Ray Williams of Music Marketing, Inc. – The Selling Power of the XCHANGE Market Platform

Canada-based Music Marketing has been expanding its reach into the American, European, and Asian markets since the group’s founding in 2002 and now serves as a software and hardware distribution center with a truly global reach.

MMR sat down with president Ray Williams to talk specifically about the company’s XCHANGE Market Platform and the more recent XCHANGE HD offering in order to learn more about the many powerful advantages available to MI Vendors and Resellers.

In most basic terms, XCHANGE Market Platform is an Internet Delivery Service. For those unfamiliar with how this differs from a traditional distributor or Retailer, can you expand on what XCHANGE offers its clients?

XCHANGE is an internet platform that allows Retailers to offer and sell products without first having them in inventory. The platform mainly offers software products as it is very easy for software products to be sold without being stocked and delivered digitally. XCHANGE put this idea into practice in the marketplace back in 2009. Today, the system is responsible for almost 2 million transactions between hundreds of Vendors and Resellers in 70-plus countries around the world.

As we look back today, it’s easy to forget how difficult it was to launch the concept of selling something that no one could not see, touch, pick up, or put on a shelf. It took more than five years of evangelizing for the concept to make significant inroads into the market. Today, all the major and medium-sized Retailers use XCHANGE to sell a significant amount of software. To our delight, a lot of small Resellers all over the world also use XCHANGE to sell software and make a significant amount of money.

The major difference between XCHANGE and “traditional distribution” is that it sells products digitally. XCHANGE allows a customer to purchase a license from a Reseller’s website and obtain delivery of a license code from a Vendor halfway around the world in seconds, even in the middle of the night. We believe XCHANGE is the best business model in the music instruments retail business.

XCHANGE is tailor-made for music software retail. Can you explain why it’s become such a powerful software marketplace?

XCHANGE has become a successful marketplace because it allows Resellers to sell and deliver products instantly over the Internet. It has attracted hundreds of software manufacturers from all over the world who offer their products in one place. The convenience of having over 7,000 music software products in the same marketplace is a very attractive proposition for Resellers all over the world. The fact that XCHANGE was Internet-based allowed software Resellers in challenging markets like China, Brazil, and India to operate on a level playing field with Resellers in the USA, UK, and Germany. We are very proud of this democratization of the software marketplace and if we did nothing more, we would have made a significant contribution to the MI business.

Similarly, many small software  Vendors have become very successful because of XCHANGE. These tiny  Vendors are able to access the same hundreds and hundreds of Resellers all over the world just like the larger  Vendors. All  Vendors enjoy the same access to the XCHANGE Reseller pool. This is very significant because small software  Vendors often have some of the most innovative products. It is important that they have a chance to get these products to market without roadblocks.

Who are some of the music software Vendors already selling with XCHANGE?

There are many software Vendors who have been selling on XCHANGE from the beginning, and we appreciate that they bet on XCHANGE when it hardly had made a sale. Some of our  Vendors include Antares, IK Multimedia, Avid, PreSonus, Celemony, FabFilter, Soundtoys, McDSP, Arturia, XLN Audio, Output, Image Line, Yamaha, Hal Leonard, Eventide, Roland, Make Music, Music Marketing, and many others.

For MI Retailers who’ve yet to leverage the selling and productivity power of APIs, can you explain the advantages and how those are achieved?

XCHANGE generates thousands of small sales when fully scaled. The reconciliation of these can be a very laborious task if you have to do it manually. As a result, we built several plugins for the popular shopping carts, like Magento, Shopify, WooCommerce, and BigCommerce, to allow the automatic mirroring of web shop transactions on XCHANGE and local point-of-sale systems.

Our generic API allows direct digital connection of any web cart and any point-of-sale system to XCHANGE. By making an API connection to XCHANGE Resellers remove the manual work and potential human errors that can result by copying and pasting sales data between the XCHANGE browser and a local system. The digital connection from the API allows automatic purchase orders creation, license code retrieval and instant delivery of software products to customers.

The most successful Resellers on XCHANGE have all integrated their systems via our API, which means it is the same amount of work to sync 10 sales per day as it is to sync 10,000. Some Resellers even go further and allow automation of payments reconciliation and invoice status. This removes hours and hours of work from the staff and allows them to do more productive tasks to increase productivity and profits.

The other obvious advantage is that the store can sell products when it is physically closed. For example, XCHANGE has recorded hundreds of thousands of transactions between the hours of 9:00 PM and 9:00 AM. Without such a system, these sales would not be made in the retail channel. This is not a surprise as lot of musicians are up and about after hours and sometimes need to get products right away. We ae happy to allow Resellers to make money while they sleep.

XCHANGE HD is a whole new platform being offered that allows XCHANGE’s automated software delivery to be applied to hardware products. Can you talk about how this works?

XCHANGE in daily use in many countries by hundreds of the best Resellers in the world. It therefore made sense to extend the system to hardware. Some of our Vendors really pushed us to explore this option. At first, we didn’t think it would be possible, but with a little creative thinking, we found a way.

The hardware expansion is built on a carefully constructed network of Logistics Centers contracted by XCHANGE to supply logistics services to our Vendors. Vendors can connect with a Logistic Center in a region, move products there, sell products to Resellers in that region, and direct the shipment from the Logistics Center. Vendors would move products to a region on demand based on market dynamics. The Logistic Centers are distributed around the world in key regional hubs that allow Vendors to serve all or just one region in the world. It all depends on the needs of each Vendor. The key thing here is every XCHANGE Vendor has access to all Logistic Centers when they need it. We have already selected and negotiated the terms of service, our Vendors only need to connect and expand their business globally.

To be clear, Vendors can use XCHANGE HD to serve the world or just a part of the world. They use the system partially and at the same time continue to use existing distribution structures working just fine in certain Regions. XCHANGE HD is not a necessarily a total replacement for everything, it provides access seamless, transparent, secure access to regions needing better service with professional partners. We have visited all the logistic partners and affirm the quality, security, and reliability of their operations. XCHANGE is investing more than money here; we are investing our reputation in this network. However, we believe this is an absolute necessity to build trust and eventual success.

XCHANGE HD provides a huge opportunity for small manufacturers who have a lot of difficulty establishing effective, efficient, and successful global distribution networks. Some small manufacturers work years and sometimes decades, before attaining an effective global distribution network. Since XCHANGE HD is essentially a ready-made global network serving all major markets, that accepts your products with no questions asked, manufacturers can freely deploy products to any part of the world and build their business and demand with XCHANGE tools and services. This is a natural evolution, and we believe it is transformational for our industry.

In addition to Logistics services, XCHANGE HD offers Marketing Centers that are regional Sales and Marketing companies with Regional expertise and influence to assist Vendors in engaging the best Resellers in the Region. Marketing Centers are experienced, respected, and influential in their Regions. To round out these services, we offer Service Centers for returns and repairs as well as Experience Centers where your products can be contracted for display in high-traffic, important spaces and busy stores. XCHANGE Vendors now have access to any amount of the global market they need.

A number of factors have rapidly changed the retail, distribution, and delivery landscape in recent years: the expanding reach of Amazon, global market geography, the looming irrelevance of legacy distribution, COVID-19, buying habits of consumers, et cetera. Could you expand on how XCHANGE and XCHANGE HD help stay in step with (or even ahead of) this changing reality?

Amazon and COVID have had a massive impact on music instrument retail over the last few years.

Amazon entered our market and is now, in several major Regions, one of the top, if not the top musical instruments Retailer. In addition, Amazon convinced MI Resellers to sell products on Amazon. In addition, Amazon convinced manufacturers to sell products on Amazon alongside Resellers. And Amazon convinced many Vendors to allow it to sell their products on Amazon. So no matter what, Amazon comes out the winner. It’s like playing a tennis match against an opponent who wins every point regardless of where the ball lands.

The rise of Amazon was not fatal, Retailers and Vendors adjusted to a parallel distribution system that offered great convenience of home delivery. Customers loved not having to drive down to the store and find that the product was not there. Customers loved having the ability to compare products against many similar products instead of have to choose from a limited assortment in a store. Customers loved not having to wonder when the product was going to arrive. Customers loved having the ability to return goods in a simple way. Let’s face it, Amazon is a great way to buy stuff. Unfortunately, for Resellers who cannot cope with or adjust to this reality, for whatever reason, their business will be hurt.

COVID-19 introduced a whole new set of issues for the industry primarily supply chain mayhem, massive freight increases, and debilitating currency volatility. Added to that is a permanent change in consumer behavior from driving to the store to wanting to have everything delivered. Retail would never be the same. It will not go back to the way it was in 2019. Today, as the COVID pandemic fades into history, we are left with a landscape permanently changed. In this new landscape not only do you have to contend with an emboldened, empowered Amazon but also with a changed consumer for whom ecommerce is the norm.

In this environment traditional distribution is going to be disrupted and only powerful, unique, and multi-dimensional distributors could survive. The notion of setting up a global distribution network from scratch is a near impossible task.

It’s a new world.  Vendors embracing this new world built on ecommerce and parallel distribution will thrive and compete well for sales and market prominence. XCHANGE HD is built for this world. It is more than just ecommerce and logistics, but integrates business intelligence and Regional know-how. When we project 5 or 10 years we see XCHANGE HD conducting tens of thousands of monthly transactions moving hundreds of brands efficiently, affordably, and quickly to customers. We believe it will be a great opportunity to better serve our customers around the world.

To whom are XCHANGE and XCHANGE HD available options? Is it on a global scale, are these platforms exclusive to North America, Canada-only?

XCHANGE has always been available globally with the same level of service in Beijing as in Los Angeles as is in Istanbul. There is no difference. XCHANGE HD is being rolled out in phases currently it is available for North and South American markets as well as Asia, Middle East and Africa. The Logistic Centers are located in Los Angeles, Toronto, New York, Miami, Luton, Amsterdam, Dubai, and Singapore. The number of locations will grow as the business demands. Resellers in almost 70 countries are already using XCHANGE and very soon, Resellers in any country will be able to use XCHANGE to purchase software and hardware.

Aside from the strictly business advantages presented by XCHANGE, what is the environmental impact of embracing this approach?

By digitizing software sales, XCHANGE prevented tens of thousands of trees from being cut down and turned into paper for boxes, CD sleeves, labels, manuals, envelopes, cardboard boxes and so much more. We are proud of this contribution and this particular evolution in the software business. It saves money, it saves time, it preserves opportunities, and it’s good for the environment.

XCHANGE HD will also have a similar impact on the environment as Vendors will ship products to Regions rather than to Countries. Typically, Vendors set up global distribution networks with distributors in 40, 50 and even 100 countries. Each distributor gets 3 or 4 annual shipments resulting in hundreds of shipments on the ocean and monumental freight costs. Each Distributor has to justify the freight costs and therefore need to place larger orders so the percentage of the freight cost is kept as low as possible. This results in extra products being ordered. As this behavior multiplies over many Distributors, the result is significant overproduction. The system creates excess inventory almost on purpose. However, this excess degrades profits when it has to be discounted and blown out. There are significant shipping costs attached to moving these excess products around the world dozens and dozens of countries, some side by side.

XCHANGE HD moves products to regional hubs in quantities matching the demand in these Region. The products are owned by the Vendor and this fact alone moderates the number of products and therefore amount of excess. A Vendor can ramp up or ramp down inventory levels in a Region as demand dictates. As we transition to such a system there would be a reduction in the number of products created followed by a dramatic growth phase as demand in previously underserved Regions ignite. This is exactly what we saw when the software business evolved away from physical boxes. Whenever it becomes easier to do business, your business will increase.

Does the XCHANGE team at Music Marketing have any recent or upcoming developments or initiatives that you’d like to draw MMR readers’ attention to? Will XCHANGE have a presence at the upcoming NAMM Show?

XCHANGE is exhibiting at NAMM. We support the NAMM show and consider it a key place to meet and connect, we won’t miss it. We will have Reseller and Vendor general meetings at NAMM show and a booth where we can demonstrate the system to all who are interested.

Expectations for the MI market in the coming months?

There is a lot of blue sky to get more software sales from the Retail channel globally. We see a lot more opportunities there as we are just scratching the surface.

With respect to 2023 and the mature markets, we see some early signs of softening and trending towards a small decline in overall sales. XCHANGE HD will help to stabilize overall sales, however, it will take 2 or 3 years for this idea to really find its footing.

This is an exciting time and we are right in the middle of all of this change. We love change and being able to shape it is the best contribution all of us can make to this industry that we love so much.