Friday, 19 September 2014
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Where did it go wrong for HMV?

High-street retailer HMV’s demise has been predicted for some time now, so the fact that it is finally going into administration has been greeted with significant sadness but no great surprise.

HMV

Source: Jason Paris

Dire Christmas sales figures from the retailer have apparently left HMV unable to secure the bank loans that might continue to prop it up, and the 92-year-old chain now looks set to close, with the loss of 230 stores and around 4000 jobs.

Most commentators agree that HMV’s inability to compete with online retailers such as Amazon, as well as supermarkets such as Tesco and Sainsbury’s, has led to its demise – but could anything have been done to keep it afloat?

In design terms, there were three main areas of challenge for HMV: branding, retail design and interactive design. Two of these it got broadly right, one it got badly wrong.

While it seems a strange thing to say about a company that is about to go out of business, the HMV brand is still a very strong one – witness the collective sadness at its potential demise. HMV has been a presence on the high street since 1921, and describing it as an ‘institution’ (as Labour business spokesman Chuka Umunna has, for one) only seems slightly hyperbolic.

Recent projects by Venturethree – which has worked with HMV since the mid-2000s – allowed HMV to keep a vibrant high street presence while referencing the brand’s heritage (witness, for example, the rather charming animated Christmas campaign featuring an animated Nipper the Dog).

The fact that HMV kept going for so long – it is the last major music and DVD retailer on the high street – must be due in some way to this brand strength.

Similarly HMV’s store design got a lot of things right. The last major redesign, by Dalziel + Pow in 2007, brought in some digital elements – plasma screens, internet hubs, MP3 purchasing – while still allowing HMV’s core physical product to shine through.

In its store design, HMV always had to strike a balance between providing interest that would attract customers and make them stay – but also facilitating a high spend.

One business criticism of HMV’s former rival Virgin Megastore (before it too closed down) was that customers were spending plenty of time in the very attractive store, but hardly spending anything. HMV, by contrast, seemed to strike the balance of a pleasant store environment with reasonably high turnover.

But the crucial problem faced by HMV was the overwhelming threat from online retailers, one that has seen off many high-street retailers. As BBC business reporter Robert Plummer says, ‘Whatever bad decisions HMV might have made, the fact is that no bricks-and-mortar record store group has successfully resisted the onslaught of digital music downloads.’

Against this threat, many commentators believe there was only really one thing that could have saved HMV, and that is going online-only. Many retail experts have suggested that HMV’s brand strength meant that if it had gone online ten or 15 years ago it could have built up a real presence and taken on the likes of Amazon on their own territory.

The fact is it remained tied to the high street, with its soaring rents and declining footfall.

HMV’s remaining brand strength may see it survive in some form – there is a suggestion that the UK music and film industry may step in to support it in some way – but its demise as a major high street presence tells us a lot about the changing face of retail.

Reaction to HMV going into administration:

Simon Manchipp

‘The High Street’s latest dead dog… First of all… it’s worth noting that Amazon don’t pay UK tax. So it’s INCREDIBLY hard for any retailer with physical overheads and a tax bill to compete. The outlook for HMV may look considerably better than for other recently dead store brands as (if they have any sense) the music industry and the film industry will want it to survive, just with fewer stores and with fewer locations. We are witnessing the death of the traditional high street. What used to be a badge of honour has now become a noose around many brands’ necks. Who’s financing this cull? We are. Consumers not companies drive change. Would anyone recommend a national high street presence to a start-up retailer today? Record labels and DVD distributors won’t want to be wholly dependent for sales on Amazon and Apple’s iTunes. So Deloitte are probably working on the assumption that these suppliers will help the creation of a slimmed-down HMV. I doubt they will be buying HMV out. But they would provide good credit terms to a buyer. Our buying habits have evolved. (I have not been to HMV for over a year.) The issue lies not with the branding (which was Venture Three at its charming best), or the offer (everyone loves music) but the market and the product. Film is dead. Yet Jessops clung onto an outdated medium hoping it would endure. Equally people are moving from ownership to access in music. Streaming is changing the model. But HMV were hamstrung by a massive rental overhead, and a reliance on past glories. Perhaps one of the cash rich digital’s (eBay, Amazon, Google etc.) will swoop in an buy up some shops, to create a touchpoint with customers - sell Chromebooks, give a human face to what they do, create experience stores — whatever happens, HMV may be thrown a lifeline… to avoid it being another dead dog on the high street.’

Simon Manchipp, co-founder, SomeOne

Steve Price

‘With the collapse of Jessops it seems inevitable that HMV was to follow suit. Ironically their current CEO, Trevor Moore, who was previously at Jessops, recently said “I don’t think we have tried everything,” adding, “If I thought we had tried everything I would not have joined.” Maybe they didn’t, or maybe like Jessops, the truth is that stores selling CDs, DVDs, books, cameras or electronics are no longer a part of our consumer purchasing habits. Like the music industry one can’t help but feel that they didn’t or couldn’t move quick enough with the times. Natural selection? Survival of the fittest? Either-way nearly 6,000 people will lose their jobs with the decline of HMV and Jessops - I’m more concerned that they will all hopefully find employment elsewhere than the loss of a brand that failed to evolve.’

Steve Price, creative director, Plan-B Studio.

Kevin Gill

‘The world of retail is changing dramatically.There remains a role for brands on the high street, for entertainment on the high street, for services on the high street - but for a pure-play retailer like HMV they no longer have a compelling reason for being. All of their product offering can now be better delivered by global players such as Apple or Amazon. Pure-play retailers need to innovate their business models. Too many tinker with product range, store formats and introduce the use of tech in store to show they are innovating. Rather they need to address the bigger issue of whether their business is still relevant to today’s consumer.’

Kevin Gill, joint managing director, StartJudgeGill

Readers' comments (1)

  • I think last nights feature on The One Show was also relevant to this discussion. Not so much about the retailers ideas of selling in their stores but their struggle with the cost of having a high street presence.

    Shop units are pricey to rent, and landlords are constantly increasing the rents, it's no surprise that so many new businesses are online only.

    Ultimately there needs to be a shift in the expectations and ideas of the landlords and owners of shops. All want to make money but at what cost? Eventually they will squeeze themselves out of the existence by overpricing themselves. Large chains can afford the higher rents (providing they are making money in that location) But if you want a high street you need to consider what it costs to be there and that means landlords/owners, councils and retailers to talk openly and be realistic.. maybe even government intervention is required.

    The internet has changed the world but it doesn't mean it has to stop consumers getting close to and trying out their potential purchases. Websites have yet to offer this experience and until they do shops have something they need to take full advantage of.

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