Upstart Mars Music Jostles With Old-Timers Online

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Mars Music continues to expand its online and offline commitments despite the rumblings of industry analysts and veterans who believe the 3-year-old musical instrument retailer entered a market that is already full.

Under its latest initiative -- aimed at positioning itself against decades-old musical instrument retailers Sam Ash and Guitar Center -- Mars Music added a guitar lessons channel to its site on Feb. 28. The lessons consist of video files that can be downloaded for $11.95 per session. A package deal worth five lessons is being offered for $47.95.

The company also expects to roll out online lessons for flute, clarinet, saxophone, trumpet, trombone, piano and bass guitar during the upcoming weeks. Mars Music, Fort Lauderdale, FL -- with 47 warehouse stores in 27 markets -- is using the 165 part-time music instructors from its stores for the videos.

The company plans to spend $2 million to promote its Web site throughout 2001. A small chunk of this money will be spent on promoting the music lessons via e-mail and postcard mailings, as well as through sponsorships for music teachers' conventions.

The company also plans to enter at least four markets in 2001 after launching in 11 cities last year. Mars Music spokeswoman Bonnie Bernstein said her firm will use the stores to promote online sales and vice versa.

Most sources said they believe reports from market analysts who say there is only room for two big players in this sector.

Dean Foster, owner of longtime wind instruments retailer Pro Winds, Bloomington, IN, said common business sense makes Mars the likely victim.

"Whom would you rather invest in -- a new Internet-type company or one that has shown it can show a steady profit for [decades]?" he said.

Bernstein admitted that the analysts' reports about this sector being full are well known in the market. However, she said, her firm believes it can create its own loyal purchasing market with programs such as the music lessons.

"I don't think we have a direct competitor because we are doing something different than Sam Ash and Guitar Center," she said, "and they are doing different things than us."

However, Sammie Ash, senior vice president at Sam Ash, repeatedly referred to Mars Music and Guitar Center as his competitors last week. He believes the two firms are overexpanding online and offline, and he foresees at least one of them going out of business in the next nine to 12 months.

In comparison, his company has opened only one store in the past year and has employed a decidedly conservative approach to promoting its e-commerce site,

"We are in a wait-and-see mode as far as these expansions by our competitors," Ash said. "We believe some of our competitors aren't watching the walls they already have."

The main philosophy for all three firms lies in their high-volume warehouse retail stores and bargain product pricing that are designed to gain market share by squashing small local competition. The philosophy appears to work in markets where the big firms do not see one another.

Derek Ferrell, owner of musical instrument retailer D-Rocks, Omaha, NE, said Mars Music moved into his market last August and has cut his business in half. He said Mars Music is driving prices down and is winning over many of his customers.

Ferrell said Omaha, which has a metropolitan population of about 1 million, had not seen a warehouse-style musical instrument retailer prior to Mars.

"I had an employee go work for them and then come back to work for me," he said. "[The employee] said Mars did $800,000 in December, which is phenomenal for a market this size."

However, Mars, Sam Ash and Guitar Center are starting to bump into each other more often. As an example, Mars Music entered the Southern California market last year -- following Guitar Center into the territory.

Foster said the head-to-head competition will likely push one out of business as they drive prices further down and tighten each other's profit margins. He said the three firms also might be hindered by fulfillment costs on Internet orders as they battle for dominance there.

"It will come down to one or two big guys, just like any other retail sector," Foster said.


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