If retailers are stuck with 2013 and 2014 models they will drastically reduce their orders of new models until the old stock is gone. Most retailers can only afford to carry a limited amount of inventory. If the situation gets too bad then retailers start dumping off to grey marketers. Manufacturers don't want that so they often quietly buy back old stock or discount new stock to help out the retailers. If stuff doesn't sell it eventually works all the way up the chain. Everyone hurts. I think Gibson has decided to stick to the high margin niche. I saw this happen with consumer electronics brands in the 80's and 90's. The pie stays the same but how the pie is shared out changes. In terms of profit high margin, lower volume does better in this type of market. High volume, low margin gets very, very tough to compete when labour costs are different. Think Korean, then Chinese electronics manufacturers vs. Japanese. The Japanese had to contract out or become very efficient (think robots) manufacturers to compete with first the Koreans, then the Chinese. The manufacturers that concentrated on higher end survived. Some of the lower end guys didn't. They all lost market share in terms of number of items sold. The ones that concentrated on high margin didn't lose as much in terms of income.

 

[cybermgk]

I used to be in the consumer electronics industry. Had a couple of retail stores. When inventory doesn't move retailers don't restock with new models or at least not to the same inventory levels. If retailers are stuck with 2013 and 2014 models they will drastically reduce their orders of new models until the old stock is gone. Most retailers can only afford to carry a limited amount of inventory. If the situation gets too bad then retailers start dumping off to grey marketers. Manufacturers don't want that so they often quietly buy back old stock or discount new stock to help out the retailers. If stuff doesn't sell it eventually works all the way up the chain. Everyone hurts. I think Gibson has decided to stick to the high margin niche. I saw this happen with consumer electronics brands in the 80's and 90's. The pie stays the same but how the pie is shared out changes. In terms of profit high margin, lower volume does better in this type of market. High volume, low margin gets very, very tough to compete when labour costs are different. Think Korean, then Chinese electronics manufacturers vs. Japanese. The Japanese had to contract out or become very efficient (think robots) manufacturers to compete with first the Koreans, then the Chinese. The manufacturers that concentrated on higher end survived. Some of the lower end guys didn't. They all lost market share in terms of number of items sold. The ones that concentrated on high margin didn't lose as much in terms of income.

Talking to local dealers though, those that are still Gibson dealers, and those that are not, that's not how it works with Gibson. First, they are required to buy X amount of merchandise each year, to be an authorized dealer. They also don't buy stock back, not directly.

 

[Kerry Brown]

Talking to local dealers though, those that are still Gibson dealers, and those that are not, that's not how it works with Gibson. First, they are required to buy X amount of merchandise each year, to be an authorized dealer. They also don't buy stock back, not directly.

That is the official way it worked with electronics as well. It is not how it actually worked. In the end it doesn't really matter I guess. Gibson has made a business decision. The only reason I bought my SGJ is because I've always wanted a new in the box real Gibson guitar and The SGJ didn't break the bank. Turns out it's a great guitar which made me very happy. The only Gibson's I'll be acquiring in the future will probably be trades. I'm too cheap to spend more than $500 on a guitar :)

 

[Biddlin]

Yeah, the buy in requirements are steep, which is why mom and pop aren't Gibson dealers, anymore. The last time I checked, about 5 years ago, the buy-in was $150,000 and you agree to take the whole line, and give it the best floor/display space in the store, no buy backs. Epiphone dealership is much more attractive, at about $80,000 to buy in. Fender dealerships are a bargain, but the company is notoriously ruthless about not renewing or voiding agreements over trivial stuff. Get mom a goalie mask.
;>)/

 

[lunchie]

I am a happy owner of a 2014 SGJ, give me all those cheap SG's with the ugly 12 fret inlay.

On a scale from 1 to 10 on the quality of craftsmanship I would give it about a 3.5. There are some issues that it had out of the box but I decided to keep it anyway. I'm glad I did because it quickly became a go-to.

The biggest disappointment was the neck. There was a sharp lip where the neck and the fretboard meets. Now, I've played it enough that I've worn it down enough its no longer sharp. Not a fan of the stock tuners on it, they don't seem to work the greatest and they just feel cheap. Eventually they will get replaced. The knobs couldnt get replaced fast enough. Those speed grip knob things feel so bad. $15 later and a nice set of mirror top hats and I'm a happy camper.

LOVE, LOVE, LOVE the Zebra 61's. I figured they would get ripped out and replaced but they were a huge surprise. Those are what made me decide to keep it originally. Now I tend to pick it up, not only for the pups, but because its so dang comfortable to play whether I'm sitting down or standing.

 

[cybermgk]

The only reason I bought my SGJ is because I've always wanted a new in the box real Gibson guitar and The SGJ didn't break the bank. Turns out it's a great guitar which made me very happy. The only Gibson's I'll be acquiring in the future will probably be trades. I'm too cheap to spend more than $500 on a guitar :)

LOL, now above I can agree with a lot. I have only spent over $600 once, and that for a semi-custom order with SS frets, contoured neck, neck through, chambering, light figured cap, ebony, MOP etc. I.E. all my wants in a guitar. Amps, are a different story. I also bought 2 new, lower end Gibson's, at year-end blow-out prices (so $550 or less). If I was honest, part of the reason was to have a MIA Gibson. But, if they were not good guitars, played well, looked good, sounded good that felt good to me, I still wouldn't. That was one of my 60s Tribute LPs and the Faded Studio. Other Gibsons were bought used (2nd Tribute LP and 2 SGs, Faded Special and 60s Trib).

Oddly, that 60s Tribute SG is probably, one of my best overall guitars (for me). I honestly would take it over some mre expensive SGs, as far as feel, tone, playability and looks go. If it had block or trap inlays, it would be perfect actually.

Now, if Epiphone would make more models with Satin or Matte Urethane finishes, I might not miss the lower end Gibsons.

I also think they may come back to them again.

 

[LeadFinger]

I got lucky with my SGJ in that the fretboard fit the neck with no lip, so I've loved everything about it from day 1. After playing other guitars the SGJ is like going to the beach on a hot day, getting out of a business suit, and walking on the sand. It resonates with power when you play it, and the neck is awesome. Of course, you pay for all that somewhat with the thin finish that damages easily.

 

[Biddlin]

My SGJ's fretboard and neck was very well finished, out of the box. My LPJ had a noticeable seam between fb and neck that has long since worn away. I've taken a couple of small hits on stage, but so far so good.
;>)/

 

[cybermgk]

My SGJ's fretboard and neck was very well finished, out of the box. My LPJ had a noticeable seam between fb and neck that has long since worn away. I've taken a couple of small hits on stage, but so far so good.
;>)/

That my friend is the BEST Cherry SGJ finish I've seen. Good one. Too many look blotchy. Not yours. Me likes

 

[colchar]

What I'm going to say may sound like heresy but here's my theory of why Gibson is abandoning the less expensive models.

As much as many of us like the SGJs, LPJs, etc they have been a failure for Gibson. Many stores are still trying to get rid of 2013 models. One Canadian chain store has had ten 2013 SGJs in stock at $449 for months. They've recently lowered them to $429. During this time they are selling lots of other guitars at the same price point. I don't know why this is but it is. There can't be a lot of margin for Gibson or the retailer at ~$500 given the price of labour in the US. I'm betting Gibson lost a ton of money on the 2013 & 2014 J models. It was a gamble that didn't pay off. I think they are overreacting but in this day and age when shareholders seem only concerned with short term profits their decision to drop them is understandable. I don't like it but I understand it.

Gibson doesn't have any shareholders - it is a privately owned company.

 

[smitty_p]

Tellin ya'll..the best way to sock it to that A hole Henry J is to NOT BUY HIS ****...hit 'em where it hurts..
So far, refusing to buy or own ANYTHING made in his regime is working out swimmingly for me!

As much as I'd love to join you in your quest, it's too late for me. My Lester is a 2007.

Ignorance is my only defense!

 

[LeadFinger]

At the risk of sounding, (wait for it) --- pedantic, I'll point out that many private companies have shareholders. Some of them have thousands of shareholders.

But there's a point.

ALL companies have stakeholders, and the ones that <cough> influence the decision-making of the CEO are the ones behind his money. I don't know what Gibson's finances look like, but never assume that because a guy is rich he is self-financing. In fact, the quickest way to get un-rich is to self-finance. With money as cheap as it's been, bastards have been tripping over themselves to invest in call kinds of stupid **** these past years -- maybe even something as downright stupid as a musical instrument company.

Of course, even Wall Street couldn't find enough stupid people to float Fender's wanna-be IPO a few years ago. They were like, "$250 mil in long-term debt, and you sell what? Electric fking guitars? Stop, I've ruined my keyboard and my boxers now. El oh el."