468 Retail and Channel Management Blog

Saturday, February 11, 2017

HMV: Where did they go wrong?

HMV, which is known for its specialty in music, film, video games, and other technological products, is closing its doors after 30 years of operation within the Canadian market. The company struggled to compete online with other retailers such as Amazon, as well as supermarkets such as Tesco, and Sainsbury and therefore have seen a decline in sales and footfall over recent years. Due to the decline in sales and the money owed for rent, as well as to its lenders and suppliers, the company had to make the decision to liquidate assets and close the doors to future business. 

This outcome could have been prevented if management got with the ‘digital age’ and made the required changes to the business plan and/or strategy to align with advances in technology, the rise in online retailers, and the change in consumer preferences, as they were becoming more evident. Instead of focusing on a specific area with the most opportunity, HMV tried to master a bunch of different areas at the same time. This was shown when they spent shareholders cash, investing in unsuccessful businesses, such as Zavvi, Fopp, and Ottakars. They spent their efforts to get into selling books when their business was known for music, films, and other technological products. This was not the case for all investments as HMV purchased Mama, which was a company known for managing music artists and live events. This business decision made sense, however, did not make up for the bad business decisions made prior to this.

With HMV already struggling to solidify their niche in the market, it seemed inevitable that the growth of high speed internet and inflow of online retailers would eventually wipe them out. This was especially evident, as the demand for digital downloads increased in the early 2000s. Companies such as Netflix, iTunes, and various pirate websites made it hard for HMV to continue to compete. Even PVR devices from network providers had an impact. Purchasing the physical DVD or CD was becoming less necessary/desired for the consumer due to the accessibility of the product elsewhere at a cheaper price. 

For those individuals who still appreciate having a physical copy of the CD, DVD, etc., cheaper products have been made available through online retailers like Amazon, Tesco, and Sainsbury. These companies offer both the convenience and affordability factor. The online stores have the capacity to offer a higher variety of products since they do not need a physical store to hold the products before they sell. This allows the online retailers to keep up with the rapid product evolution and innovation. For the consumers who are not yet at the stage where they feel comfortable to purchase products online, they can go to a physical supermarkets. These are still often more desirable than specialty stores given their size and ability to offer a product at a cheaper price. 

HMV had the brand developed to be successful if they only would have played their cards right. It would have been beneficial for them to focus primarily on the music and film industry and try and master that before taking anything else on. On top of narrowing their focus, they should have jumped on board with Amazon when they saw the opportunity. If they would have created a stronger presence online and made it easier for consumers to access their products, they might be in a very different position than they are right now. 



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