The sad news about HMV going into administration this week has left many people pointing the finger. Who really is to blame for the demise of this once so popular store? There are a number of factors which have accumulated to HMV’s downfall, some more prominent than others, but all factors combined together have left HMV with no place left to turn.
First we need to look closer into the HMV business model. There are 239 HMV stores nationwide, with over 4,000 people currently employed. The Film and Music Industry want HMV to survive, a glimmer of hope left for the chain, as they don’t want the market to be wholly dependent on Amazon and other online retailers. Deloitte, the appointed administrator for HMV, are currently searching for potential buyers, with Record Labels and DVD Distributors promising easier credit terms to try and encourage new buyers. This will hopefully see HMV survive, potentially in a much more slimmed down version, which will hopefully also minimize any job losses. There are issues which remain however, into why HMV are in this mess in the first place.
So how much of the problem lies with online competitors? The answer has got to be, rather a lot. Online sites such as Amazon and Play.com have risen in popularity over recent years, selling items much cheaper then HMV. Since 2007, the internet’s share of retail sales has risen from less than 4% to over 10%, alongside internet spending rising to around 25% per annum in value terms. Amazon has been dominating the physical sales of home entertainment, with iTunes blasting competitors out of the water in digital sales; leaving HMV somewhere in the middle, trying to compete. The argument about VAT payments (or the lack of it for the online retailers like Amazon and Play) is for another debate, but certainly hasn’t helped HMV.
There is also an argument to lay blame solely at the feet of the HMV management team. The launch of HMV’s digital download store for singles was seen by many as a way for HMV to compete online. They had songs which iTunes didn’t, and catered for the more niche musical palate. Customers didn’t mind the fact they were paying 10p more for the digital copy compared to other retailers (HMV digital singles are 89p compared to iTunes 79p) they were just happy they could now get their hands on their more obscure favorite songs. What they weren’t happy about however, is the fact HMV’s website only supplied music in a copy-protected Windows media audio file, rather than as an MP3. This meant that you couldn’t put the song onto your iPod and couldn’t burn it to a CD; you were also paying 10p extra for this privilege. HMV’s digital download store struggled from the start, not surprising when you consider that most people download a track to listen to elsewhere, be it iPod or CD, and this problem should have been spotted from someone at the top, knowing their customers’ downloading behavior and their competitor’s products. Sadly, it wasn’t, and we are now seeing the pitfalls of not competing properly.
It remains to be seen what has been the main issue in the demise of HMV. We feel that it is a number of factors, and with companies such as Argos, Curry’s and Waterstones currently doing well, you can’t blame the consumer being disloyal to the high street. One thing that is for certain is the fact that the consumer’s buying behavior is changing, and the high street must adapt to this.
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