
Photo by James Cridland
Cast your mind back to 2008. It was a very strange year since that was when the recession kick-started and it seemed to accelerate the losses of most retail companies. For one of them, Woolworths, it proved to be a fatal blow. That said, they can’t blame an economic downturn for their death. No one knew what Woolworths was meant to be any more. Was it meant for CDs? Was it meant for DVDs? Clothes? Toys? Sweets?
The problem was that it was for all of these things and going into a branch of Woolworths was like going into a messy house of random stuff. Who is ever going to need both a bathroom mirror and the soundtrack to Mamma Mia in one shop? No one. In October they were placed into administration and their lifespan came to a messy end in late December/early January 2009.
Those in charge at HMV must have seen what happened and thought that it couldn’t possibly happen themselves. It couldn’t possibly be that the only major entertainment/music retailer left on the high street could be in similar trouble. However, last month CEO Simon Fox fired off the much-feared SOS warning.
Their sales figures, released yesterday, made from grim reading. Like-for-like sales fell by 8.2% – an improvement on last year’s disastrous 13.2% but only because there wasn’t any snow stopping them and that there was an extra trading Saturday in the run up to Christmas Day. Competition from the internet and supermarkets have slowly been suffocating them and Fox admits that ‘material uncertainties’ has put doubt on their future.
New plans
So, not for the first time and only months after getting rid of bookseller Waterstone’s last year, it’s time for a major rethink about what HMV is about in this new era of commerce. A couple of years ago they pinned their hopes on HMV Live, their concert decision that runs thirteen music venues such as Hammersmith Apollo and the Kentish Town Forum, because of the resurgence of the live concert industry. Now they’re looking to sell it because of its huge costs (the debts run up to over £160m) but the chances are that they could find themselves a good deal after it has attracted plenty of interest; a sale of over £60m is entirely possible.
Now it looks technology products could be their new saving grace. Fox said that the 144 stores that were re-fitted with a range of digital profits reported an increase in technology like-for-like sales of 51% in the five-week period leading up to Christmas. 500,000 pairs of headphones were sold as well as 20,000 tablet computers.
DVDs and Blu-ray also look likely to stay despite their falling demand. The former is still worth a lot of money and the latter is finally starting to pick up the pace with more and more people owning some form of Blu-ray player.
This will all be at the expense of video games. Stock of a wide range of titles available for the Wii, PS3 and so on will soon be limited to the most recent/popular ones. It’s also probably for the best. If I wanted to buy a computer game on the high street then I’d go to a branch of Game, since it’s by far the most obvious place to buy one…in very much the same way that if you wanted to buy a CD a few years ago then HMV was the first choice for many people.
Will these plans work?
To be honest, for all their good business intentions, it’s hard to envisage a major and instant turn-around in fortunes.
Regarding the problems of HMV Live, whilst you can’t fault them for choosing to invest in live music, they chose to do it in a way that was ultimately beyond their means. Had they reduced the scale of their plans they might have found themselves in a slightly less worrisome position. Even their plans to focus on technology has huge risks. They’re moving into a field with a lot of competition, particularly with online retailers like Amazon, so they’re going to find it tough.
Instead, they should focus on their strengths. Yes, technology is doing well but they should do more to promote their range of CDs and DVDs. It’s not like Tesco or Asda is going to have a similar wide selection of products available in that area. They also need to stop the ridiculous pricing of certain items. Of course no one is going to buy a CD if you’re going to put a sticker that says £16 on it.
When you go into any of their branches you’ll see CDs in one corner, books in another, games in a slightly bigger one and T-shirts and posters in the middle. There’s even a soft drinks fridge for you to pick up a Diet Coke or something similar. It’s a store of increasingly random stuff. HMV runs the risk of ending up like Woolworths, closing up shop because of the fact that they no longer knew what they were meant to be any more.
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Sidenote: Writing this reminded me of a feature on Wired’s website in 2010 about Rough Trade East and how they managed to survive. It’s worth a read.