Few would have been surprised when in 2013 HMV went into administration. It was a business with a big, under-performing store estate operating in a category that was being structurally assaulted by digital, the grocers and Amazon. However, 18 months later it’s profitable, has proudly restored its place on Oxford Street and has overtaken Amazon to become the UK’s #1 retailer of physical music. Having reduced its store estate by a third, it has doggedly fought its way back and is clearly now getting several things right and proving the doubters wrong.
The market for physical music is rebounding, and vinyl is now selling as much as it did in the mid 1990s, so this resurgence of interest benefits HMV, a brand that retains much goodwill. The overall market’s long-term direction though remains downwards, so HMV’s success is winning share of a declining overall market. The strategic challenge therefore is how to continue to build a strong sustainable business built on creating value for customers that its rivals cannot.
Like Game, it has a strong history and partnerships with the content producers. In HMV’s case its relationships with the record labels means that it can build a strategy around exclusive content. It’s in a strong position particularly with smaller bands and local talent, and can bring those artists into store and maintain relevance for customers, giving them a reason to stay connected. These relationships foster authenticity which in turn enables a defensible positioning for HMV as a credible curator of music. Discovery is an important concept in entertainment, and HMV makes strong claims in this space separating itself from retailers deemed too transactional or too ‘algorithmic’.
The emphasis on editorial on its website sets it apart from Amazon and strengthening its positioning as the brand for music lovers. Its marketing can do more to strengthen this stance as an authority, in contrast to the retailers commoditising entertainment. Though that is a strong positioning, it will need to maintain something approaching price parity and focus on brilliant basics. It will need to further develop its operations to come closer to Amazon’s fulfilment capability and it will need to do more with its award-winning loyalty scheme ‘Pure’. This wisely eschews points and promotions instead focusing on content, events and ‘money can’t buy’ experiences, making it symbolically powerful and a strong engagement tool. But in this area it will also need to reflect on Amazon’s skills around recommendations, reviews and personalisation. HMV should emulate Amazon in how to develop excellence when using Pure’s underlying data to build superb customer insight, which it can then use to great effect.
Developing a digital download business to attempt to rival Apple’s was necessary for longer term viability (and welcomed by content producers) though nonetheless a difficult move. In developing the first service that would enable customers to put downloads directly into the iPhone’s music library (though its relationship with Apple has continued to be rocky) it demonstrated smart thinking in how it partners and how it exploits the eco-system. This will be a key skill as it navigates a market in flux.
Similarly, it is partnering in order to build a strong International plan. Expanding into the Middle East and Africa appears to be a core pillar in its strategy, and it is notable that while the Virgin Megastores disappeared from the UK, they have continued to trade overseas.
Prior to its collapse, the HMV team had a vision of what success could be. It pictured a diversified business where music sat at the heart of an experience proposition, involving headphone sales, fashion, merchandise and of course live events. Excellence in customer-centricity would enable them to embrace customers as individuals and market to them distinctly, and to do so in a truly multichannel way. A visit to a concert would trigger an exclusive emailed preview of the band’s new single and a promotion code ahead of its general release. The push into a broader, low margin and competitive product range was probably unwise. But a vision built on being an authority in entertainment categories, where a curated, broad range is delivered online but more importantly through an experiential retail environment, feels credible. Now it’s operating from a more robust store estate and is strengthening its authenticity, we may see it continue to build its sales growth. That would be music to the ears of its rescuers Hillco.
Scoring
The simple scoring from Transform is based on whether or not five services are offered by the retailer in the UK with a score of 0 for no and 5 for yes. On this basis, HMV scores 15/25.
Collection in-store: No
Mobile app: Yes
Mobile web: Yes
iPad app: Yes
In-store tech: No
