Brand heritage alone will not be enough to save HMV

HMV has gone into administration again, raising questions over whether it is worth saving and if it is, what the retailer might look like post-purchase.

Last week HMV became the victim of the ruthless jaws of a struggling high street and collapsed into administration for the second time in six years.

A cruel sense of de ja vu two years before it is due to celebrate its 100th birthday, the news has (again) reignited the debate over whether this signals the ‘death’ of physical media as streaming services, YouTube and tech giants like Amazon take a growing share of the listening pie.

HMV is the first to admit it “cannot withstand the tsunami of challenges facing UK retailers over the last 12 months” and that festive trading had been “extremely weak”.

Indeed, while HMV still accounts for almost a third of all physical music sales in the UK and nearly a quarter of DVD sales, sales of DVDs across the market are down 30% year on year.

“While HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” boss Paul McGowan said.

And while there has been a resurgence in vinyl in line with the growing trend for nostalgia, there is no doubt that more and more people aren’t paying for music – a pressure that is impossible to offset when business rates are increasing and consumer confidence declining.

HMV’s fate is clinging on to a very fine thread that – if a potential buyer doesn’t throw a lifebuoy – will see it join the likes of Coast, Poundworld and Toys R Us which all went into administration in 2018.

So what equity – if any – could be inherited from HMV and what might the business look like post-purchase?

While the first move of any buyer will almost definitely involve reducing its 125-strong store estate to immediately alleviate some of the financial strain, HMV’s challenges go beyond that.

Over the last year, HMV’s overall YouGov BrandIndex score has fallen from 14.6 to 13.2. Within that, its buzz (below) has dropped significantly from 1.6 in January 2018 to -0.2, seeing it fall 19 places to 42 out of 50 British retailers.

Scores for quality, value, reputation and satisfaction are also down, as well as awareness – something HMV has struggled with since its marketing budgets were slashed after it went into administration for the first time in 2013.

While HMV has a strong brand heritage that dates back to 1921 when its flagship store opened on Oxford Street in London, there is clearly a big brand-building job to be done.

For a generation that is used to being able to get their music at the click of a button for free, and for hardcore music fans that have no shortage of independent record shops to visit, HMV has little appeal.

Once upon a time it was where people went to buy chart music. And 20 years ago that was enough to survive. But HMV has failed to move with the times and the sad fact is it is no longer relevant.

Its first administration should have shocked it into action and it has had six years to become a retailer fit for an experience-driven high street that has long been battling the shift to online. Putting on gigs, signings and Q&As would have given people more reason to step in-store. (Even Dr. Martens has its own gig venues.)

READ MORE: HMV’s marketing boss on bringing the brand back from the brink

Instead, HMV chose to sit in the background, blaming the music industry for moving away from physical media while watching people walk by listening to music on Spotify and with records from Rough Trade in their bag.

One of the challenges, its marketing boss Patrizia Leighton said in an interview with Marketing Week in 2017, has been convincing the music industry “that things such as the vinyl boom aren’t just a flash in the pan.”

But this is less about the existential nature of music – there are plenty of specialist shops that have no problem selling vinyl – and more about finding a point of difference in a challenged market and offering consumers something beyond the sell.

It goes without saying marketing will play a more crucial role than ever if HMV is given another second chance. HMV not only needs to reinvent its stores, it needs to completely reinvent the brand, which is a tough job for any retailer – especially one with an already stretched marketing budget that will likely be cut even further if it survives this administration.

So HMV’s marketing team is going to have to be incredibly savvy with the resources it has to make sure it is targeting the right people, at the right time, and appealing to that all-important younger audience that it has struggled to reach in more recent years.

Leighton said for as long as people want physical media, HMV will be on the high street.

“The music industry has recovered really well over the last five years and it’s a solid foundation to build upon,” she said. “At the end of the day we have weathered the storm and will continue to do so.”

We will soon find out whether HMV can weather this one.

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Comments
  • Paul Woolf 2 Jan 2019 at 4:20 pm

    It is a sad indictment when a high profile music brand like HMV goes, again, into administration, and where, as the author notes, they’ve had a second chance before but failed. It’s clear that having 100 years of history is not enough to remain salient , not without foundational changes in how it is marketed to act as a destination retailer (and with a strong on-line or even, dare I say it, streaming music presence itself). It could easily evolve into a gift store of relevant physical items to appeal to Millennials. Perceptions of the HMV brand have clearly waned, to the point where it stands for ‘old school’. Only shrewd marketing, leveraging that 100 years of heritage, can right the ship. And, of course, cutting locations to a more manageable size.

  • Steven Packer 3 Jan 2019 at 9:46 am

    If you look at the product proposition from HMV you can see why they have failed again. On the plus side vinyl sales have grown and more shop space has been given in most stores as a result of that. Vinyl continues to yield encouraging growth in sales and Record Store Day in April was an indicator that there is still a core audience that relishes buying the physical stuff.

    The big deficit in sales has come from DVD. Technology changes, streaming preferences has had a major impact in this sector of the business. I couldn’t even get £1 a DVD in recently trying to sell a significantly large collection. In fact, in general terms you cannot even give DVDs away at a car boot sale.

    Box set DVDs are readily available in most Virgin Media and Sky packages so why buy a chunky set of DVDs that takes up an enormous amount of space.

    Blu-Ray and in particular Ultra 4K Hd titles are too expensive and this is in my opinion why volume sales have been obliterated.

    That leaves technology, gifting and clothing which isn’t an area of expertise for HMV and takes up valuable shop floor space. The Pure HMV loyalty scheme only works for hardcore spenders like myself and is archaic in its proposition.

    My thoughts as a 57 year old vinyl enthusiast is for HMV (if it survives) to become a vinyl only store. This is the specialism that kick started their business all those years ago. All other formats are dead ducks. Leave clothing to Primark and technology to Richer Sounds. Any senior HMV member of management that may take interest in what I have articulated here is more than welcome to contact me as my passion for this industry is undying and I want HMV to survive and trade another day. Steven Packer

  • simon jones 3 Jan 2019 at 2:24 pm

    looks like they have been saved Buyvia Rescue Struggling Retailer HMV From Bankruptcy

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