Richard Edgley

Last week we held an event where we explored one of our ongoing themes for this year – the future of the high street. We had a lively debate involving our expert panel: Philip Beeching (ex HMV Agency Head), Robin Bresnark (ex-music journalist), Faisal Galaria (ex-Spotify and Tesco Digital), and our very own Richard Edgley (Strategist). Via live link we were joined from across the pond by Stephen Godfroy (co-owner of Rough Trade Retail) from his new store in Williamsburg in Brooklyn, New York. 

We looked at why traditional retail models, exemplified by HMV proved unsustainable and how companies like Rough Trade are staying ahead through experimentation, innovation and customer intimacy. You can see the slides that set the scene for the evening here.

Following his previous blog on the demise of HMV, Richard Edgley reflects on some of the themes identified during what was an entertaining and informative evening.

A few weeks ago I shared my own thoughts on the demise of HMV and pondered if there might be a future for the brand. We didn’t want our event to be a negative take on where HMV went wrong, rather an opportunity to consider what we might do with the brand given a clean slate. The discussion inevitably broadened to consider the future of the high street and the challenges traditional retailers like HMV face unless they think differently.

Deloitte, HMV’s administrators, had set Monday 25 March as a deadline for agreeing the sale (the date being the day retailers pay rent for the next quarter). Over recent weeks there has been speculation about what Hilco might do and whether supermarket chain ASDA might make a play for the brand.

It seems that the process for agreeing the terms of HMV’s restructure with landlords and suppliers has been complex. The suppliers, record labels and film studios, are inevitably keen to ensure a high street distribution channel to challenge the supermarkets, streaming services like Netflix and Spotify, Amazon and Apple.

While I recognise HMV’s future will be in part shaped by the record labels and film studios, I hope the restructured business will be able to rediscover itself unencumbered by the slow and risk adverse take on innovation that has caused both the film and music industries to struggle with digital in recent years.

Hilco have experience with entertainment retail having bought HMV Canada in 2011 and had some success with sales over Christmas 2012 increasing 1.4% to C$65.4m (£41.4m). However, Canada is a very different market to the UK with a slower move towards digital downloads. What they have done in Canada will not be enough to save HMV in the UK. If Hilco want to provide more than palliative care, they will need to be more innovative in their thinking and practical in delivery, being prepared to experiment, learn and adapt.

My fellow panelist Philip Beeching has shared his take on our discussion and its well worth checking out. Here are some of my observations:

Understand your customers, embrace being niche

Pure music and entertainment retail is not a high street activity. To survive HMV will need to accept that they cannot be everything to everyone. It is not about stocking everything. That is what Amazon is for and iTunes is for. Instead they need to understand who their customers are, what they like and build experiences with complimentary products around them.

To do this they need to play to niche audiences and not be afraid of experimenting to see what works, keeping the experience and product fresh. Music and film fans like discovery, they like hanging out in stimulating environments with interesting people. Make the stores somewhere where people want to linger and then make money from the products and experiences. Be it in-store gigs and screenings, using recording equipment and instruments, or just being a place where people want to meet up. This is something that Rough Trade do very well and has seen the business thrive while others have failed.

Physical is not dead – it gives you a unique edge

While the sale of CDs and DVDs continue to decline, under pressure from digital formats, there is still a desire from consumers for physical products and experiences. Vinyl sales are on the increase. Digital only music formats cannot provide the whole experience that physical product such as vinyl can. Vinyl was never just about the quality of the recording; it was also about the artwork, the liner notes, and the experience of playing it.

The same could be said for books. While it might be convenient to have download eBook, something tangible is lost. Just as we have seen a rise in vinyl as a format, I think we will see a similar trend towards beautifully bound hardback books.

A revitalised HMV should focus on offering augmented physical products – buy the vinyl album but also provide the digital version with additional content; provide a digital layer with personalised offers, recommendations and experiences.

Think like a gallery or museum, and learn from culture

In recent years gallery and museum spaces have reinvented themselves as engaging interactive experiences. Exhibitions are curated. Taking a curators approach to retail appeals to music and film fans – that’s what we do ourselves with our own collections and is key to discovering something new. Curating experiences will force you to rethink the use of flexible physical space and how it can be augmented by digital.

Encourage your staff to curate and embrace fan culture to host themed experiences with related product. We only have to look at the success of Kraftwerk at Tate Modern or the massive ticket sales for the Bowie exhibition at the Victoria and Albert Museum.

Don’t rely on just Generation X

Boomers and Gen Xers are easy wins. They understand and have shaped entertainment culture and retail behaviour. After all, they invented and evolved the record store. They are nostalgic and are warm to brands like HMV. They also have money to spend.

But what about younger consumers? They are likely to have no association to HMV the brand or an appreciation of the store experience. They discover music culture through Tumblr and YouTube. They expect product to be free.

Brands like HMV need to think about how they can ensure longer-term survival through engaging with younger audiences. They need to make their brand relevant to them. Perhaps HMV should host hackathons and embrace maker culture. They should be places where kids can hangout after school learning to code, making stuff, mucking about with instruments, recording stuff, and editing a film. Wrapped around this, provide the knowhow and the tools to rent or buy.

The high street is not dead. Our desire to engage with lifestyle products continues to grow. But brands need to be more inventive in how they engage with consumers both physically and digitally in order to survive.

One of our themes this year is the future of retail. With former bastions of the high street going into administration and many others facing an uncertain future, Fluxx takes a look at HMV. Over the coming weeks we will consider what went wrong and whether there is a future for the brand. In our first piece, Richard Edgley gives a personal perspective and wonders if we should care.

January can be a boring and depressing month – credit card bills, gym bores, people not drinking alcohol (and constantly going on about it). These days the national gloom is compounded by the Christmas trading figures swiftly followed by news of former titans of the high street going into administration. This year we had Jessops, HMV and then Blockbuster. All three have resulted in reams of comment pieces and analysis, none more so than dear old HMV.

HMV have a cultural heritage that runs deeper than the high street, they are entwined in the fabric of popular culture and our nostalgic association with it. HMV has a heritage that goes back to the early 1900s and the early days of the consumerisation of music. While for some HMV was an infrequent but necessary stop-off for purchasing Christmas or birthday presents, for many it meant more. It was the place where you might meet a friend, where you would idle away time, where you bought your first record.

HMV holds plenty of memories for me. I dread to think how much time and money I spent in my local store over the years. As a music obsessed teenager in the late 1980s, my local HMV was a regular destination for my mates and me. It was hangout; somewhere where we could thumb the racks until we either bought something or got bored. We rarely bought anything. We could not afford to. But when one of us did, it was quickly taped and shared. It was the place where I bought my first CD (Primal Scream – Screamadelica, if anyone is interested).

Later it became my employer. I worked in HMV in the late 1990s early 2000s and loved it. It was a means to help pay for law school and a great fall back when the world of gown and wig no longer appealed. While it may not have had the cool kudos of a ‘High Fidelity’ style indie store, it allowed me to work with some interesting, knowledgeable and passionate people. It was a pleasure to help a customer track down a hard to find album or discover something new. I had a staff discount, access to a massive music database and ordering system. That was dangerous. Most of my earnings went on vinyl and CDs, or down the pub chatting with my colleagues.

But am sad to see them going through the pains of administration and restructure? Should we care about the demise of HMV and should it survive?

Perhaps I should care, but I’m not sure that I do. I feel for the staff that have either lost their jobs or are likely to. But for me HMV embodies the old world music and retail business models. These are models that are long past their sell by dates. While its first Oxford Street shop was opened by Edward Elgar in 1921, its last will probably be shut with unsold X-Factor stock still inside.

A few days before the announcement, I had walked past HMV on Oxford Street, seen the giant blue cross sales signs and considered popping in for a mooch. I had £30 worth of vouchers to spend and there was the unlikely chance there might be something interesting to buy. I didn’t go in. I walked on by and grabbed a coffee instead. I had not been in an HMV for months, possibly over a year. HMV had become a former friend. One that you saw about now and then, thought about saying hello only to realise that you have nothing in common anymore. The trouble is that I was not alone in behaving like this.

There has been much analysis already about where HMV went wrong. HMV’s cultural heyday lasted from the 1950s into the 1980s. It created a retail experience that worked for the music business and the consumer. HMV had a huge catalogue. It was regarded as the place to go to get a record that the local indie could not afford to stock. Staff who knew what they were talking about provided a naturally valuable service. This was the retail experience that worked for the music fan.

If those were the halcyon days for the music fan, its fat cat days were the 1990s to the mid-2000s. There were new and complimentary formats to exploit in DVD and gaming. During this time the business, buoyed by high share prices implemented a strategy for growth that saw diversification into book retail with Dillions and Waterstones. Such growth and profit saw the CEO hauled before a House of Commons Select Committee and questioned about anti-competitive practices.

For me it was around this time that HMV started to lose its way. Inevitably store layouts changed to accommodate the new formats and the move into consumer electronics. Music seemed to move further away from the heart of the business. As someone who loved music, I found it increasingly hard to find what I wanted or discover new things. Something changed.

When I worked at HMV, while the majority of product was centrally ordered, individual stores could buy product that worked in their area. I remember the team leader for dance and electronic music regularly buying in the records he knew would work well. He knew because out of hours he DJ’d at clubs. Many of my former colleagues were either in bands; DJ’d, or were film buffs and music geeks. As the 2000s progressed this wealth of cultural awareness and passion was being eroded by the move to being a media and entertainment group.

The high prices didn’t help. I spent more time in Rough Trade and Fopp. They appealed to the music fan. Where Fopp offered lower prices, Rough Trade had knowledgeable and passionate staff. Both were more enjoyable retail experiences, places where you felt you wanted to linger and discover.

Much as already been written about why HMV failed. I think HMV’s former ad-man; Philip Beeching’s comment piece is one of the best. In the late 1990s and early 2000s, senior management failed to make a coherent long-term strategy. The failure to develop a compelling online offering was fatal. It made it more difficult to respond to the likes of Amazon and Play.com; supermarket discounting and online downloads.

HMV strategy since then has been scattergun, either a mix of poor ideas or poorly executed ideas. The move into the mail order business with HMV Direct proved expensive. Their loyalty and reward programme – purehmv – was a sensible idea but seemed badly delivered and provided a disjoined experience with both the online and physical stores. Their attempt at social networking – GetCloser.com – appeared sound, connect fans with each other and engaging content in the hope they would buy more music. Again the idea suffered through poor execution and communication. It was disconnected from HMV.com and purehmv.

GetCloser also suffered from the fact that the target market was not interested in connecting in HMV’s space. Music fans would rather connect and discover through Spotify and Lastfm. Even Apple Ping failed to crack social networking and music.

The old world music and retail business has been a victim of technology and a myopic approach to understanding the implications and responding. As a traditional entertainment retailer who was slow to digital, how do you respond to the threat of online piracy and file sharing, to Amazon, to iTunes and the Apple App Store, streaming through Spotify?

Games retail is no longer about purchasing a box in a store; the preferred channel is digital distribution through app stores or the likes of XBox Live. Box set culture and home viewing is moving to Lovefilm and Netflix. Smartphones and 3G networks added another challenge to music retail. A customer could stand in HMV looking at a product only to check the price on Amazon and purchase through them.

Yesterday trade body BPI published its Digital Music Nation 2013 report. It indicates that there has been a tipping point in the behaviour of British consumers in favour of digital music services. Almost three in ten people in the UK have purchased downloads or streamed music in the last year, while 80.6% of consumers recognise one of the leading streaming services such as Spotify. For HMV with a relatively poor digital presence this is terminal.

But what about physical retail and entertainment experiences? The eventual failure of both Fopp and Zavvi gave a clear indication that there were serious challenges to traditional entertainment retail. HMV took over Fopp and some Zavvi stores. Fopp continued to trade in its own name. It seems odd that HMV should keep Fopp at arms length, when their appeal to the music fan was perhaps what the HMV store network required. Instead they turned to selling iPods, headphones and random tatty merchandise. The iPods and headphones may have seemed self-destructive, but they offered a potential lifeline I generating enough revenue to pay of its debt or refinance. The tatty nonsense served only to distance them further from their core customer base.

In recent years HMV diversified further. The launch of HMV Tickets and ownership of the Curzon cinema, Hammersmith Apollo and MAMA Group venues such as G-A-Y were all sensible moves. The shame is that it was too little too late. In 2011 HMV were forced to sell Hammersmith Apollo in order to payoff debt. Weeks ago G-A-Y founder Jeremy Joseph started the process of buying back MAMA. The strategy that could have offered hope was significantly weakened.

My music is consumed through iTunes, Spotify, Soundcloud, Lastfm, This Is My Jam and The Hype Machine. This week I purchased and downloaded the new My Bloody Valentine album direct from the artist through a link on an online music magazine. I enjoy the odd trip to Rough Trade East. But that is less about music retail and more indulging in a geeky experience. I’m not alone. If music and film fans like me find no need for HMV, then how do they attract new and younger consumers?

Many teenagers expect music and related content to be free, consuming it on YouTube and Tumblr rather than any physical or digital store. They have no cultural association with the old world music industry or HMV. Why should they?

For the Baby Boomers and Gen Xers who still love physical product, there is Amazon and the remaining independent shops.

So should we care if HMV goes? I don’t think so. We can be nostalgic about the past, but those times are gone. And we certainly should not mourn the HMV of recent times.

Is there a future for HMV the brand? There might be. If there is, then it needs to play on the strengths of its heritage while adopting the innovative mindset of those digital start-ups that ten years ago began changing the music business forever.