Is HMV an old dog that has run out of tricks?
When video killed the radio star, who would have thought that before long CDs would triumph over vinyl, downloads would top CDs, and digital streaming would kill off almost all physical music sales entirely?
Possibly not HMV. As the High Street staple announced its second administration in 6 years, citing the “tsunami of challenges facing UK retailers over the past 12 months”, commentators were calling the end for His Master’s Voice. This old dog had simply run out of tricks to reinvent itself.
But it has since been announced that Canadian firm Sunrise Records will buy 100 stores, saving 1,487 jobs in the process. The Canadian firm has a track record with HMV, having previously bought its portfolio of stores in Canada in 2017. The new owner has big plans for the “fantastic, heritage brand” it has just acquired, building on consumer experience and interaction and exploiting the growing trend for vinyl in order to turn the chain around. If first indications are anything to go by, the firm’s capability to respond to customer demand is good – the new owners have just confirmed that the iconic Fopp store on Byres Road, Glasgow will be saved following public and media outcry at the announcement of its closure.
Is this enough to carry the brand through the current turmoil? Maybe. Take a walk down any High Street now and you will see stores exploiting the concept of consumer experience, transforming the traditional idea of shopping to create a physical draw to the store – something you cannot get on-line. Whether it is opportunities to test products, interact with knowledgeable staff, or by creating a space that combines both retail and leisure, there are many examples of retailers developing consumer experience to draw people back into stores.
But this can only go so far. Unrealistic rents, long leases and increasing business rates have all been cited as factors contributing to the downward turn in the retail market. Yes – online shopping has undeniably had its effect, but these factors must be taken into account if the business is to be turned around sustainably. Reports are that Sunrise Records have the support of the landlords – Sunrise Records owner Doug Putman is quoted to have said that the response of UK landlords had been “very positive”, adding “they are well aware of what is going on and see the value in a different product mix. It’s a partnership – they need to make money too”. This more collaborative approach may well set the business off on a stronger footing going forward.
Mr Putman may do well to look to the example of Waterstones. Formerly owned by HMV, the chain was sold off in 2011 for £53M. By 2016, the brand’s fortunes had been turned against very unfavourable conditions, reporting a pre-tax profit for the first time since the financial crisis, and in 2018 reported a further 80% increase in annual profits for the year to April 2017. Focus on in-store customer experience and an overhaul on the stock direction has meant the chain is able to perform even in a market now dominated by Amazon and Kindle, whilst the ability to negotiate reduced rents when leases have come up for renewal has also had a positive impact at some stores. Reinvention and innovation across the scope of the business has enabled Waterstones to re-establish itself securely on the High Street.
For a company that has had a presence on the High Street since the invention of the gramophone, reinvention and innovation should come naturally to HMV. Gramophones became outmoded; vinyl, cassettes, CDs came and went (and came back again); video killed the radio star – HMV survived. Perhaps this time the change in the market, combined with the prevailing economic climate, will simply be too much to adapt to. Perhaps not. Who says you can’t teach an old dog new tricks?
