Reverb.com founder and CEO David Kalt came to MI retail with the same passion for music and guitars that most in the business do, but leavened with a tech entrepreneur’s instincts. Kalt, who was co-founder and CEO of online brokerage optionsXpress, which he took public in 2005 before the company was sold to Charles Schwab, and founder of ClientBASE, the first CRM solution for travel agents and tour group operators, would be the one likely show up at the gig in an Uber and head back later in a Lyft to an AirBnB rental, with TaskRabbit bringing dinner to the door.
His online adventurism paired well with his affinity for guitars. He started Reverb.com in 2013 and in barely three years it’s grown into the most popular music-gear website in the world. Kalt is equally comfortable in the brick-and-mortar universe, as well, however. In 2010, he acquired the Chicago Music Exchange, one of the Windy City’s better-known MI emporia, drawn by its success in the vintage guitar arena. Kalt added drums and other instruments to its portfolio even as he burnished its social-media presence, most notably with the viral video of “100 Riffs.”
Here, Kalt has his own riffs on how online and brick-and-mortar can interact, the prospects of the resale market and why that Jazzmaster is so damn hot.
GAMA: Reverb.com has been regarded as both disruptive and complementary to the traditional guitar retail market. Do you see it that way?
David Kalt: Definitely. We see ourselves as very complementary to what’s going on but we also are disruptive in, we think, a very positive way. It’s a two-way marketplace [and] we’re the middle man. We’re making it easier than ever for buyers and sellers of guitars, accessories, all music gear to connect with one another. We’re not changing the behavior; we’re just simplifying it. We’re bringing buyers and sellers together in a very unique way that I think allows us to grow the entire pie.
GAMA: It produces an effect beyond the initial transaction?
DK: Exactly. I have many, many examples of musicians going to their local music store expecting to get ‘X’ for something. Then they get half ‘X.’ They walk out. That instrument ends up going back to a hook in their basement or their music room and not getting played whereas now they can get pretty darn close to ‘X’ and feel good about it. Then move on to find something else that they want to consume.
GAMA: You came at MI retail from a very, very different perspective. You came at it from basically the high-tech world rather than as a player. Is that a fair assessment?
DK: Yeah. I’ve always been in technology, but I’ve always never considered myself technology exclusive. I really am a product guy, and a customer-service guy. I love to wow the customer. As a consumer of music products and other products, I always look for brands and retailers that inspire and don’t just take the order and expect some margin from it. The reason I bought Chicago Music Exchange is I saw it as an inspiring store. I really wanted to build an inspiring experience for MI [with] enough knowledgeable salespeople to really support that inspiration. That’s what I’ve done in tech. Now I’m trying to marry that with the same inspiring experience in a brick and mortar store online at Reverb with all the great retailers and individuals who have amazing gear to offer the world.
GAMA: Until you put the word MI in there, that sounded like you were building or describing a template that could have been applied to almost any kind of a retail lifestyle proposition.
DK: Who would have thought people would go and hang out in computer stores and just wow over the little black devices that sit on tables, but Apple figured out how to do that. The other thing that the [CME] experience includes is the mixing of new and used, where you can play the $20,000 1962 Stratocaster or you could play Fender’s new re-issue of that or you could play a Squier Chinese-made Stratocaster right next to it. It takes more work to effectively [combine] used and merchandise used inventory, but when you mix the history with the present, you create a very compelling experience that multi generations love. Musical instruments need to be in the same room in order for people to explore and discover the past.
GAMA: How is the resale market compared to previous years these days, and which brands are holding or increasing in value today?
DK: The pure vintage market — 50s and 60s, Fenders, Gibsons, Martins — is pretty stable. That market is recovered from the recession, [though] I wouldn’t say it’s booming. I’d say the used market, the 90s and the early 2000s, there was a lot of great guitars. I look at [that] as Fender, Martin, Gibson, Taylor and on a smaller level Rickenbacker.
GAMA: In the upper end of the new guitar market, is there a danger of “affluenza” — the narrowing of the market into an older, more affluent set of buyers and collectors.
DK: I do worry about that from time to time, but I’m not seeing anything that gives me any real fear. The best telltale that market is still strong is when I see the up and coming artists that are playing Lollapalooza and Coachella and Bonnaroo come through our store. Whether it’s Mumford and Sons or Adele or Tame Impala or independents, they flock to Gibsons, Fenders, Martins, old ones, 70s, 80s. I think there’s a generational gap whereas you might not want to play what your father played but maybe you’ll play what your great-uncle or your grandfather played. I definitely see the top performers, the main stage performers at the festivals playing quality used instruments.
GAMA: Why have Millennials elevated the Jazzmaster to status of deity?
DK: You could maybe point to Sonic Youth? Nels Cline from Wilco? Elvis Costello was a pioneer in that. I love watching kids explore offset guitars and their fascination with them. There’s a lot of great music coming out of that. I can’t totally explain it, but I love it. Chicago Music Exchange has a custom Fender exclusive that we built, a walnut Jazzmaster that’s doing exceptionally well. It’s really cool to see.
GAMA: What changes have you seen among the high-end guitar buying community over the last couple of years? What are your expectations for the future, particularly the holiday sales season? When I say the future, the near future?
DK: I think it’s going to be an extremely robust holiday season. We’ve had a really strong summer season, which tends to be seasonally slow, so I’m pretty optimistic that holiday buyers are prepared.
I do see people that are not as married to their purchases as maybe they were in the past. The best thing that we can do for this industry is have a really strong, healthy used market, not because the new, shiny object is so much better, but because tastes can change and objectives can change. When artists are trying to discover some new sounds, they have to be able to swap instruments. That, to me, is a real healthy sign in the market, because when people spend thousands of dollars on a bunch of new gear that they buy for the holidays and then they’re stuck because they don’t see value in that, then they can’t consume or they can’t try other things. People are relisting things and moving on.
The stomp box/pedal effect category is really off the charts. What really surprises me as a guy in his late 40s who bought Boss pedals in the 80s is how much the kids today, the young players, how committed they are to analog sound. Even though they could get pretty close with a digital signal processor, they can get them 90 percent of the way there, they’ll go and buy three, four different fuzz pedals just to get that subtle variation. They’ll buy multiple delays. They’ll buy different distortions. There’s unlimited exploration going on in the pedal and effect category. It’s creating real, real discretionary spending.
GAMA: You mentioned you own Strats, Teles and a Les Paul. What’s your personal favorite?
DK: I have this 1963 Stratocaster which just represents something that I was able to acquire when I had some success. It’s a great American-made guitar that symbolizes the blues and great music of the ‘60s, ‘70s and ‘80s. I just cherish that. I’m still stuck in the past with my Stratocaster, but there are [guitarists] like Josh from the Red Hot Chili Peppers. They played Lollapalooza two weeks ago, and it was all Stratocasters. There’s lots of future generations that can appreciate the tone you get out of a Strat.