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Double Glazing Blogger: How Long Left For HMV?

Monday, January 9, 2012

How Long Left For HMV?

HMV announced figures today that in the 5 weeks leading up to Christmas in 2011, sales were down 8.2% in comparison to the same 5 weeks in the year before.

You know things are bad when the company itself is saying that it may not be around in the coming few months! However according to reports, the suppliers to the high street chain are still backing the company, which is probably the most important string to the HMV bow right now. If they lose the support of their suppliers however, they might as well shut up shop now.

The big question here is what has caused HMV to be hit so hard? It lost out mainly due to being on the back foot when it came to the digital music revolution. iTunes from Apple really hit the company, as well as others, very hard indeed. In fact iTunes sales account for over £2billion per year in online music sales in the UK. Other companies like Amazon have adapted a little bit better. They've created their own music download section, though it's nowhere near as advanced as iTunes, at least they're making an effort. HMV on the other hand have been very slow off the mark. They have tried to update their online music operations. Their site looks well laid out, better than the Amazon download site. They have a list of 8 million songs to choose from, and the prices are very similar to iTunes. But because they were so many years behind Apple, most people's default choice of online music store is now iTunes. They won't be able to catch up.

Speaking from a personal point of view, their prices in-store are far too expensive. Why would I pay £15 for an album when I could pay half that online? Spending another £7/£8 just to own the case isn't enough justification. 

HMV have spent a little bit of money trying to update their stores. The thing is, I never found their stores dowdy or offensive in the first place. I always found it a nice environment to be in. So money wasted there if you ask me.

They've also made their way into technology. They sell things such as iPods, iPads, speakers and other musical hardware. The problem here again is price. Online these items are cheaper. And if someone is going to buy something like an iPad, or speakers, they're more likely to go to those suppliers direct and pay a cheaper price.

I think the overall problem here is that HMV have an old business model that has just been caught out by the advances in internet shopping habits and the recession. I can see the chain going into administration sooner rather than later. Hopefully it will find a buyer. I've always been a fan of HMV. In fact I have a points card with them, which I probably need to spend before they go! Someone, possibly one of the guys from Dragons Den, needs to take over the store and inject some new passion and ideas. Maybe reduce the high-street presence, as there probably isn't a future with that, and focus more on creating a bigger and better online business.

The employ thousands of people in hundreds of stores. It will be a sad day if they were to go from our high streets altogether.

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6 Comments:

Anonymous Anonymous said...

Wherever you shop you will never get a lower price on an iPad. Prices are set by apple, can't be altered so same price at hmv as apple store etc etc
I for one hate online shopping. Loathe it with a passion and would much rather go to a shop.

January 9, 2012 at 8:38 PM  
Anonymous Anonymous said...

Amazon are untouchable when it comes to books, music, videos and electronics. They've been leading online shopping for more than ten years.

More recently, iTunes has claimed a significant stake in the music market with downloadable music. Like Amazon, they're untouchable.

So, in your infinite wisdom, you think HMV should move away from the High Street and concentrate on the online market, where they have absolutely no competitive advantage, but will always be more expensive than their rivals.

Genius.

January 10, 2012 at 1:18 PM  
Anonymous Andy said...

Re the above comment... and in your infinite wisdom, how exactly will clinging onto the high street help?

People are moving towards buying music online, both for downloads and for actual CD sales. Not surprising as this is not like buying a TV or washing machine - if you want an album it doesn't really matter where you buy it and you don't need to visit a store to research it first - chances are you've heard it on TV/YouTube/Radio etc and decided you want it - wherever you buy it from it will be the same thing so it is hard to muster up a USP to get people to buy from you rather than the next man (I'm sure that iTunes only do so well because they have a captive audience).

Which means it comes down to price for HMV and they will always struggle to match Amazon as any sales they take need to pay for their huge network of high street stores (which, of course, Amazon do not have). Even on the high street they face competition from the major supermarkets who are selling CD's etc at low prices.

So to be competetive surely HMV need to seriously limit their high street presence and focus their brand on the channels which people are actually using to buy their music etc?

It's absolute BS that Amazon are untouchable - nobody is, all companies can and do slip up. Yes Amazon have a huge advantage due to their current position, but things can and will change in time, normally because someone else is able to think outside the box and come up with the next big idea.

This is nigh on impossible if you are a start up or a small player but HMV are neither. They have a huge brand and history up their sleeve and if they leverage this well I reckon they stand a chance at competing online even against the likes of Amazon. Whether or not they do is another matter!

I would not write off the high street entirely for HMV - there is probably a limited opportunity to reinvent their presence there, but it would have to be a supporting role in order to limit rent and staffing overheads, possibly with events playing a bigger part - cd signings, live performances from mainstream and up and coming acts, gaming events, DVD screenings etc. The remaining stores could also act as decentralised customer service, admin and even warehousing support for the online activity.

Well that's what I'd be looking at anyway!

January 10, 2012 at 5:40 PM  
Blogger Double Glazing Blogger said...

Andy - your explanation of how HMV could reinvent itself was sort of what I was aiming at. It's current business model will make sure it won't see past the end of the year. It has to focus more online. I do think it can compete against the others, but if it is to stand a chance of doing so, the effort needs to be made now. Also, good point made about the existing high-street stored playing a decentralized role.

I don't think HMV should be 100% written off yet. Some creative business man could take over and turn things around in a shot - which would make those 3p shares quite a clever buy now if that does eventually happen! Think I might buy some!

Thanks for your comment Andy.

January 11, 2012 at 10:29 AM  
Anonymous Anonymous said...

The combination of their online experience (longer than virtually any other significant online store), infrastructure and global buying power DOES make Amazon untouchable in online music sales.

HMV have, for several years, had an online store of their own. It's failure (who here can honestly claim to use the HMV site more than they use Amazon?) has contributed to their difficulties.

So advising them to withdraw from a market they know well and put their efforts into a market they have previously failed in and which is dominated by corporate behemoths HMV can't possibly hope to compete with is - frankly - idiotic. Actually, it's lazy thinking; just jumping on the "go online!" bandwagon.

HMV need to seriously assess their current business model and - based in part upon their long retail history - come up with creative ways of reinvigorating their physical High Street presence. And if you need an example of real shops succeeding in a digital market, just look at Apple stores.

January 11, 2012 at 1:27 PM  
Anonymous Andy said...

I take your point about the online bandwagon, but in this case I genuinely think it does apply, simply because the market for their product really has moved online and , I believe will c0ontinue to do so more and more, especially as the download side grows at the expense of CD sales.

Speaking personally, I always resisted buying music as a download and preferred CD's - although I do still buy CD's, I get most my music now via downloads and what CD's I do buy are brought online, 99% of this at Amazon (and very occasionally in supermarkets as more of an impulse buy). This seems to be the way it is shaping up and I wouldn't be surprised to see CD's as a format for music distribution falling away in the not too distant future, just as tapes and records did before CD.

I also absolutely agree that Amazon has an intimidating position in online music sales (even my 65 year old dad buys his music on Amazon) and that HMV have not made their online work. But the fact that they are teetering on the brink of failure shows that they have also failed to make their retail side work in the age of broadband driven internt. All I am saying is that if they are to have a future, it surely has to be focused on where the sales are predominantly now, and where they are certainly heading even more so.

HMV still have a strong brand to fall back on and one that is firmly centred in music - if they use this creatively and effectively to their advantage then I honestly think they could steal some market share from Amazon. Especially if they link it in with a much reduced but unique high street offering along the lines of what I was talking about in my previous comment.

But again it all hinges on being able to compete on price - not necessarily undercutting or even matching Amazon, as long as they can get close. HMV have a firm focus on music - Amazon handle music very well but they have a wide product offering to accomodate and this in itself should present opportunities for someone like HMV to make improvements. Rewards cards are one idea, perhaps tie ins with some of the big events companies so that these points could be redeemed against live music shows for example.

Not saying that all this would be easy, but it's going to be a hell of a lot harder trying to sell music on the high street once everyone is buying it online.

I'm not convinced that Apple is a great example for this debate as it is really not comparable unless I'm missing the point here? For example, Apple are selling hardware from their stores, not a digital product that could be downloaded.

My bottom line is that I couldn't say with any certainty that HMV has any kind of future, but that if it is going to it has to be built around the internet - i.e. where the sales are now and where they continue to grow. Trying to build a future focused on the high street can only hope to, at best, delay the inevitable.

January 12, 2012 at 12:02 PM  

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