detailed business evaluation

Queueing outside HMV

Commerce In my predictions for this year I suggested that "a major high street entertainment retailer will close". I was, of course, hedging my bets, not naming any names, but obviously I meant HMV. On Christmas Eve I visited the Bold Street shop in Liverpool, which as this Daily Post article explains was originally spawned in the old gas showroom as a temporary measure during the building of the Liverpool One shop but stayed open.  In previous years the queue has been around the shop (even last year when the new store was open) but on the 24th December I was served immediately.

I asked the clerk about that as he sold me a cheap copy of State of Play.  He said he was surprised and suggested the credit crunch and internet sales as the cause.  I asked him if he thought the business was in danger.  He pointed to the share price with has plunged from pounds to pence within a few months.  I asked him if they were Zavvi vulnerable and he said that they weren't.  Yet.  Now HMV group have announced the closure of forty music shops and twenty Waterstones and I think about that clerk and the similar conversation I had with the girl in Zavvi at about this time last year and how she thought her job was safe.

I did enough hand wringing last year across those death of Zavvi posts on the causes of that closure, the digital downloads, the online purchases, Spotify.  It's just shocking to some of us that such a venerable old name like HMV, the place were many of us caught our first taste of vinyl, bought our first cd (not me though -- my copy of Bon Jovi's Slippery When Wet came from Our Price) or dvd.  I even worked for them briefly in the 90s and though it was one of the worst working experiences of my life I'd still be sorry to see the pink logo go.

My guess is, with apologies to be people who hate Robert Peston types, that if there's more than one location in the city, HMV will close the least eye-catching or profitable, so Bold Street's music shop will go and the Waterstones almost next door (originally a Dillons before they were absorbed into the larger chain which itself is now in trouble).  Smaller shops are always the first casualties of the war against closure, which is odd because it has to be the larger positions with larger shop floors that cost the most in rent.  Why not downsize, effectively mothball and wait for better market conditions?

My more detailed business evaluation is that HMV Group will eventually fail.  The closure of some shops is the first stage of a long restructuring process designed to protect its core assets.  They might offload the bookshops back to the man who gave them their name (he's not uninterested).  They may sell Fopp on assuming they're not included in the store closure plan.  They'll sell some more of their international appendages.  But unless they can convince people to come through their doors and pay more for product that can be bought cheaper and more conveniently elsewhere, Nipper's bark will be silenced very soon.


  1. I worked in HMV a bit too, unlike yourself I loved it... but I can totally understand why anyone would hate it.

    Anyway I have a couple of friends who are now managers of stores... and I don't like what I'm hearing from the messages from the top.

    Apparently there was a point last year where they took the powers of the shop away for ordering stock and put it in the hands of a computer system (which is ultimately what did for Zavvi from what I understand). And also stopped consumers ordering things too.

    They essentially took away the last advantage HMV have got - their staff's knowledge. What's right for a store in Liverpool is not going to be right for a store in Hastings... I don't think they have Scouse House in Hastings.

    Fortunately they seemed to realise it was a stupid idea and gave the power back - but it does make you wonder what they are actually thinking at the top.

    They seem to be on a race for the bottom line these days and I can't help thinking it's a race in the wrong drirection.

  2. Hello Anthony.

    Central order also happened at Waterstones which makes even less sense because having an idiosyncratic stock should be what bookshops are about. It also led to a small selection of books in stock which inhibited the very browsing which makes visiting bookshops different to using a website.

    But genuinely, if I was HMV, I'd take the radical step of shutting the larger stores, opening smaller ones and specialising, in effect take on the trappings of an independent music store, with experts and enthusiasts behind the counter and a mission statement to promote music and film.

    Then again, that didn't work for Fopp, so.

  3. In an ideal world yeah that would be the best way, but as you said it hasn't worked for others... and it it barely works for the likes of Probe.

    Music just doesn't make HMV the money anymore. Even when I worked there (10 years ago now!) games had already moved in to being by far the biggest money maker.

    I always like the approach they took to the Classical section in the old Chruch Street HMV. It was in a totally different sound proof room!

    I think they could section off their bigger stores in to different zones, with specialist shops. Have the bulk of the space for games and DVDs - which is what they do now - but have little rooms for classical (which has always done quite well), indie, electronica etc etc.

    May be a bit far fetched, but I could see it working in the bigger stores.

    Oh and they should ditch selling phones and stupid things like that. Who goes to HMV to buy a phone?! Never understood the logic in that.