Alex Marten (right) and co-owner Joe Frankel
Kenny’s Music has been on quite the journey, asking the public to invest in your community crowdfund and join your mission to build the UK’s home of pre-loved music gear. Why did you decide to pursue crowdfunding?
Having acquired Kenny’s Music from the previous owners back in 2022, our plan was to build on the solid foundations they had laid and ultimately take the business to the next level. Kenny’s Music has always had a great reputation across Scotland, and we felt like the rest of the UK (and the world) deserved to get in on the action! We could either continue to grow organically or we could raise money to strategically invest in targeted, more rapid growth.
There are myriad ways of funding a business, from boot-strapping to loans to angel investors to venture capital, and each has its upsides and downsides. I’ve long felt that crowdfunding is a great way of funding a retail business as it not only generates the capital required to grow but also puts the customers of your business right at the centre of the action, ultimately building a legion of brand advocates.
It’s a common way of building businesses in the tech and FMCG worlds and – if successful – it’s a great way to generate funding, loyalty, and exposure, all in one go. It is a growth tactic that has been hugely successful for Brewdog, Monzo, Peloton and many others.
I’m surprised that it hasn’t been used more widely in the MI world as our businesses are built on passion and brand loyalty, so it seems like the perfect fit.
The target for your crowdfunding project was £200,000, and you’ve actually ended up raising £243,036. Why do you think you were so successful?
We’re really chuffed to have smashed our target, and it’ll mean we can accelerate our plans. I suppose we were successful because 1. Our message resonated with our customers (and further afield), and 2. we worked very, very hard on the campaign! The aim was to get the message out to as many people as possible, and I think we did very well on that front. Huge props to the Kenny’s Music team for getting behind it and giving it their all! And also to the many friends of the business who helped us spread the word, and of course the investors themselves for believing in us.
What does this all mean for the structure and business model of Kenny’s Music going forward? Does every shareholder own part of the company, and how does this align with your mission?
Company structure wise, there is no fundamental change, other than there being more people involved – we have issued new shares to all the investors who have come on board, meaning every investor from £10 upwards now owns a share of Kenny’s Music.
This will mean we will need to report to shareholders on a regular basis, but that’s a good discipline anyway and ensures we keep focussed on making sure there’s lots of positive stuff to report!
In terms of aligning with our mission, we are very much focussed on becoming the central musical hub in the communities that we serve (both locally and online), so offering our customers an opportunity to own a part of the business and support our growth completely makes sense.
Tell us why you specifically want Kenny’s Music to be the home of pre-loved music gear. Why is the second-hand market so important to you?
There are three main reasons: variety, diversification and sustainability.
Firstly, variety: the business model of many of our suppliers now is to proscribe quite closely which products dealers must stock from their ranges. I appreciate why; they want to sell what they make, and they want to ensure a consistent experience and standard from their dealers. However, this can lead to music shops being very same-y; the same stock, the same fittings, the same marketing. I really don’t think this makes sense in an industry that is selling to creative people – creative people like variety! With second hand gear, you can massively expand the range of products you stock, and you are giving potential customers many more reasons to travel across town – or across the world – to come and visit you.
Secondly, diversification of the business. This is the complement of ‘variety’ – margins have been consistently eroded in selling new gear. The vintage and pre-owned segments give us an opportunity to add value through sourcing, expert advice, refurbishment and provision of warranties, and support the kind of margins you need to make to exist as a retailer in the 21st century.
Finally: sustainability. At the risk of being accused of green-washing, I think this is actually one of the most important reasons to embrace the second hand market. There are millions of instruments in the world already, do we need to keep making more? I appreciate that there is a place for innovation in the MI world, and we will always stock a decent range of new products for those that want them, but if we can replace even 25% of our sales with second hand gear, that will make a huge difference to our carbon footprint.
Where do you see MI retail going over the next few years?
In terms of the relationship between dealers, distributors, and manufacturers, I think something really needs to change. The financial rewards for stocking products in expensive city centre stores are simply not sufficient to maintain those stores, and manufacturers underestimate the value those stores bring at their peril.
It used to be that the buying decision and the purchase itself were made in the same place (a physical store) but this is no longer the case – the buying decision may be made in a store and the purchase made at another retailer online (“showrooming”), or indeed vice versa: the customer decides what they want to buy online and then visits a local store for convenience.
Often buying decisions are made on Youtube, or TikTok or whatever. The key is that rewarding an outlet purely based on the level of sales going through that outlet (via profit on items sold) no longer makes sense. Channels (whether a shop, a website, or a TikTok profile) need to be rewarded based on the value they bring, and the costs they incur in doing that.
I think a model whereby stores are treated more like advertising opportunities than sales outlets would make sense. If manufacturers need customers to try their products, why not pay for space in stores to let them do that? Whether that store sells that product doesn’t necessarily need to be part of the equation.
I am a huge fan of online retail, and think good quality online retailers can and do offer masses of added value to customers, but it is not realistic to expect bricks and mortar stores to survive on the same margins that online retailers do, so another model is required.
Do you have any advice for businesses that are interested in going down the equity crowdfunding route?
I’d highly recommend it! Although it’s been a pretty manic few months, I’m really glad that we did it. I think it really makes sense in the MI world where customers are very loyal to brands, and could work particularly well for e.g. an up-and-coming manufacturer.
I’d be happy to talk to any other business owners considering it as a growth option.
