Tag Archives: HMV

HMV summary of posts on Interacter

A post on the Interacter blog last week, proved incredibly timely in criticising HMVs Blue Cross marketing campaign.

Three days later, HMV went into administration.

The article itself is excellent, but the comments (of which I have contributed several) provide some interesting reflection points of the wider implications of HMVs failure. Go to the original blog to see all the comments.

Here are my posts together in one place. 

Post 1

If you were designing a new music retailer business how close would this be to what HMV is like today? … answer: NOTHING LIKE HMV!!! And herein lies the problem. The core issue it isn’t simply struggling with clicks and mortar integration, the problem is more fundamental than that. HMV has wholeheartedly missed fundamental market shifts in retail design, experience shopping, online/offline business models and dynamic pricing – and a last ditch sales promotion will not fix this.

Some examples of what I personally experience:

– No or limited ability to actually listen to the music in the shop (unforgivable) – heck I could walk into Apple next door and listen to music on Youtube, but not in a music store!
– Out of date design – largely unchanged in 20 years (even more)
– No search functionality – how can I quickly find whether an album is in stock?
– No download/custom burn functionality in store
– Poor quality furniture/displays – zero interaction of furniture
– Broken electronics displays for headphones and speakers … some work, some don’t. No one is ever there to help, offer advice or actually ‘sell’.
– Zero online/offline integration – heck after 25 years of me spending great amounts of money in there you have NO IDEA who I am. Small retailers that I buy from online nail this with my first purchase from them. Even small new local shops incentivise my business and capture my contact details to send me offers!
– Generic layouts with no limited input from staff (I agree that the employees could be a huge asset, but this is never going to happen when they are stuck behind tills rather than out there helping customers). This is a very simple change that could be made. I have some great experiences with staff and used to enjoy talking about new releases and limited editions that they had secured from local record reps, but not in recent years. Why does your badge not tell me what you like – or know about? I’d introduce badges so I can find the dance guy, the sci-fi bloke, the rock chick – who can help me???
– Unpleasant shopping experience. My kids dislike the shop – they find it cramped often noisy and hard to navigate – this says more about the future viability than I could. To them it is simply not relevant. Anything that they want is downloadable from a number of sources (including free listens/views on Youtube) – they can listen to clips, see videos and download to a device of their choice if they want to keep it. In many cases, they don’t – so streaming from Youtube is enough. If they want a video – the default is online, not HMV.

I am not sure HMV can be saved. That is because the business model that HMV has today is dying. It is arguably dead as no new business could ever get funding for a business that was even close to HMV in concept. If I went to a bank with the HMV business model they would think I was mad. It didn’t have to be this way – HMV could have evolved. It didn’t. HMV could have downsized, reinvented itself and became THE social space on the high street. It didn’t. And on that point … did no one in HMV notice that Starbucks? or Costa or Nero … or any of the successful independent stores?

The Blue Cross sale has one purpose – increase short term cash flow to pay creditors threatening to cut supply. It isn’t necessarily the wrong thing to do, but it is not a plan that will help it survive. It is likely to simply extend the inevitable, but only by weeks.

I agree with several comments so far that the timeframe of 10 months looks optimistic. If HMVs Christmas results didn’t make the grade, then it will not be allowed three more quarters to continue – given that Christmas is its busiest period. Early January will see vouchers being redeemed and children’s pennies buying new games for their Xboxes, but this will not continue at this rate until Easter. February and March are going to be a brutal for lots of businesses and I don’t see HMV escaping this.

The financial structure of HMV (high debt, low margins and falling profits) may mean that the only viable strategy is the one that they have (keep as much cash as you can coming in). I have posted my solution to the problem previously on this site, so go look for this if you want to see my thoughts on the solution, but this may not be feasible anymore.

Can HMV be saved? The theoretical answer is yes. But the logic that supports that is that until it is formally dead/bankrupt, it is alive and if alive it can be saved. But then until yesterday the same logic applied to Jessops.

What would I do if this was my problem?

1) Figure out how long the business can survive. Close at least 50% of the stores to extend this period to buy time to remodel, redesign and relaunch.
2) Change the exec team and the marketing team and replace with someone who actually cares and understand retail experiences and can see what is possible. Invite design agencies to collaborate on a results reward basis (and pay well).
3) Rapidly relaunch a smaller number of concept stores to demonstrate viability to investors and customers. Rapidly iterate/improve/innovate by rewarding and empowering local managers – then roll out as quickly as possible.

Chance of this happening? Pretty much nil judging by what has happened over the last ten years

Good luck HMV. I wish you well. If anyone has any unused gift cards though, I’d quickly redeem them.

Post 2

We agree that the staff are a HUGE potential asset. I’d love to see more innovation in how they are utilised in the stores. They are a massive potential differentiator over other sellers. I’d love to see managers given small marketing budgets to innovate and attract customers and freedom to respond to local tastes and events. Neither of these cost a great deal of money. In fact a strategic shift to better engage customers, and be ‘the music and video experts’, could cost very very little. The big strategic mistake HMV is making is going into a low cost price war when it is carrying huge debt – but I assume this is for cashflow reasons so excusable as long as alternatives are being developed. All of the other companies listed tried this approach too. Price reductions reduce margins and sets the expectation with customers of always expecting a big discount. If this can be sustained, then fine – but lets not forget supermarkets sell CDs and DVDs too and they have deep pockets to win price battles. Low cost pricing is ONLY viable as a strategy if your costs are lower then your competitors (not your prices). Whilst HMV clearly negotiates well – I’d expect cost of good to not be significantly different to what Tesco or Amazon pay.

As for the cost of expenditure on refits and new designs. As it stands HMV is on borrowed time in terms of its concept and viability as a high street store. My argument was reinvent or face irrelevance. Having one or two next generation stores (assuming that they were successful and generated increased profit and customer sat would give investors the confidence to support a longer term strategy of investment and future development.

As for change coming … I’m still waiting. Most of the changes I listed in the earlier post as missing have been available for many, many years and I’ve yet to see them in any HMV stores. I wish HMV well, but the graveyard of high street names is only going to grow in 2013.

Post 3

Matthew – you are right but they are still competition and cannot be ignored. You may not like the practices of either, but the strategy needs to account for these. Every CD/DVD Tesco/Amazon sells is one that HMV does not. Tesco focuses on the best sellers – but that is where the volume is – which is all Tesco cares about – always 80:20. The tax issue (which I agree is wrong) is irrelevant in terms of survival strategy for HMV. It should lobby about this), but to customers it mostly doesn’t matter. Just for interest (as HMV has a sale on), so I thought I would check 10 random online prices (5 best sellers from 2012 and 5 random albums including Jarre, Michael Jackson, Jack Johnson and a couple of compilations.

Results: HMV matches 1 album from Amazon on price. 3 are separated by penny (Amazon does the .99 pricing whereas HMV rounds up) … but 4 are more expensive by at least at £2, with the largest differential being £5.01. 2 are priced within £1. On 9/10 HMV is more expensive.

Total difference: £14.30 – absolutely not scientific, but interesting nonetheless.

I don’t care about the colours – I care about the strategy. This is the issue for me. HMV has to be a destination store – with tight online/offline integration.

Post 4.

Showrooming is simply a sales failure. Forget the online aspect, it is a failure to engage and sell.

Allow me to explain …

So the problem is this.

1) Customers are interested in a product.
2) They visit a local retailer to see/touch/try on the product
3) They go home and order this online from another retailer

And the problem is the online retailer?

NO, NO, NO.

The problem is the shop. They had a customer wanting and willing to potentially make a purchase and they let the customer walk out of the store without converting that sale. This is a fail of salesmanship. Price may have been a key determinant in the customer choice, and this needs to be addressed [solution – offer better value, and avoid losing on price], but did the local shop engage the customer? Did they explain the advantages they offer over the online retailer? Did they differentiate themselves and show why they are the best choice to buy from? In almost all cases the answer is no.

Retail shops need to move from being ‘passive’, whereby a customer walks in looks and around and maybe buys to ‘active’ sellers. This means that shops engage with customers BEFORE, DURING AND AFTER the visit. It is an ongoing engagement.

– BEFORE by sharing offers, announcements, advice, new stock.
– DURING by understanding needs and being an A+ service company
– AFTER by thanking customers, offering come back deals and trying their best to stop the online purchase and convert this to a local one.

In most cases, none of these stages happen in the shop. But the online retailer does this through targeted advertising and display, through emails, Twitter engagement and dynamic website content management.

When retailers think active, every customer matters. Every interaction matters. Service IS everything. Price matters, but successful hotels know that only winning on price is a way to lose customers. The solution to showrooming invoves all aspects of retail – price is there, but also is display, service, and most importantly retail experience.

If you are a retailer – there is one simple way to start understanding this …

Imagine that 80% of your existing customers are never going to walk in your shop again … ever

AND

And of those who do come in 80% will not buy anything.

What would you do?

How would you fix these two issues?

Now do them, because a majority of potential customers are not visiting you and of those that do, most are not spending with you.

I’m not saying this is easy – but the default outcome – what will happen without change -is business failure. The good news is that many small retailers are reinventing themselves and becoming successful small GLOBAL businesses.

I can see a book here somewhere …

Post 5.

This is particularly bad for the 4000 staff, but also for other high street stores, who are going to find trading increasingly difficult as confidence in the high street business model wanes.

Some thoughts:

1) Whilst the ultimate responsibility lies with HMV’s management – and particularly its retail strategists, others including councils and high street property companies play a part too. Councils need to recognise the importance of the high street, to the viability of a whole town or city and stop introducing measures to keep shoppers out (punitive parking management, car unfriendly measures, and carte blanche for mini-supermarkets to kill diversity. Property companies need to better support companies unless they want all their shops to become charity rentals. Retail forums need to represent all retailers – not just those with deep pockets able to participate.

2) Change or die. This maxim is taught to business studies students, but as they progress to senior roles, they increasingly fear change. HMV ‘was’ THE music shop, full of passionate people who cared about music. Have a look at the comments in this Peston article – http://www.bbc.co.uk/news/business-21023602 Comment after comment stating what everyone knew, but HMV seemed immune to believe. As for the tattooshttp://www.guardian.co.uk/business/shortcuts/2012/oct/24/hmv-banning-tattoos-staff-wont-increase-sales – this tells me everything I need to know about HMV and understanding culture. WRONG.

3) You can argue about online trends, competitors advantages, operating conditions all you want. You can decry Amazon’s tax behaviour, criticise Tesco and it is all a waste of time and energy. Instead of this – recognise reality and FIGHT. Stop moaning – start battling and divert your energies to winning customers, one by one. A previous comment highlighted Zappos – excellent idea. Forget the metrics, forget the statistics. You either provide great service and put the customer first or don’t. Guess which one has the best track record of surviving over the long term.

So what bright ideas would I propose to reinvigorate HMV, to make it viable?

Just one … don’t let anyone over 25 be involved in this!!!! Consult, involve, engage young people. Let those under 25 tell you what they want. Understand this and you have a half decent chance of keeping the company alive.

Post 6.

My point was that the core concept of HMV was increasingly failing to be relevant to the largest section of music buying market. For ANY high street store (or increasingly any store) to be viable it has to be a destination that attracts the target market to shop there. With HMV this is much wider than the u25 demographic, but designing a future that doesn’t cater to their needs would be highly ill advised. Example … young people increasingly have tattoos. Do they find tattoos offensive? Does it reduce their willingness to shop and spend money there, or does in demonstrate cultural diversity, encourage discussion and engagement in conversation and thereby support the shop – and thereby sales?

The tattoos decision MAY have been relevant for an over 50s shopper, but was this decision the right one, or misjudged? I do not like Hollister as a store, but I’m not meant to. It is a destination store for my 12 year old daughter not me – she wants to go – I just tag along at a distance and fund the purchases. Would HMV have a future as a series of smaller niche stores, focusing on depth knowledge and being a cool place that over 25s hated? I don’t know – not without the research and data. What I do know is that banality fails every time.

Your last point about retail agility it spot on. Both at a national, AND local level.

Post 7.

It will be interesting to see what happens. None of the media companies will want to see HMV disappear as this gives Amazon and increased power to demand reduced prices and therefore reduce record company profits. The larger media companies may be willing to extend supplies and amend terms, but this does not change the fact that the core HMV business is not attractive to customers – it is this that needs the change. Unless the HMV store/business model is reimagined/updated, my expectation would be the same happening again in a couple of years.

Post 8.

A reality check for the High Street:

1) According to Verdict, the retail research group, the internet will account for about £1 in every £8 spent in the UK this year. (Source:FT). That means 7/8 of spend is NOT spent online (although this varies between goods sold). Given the relatively low cost of setting up an internet shop (many small shops have successful online businesses), there is no excuse. That means you a shop + online business has ALL of the potential market to play for … GLOBALLY. Online businesses have 1/8 of it. If you are not selling, don’t blame the shift to internet.

2) Retail vacancies are at an all time high (Source: LDC). This excludes charity shops, which are often temporarily disguising available properties. This is bad news for everyone (inc. shoppers, councils, property owners). It does though present an opportunity to negotiate and re-negotiate hard on costs and lease lengths. If the deal is wrong, leave it. If a costs are killing a business – deal with these before it is too late.

3) This is not going to get any easier. Whether we move into recession (for the 3rd time in recent years) doesn’t significantly matter, because the underlying economic environment is going to stay challenging for a few years yet [this may be the new normal for some time to come]. Businesses need to start by asking themselves one question – and make sure that they have a good answer:

– Why would prospective customers choose to buy from us?

You can add another ten or one hundred follow up questions, but this is the starting one. What is your value proposition? Why is it better than your competitors? Who says so? How do you know? How do you measure it?

HMV is the first, but will not be the last. Act now to make sure it isn’t you next.

Post 9.

The dominos continue to fall as Blockbuster follow HMV.
http://www.bbc.co.uk/news/business-21047652

A much clearer case of online media killing the business than HMV, but a compelling retail destination … no. As the core business is profitable according to BBC News, there is a good chance of saving many stores, but without a viable business model, long term prospects are far from secure.

Could a checklist be companies at risk be developed?

Some early thoughts …

1) Does Amazon sell your product?
2) Does Tesco sell your product?
3) Can I buy your product digitally and download it?
4) Are your monthly physical visitor numbers decreasing?
5) Is your online business separate to your core business?
6) Is the purchase functional to fulfil a clear task (as opposed to emotionally driven)?

If the majority of answers are ‘yes’ then be afraid and start to think hard about how your future.

Any other ideas?

Learning lessons from HMV

The collapse of the High Street continues as HMV enters administration this week with the potential loss of over 4000 jobs.

Unfortunately, this was a failure that was absolutely predictable.  There were no shortage of signs – from the first profit warning in early 2011 ago, subsequent profit warnings, and finally the drop in sales to below £1bn in mid-2012. The final closure this week is the inevitable result of failure to respond to pressures on the business.

The problems didn’t start though in 2010 with the profit warning. They started in 2003 with the launch of iTunes. Music services were available before then, but when Apple moves, companies should be taking notice. Even when Apple became the most popular music vendor in the US in 2008 HMV had not committed to a digital future. By 2010 when Apple was the worlds largest music vendor, the point of no return had surely been reached.

As a former fan and big spender in HMV I have watched the demise with a combination of amazement and anger.

Amazement that HMV fails to make any change in its operations that is visible to me (as a customer), and anger as it is clear where this will end – in the demise of a once great British company and the loss of many jobs.

Failing to adapt was never going to be a viable strategy. Yet, this is the one strategy that I, as a customer saw HMV adopt, the ‘head in the sand strategy’. Core problems in the business and operating model were simply not addressed, despite these being repeatedly raised by analysts and their own staff to senior management over many years. Philip Beaching gives a very readable account of this, clearly describing the hubris and sheer ignorance of wider market shifts at the senior levels in HMV.

And then the inevitable happens …

A long list of causes is cited: internet shopping, supermarkets, pricing strategy, High Street costs, digital downloads … and so on.

And yes, each of these is a valid contributing factor to the problems that HMV faced, but the core issue lies not outside the company, but within.

The core problem was an unwillingness to change; it was sheer arrogance. Arrogance that HMV was immune to market changes and was assured a future.

Wrong. It wasn’t.

No company is. Every company is at risk. Constantly. Failing to respond to changing markets and evolving customer demand sows the seeds of your own failure. It is simply a matter of time for the seeds to germinate.

Adapt or die. Simplistic, but true.

This is nothing new. Good to Great by Jim Collins does an excellent job of explaining why companies fail, but despite these lessons many executives in failing companies still fail to act. Only when put into administration are hard decisions taken. Often these decisions are the same ones that done 3 or so years ago would have helped the company survive.

So where do business leaders go to learn these lessons?

Going back further to economist Joseph Schumpter’s ‘Creative Destruction’ in the 1950s we find useful lessons for managers. Continuing back through Hegel, Marx and beyond we find the same lessons with the same outcomes for those who ignore change. Look at many empires and civilisation failures and the same lessons apply.

So how do we prevent this?

How do we build companies that can evolve and adapt?

How do we develop leaders who can keep companies alive?

The starting point has to be with the education of those responsible for companies, that is executives – the business leaders – those intelligent few trusted with steering the corporate ship and keeping it away from the rocks of administration and bankruptcy.

But is this happening?

It appears to me that a fascination with complex financial engineering, operations efficiency and supply chain management is giving us leaders able to manage the minutiae of business, but unable to recognise the disruptive forces that threaten the viability of the organisation? We are managing the stocking of the wine cellar, but failing to notice the ship is heading for the rocks.

Instead of seeking professional business leaders obsessed with micro managing market performance, we should be looking for passionate explorers with a good understanding of history – able to spot the rocks and storms that threaten the ships very survival.

HMV is the first High Street casualty of 2013, but it will not be the last.

I hope the one positive outcome of the HMV debacle is the recognition that many High Street companies need to quickly change direction. You can argue against the rocks, you can shout they they shouldn’t be there, but fail to change direction and they will sink you.

Does 2012 spell the end of the High Street? Tip: the internet is not the problem

The Situation

6 days into 2012 and High Street retailer Blacks becomes the latest casualty in a stream of failed business caused by …

… by what exactly?

  • ‘exceptionally challenging trading conditions’
  • ‘difficult economic conditions’
  • ‘the economic environment’
  • ‘depressed sales’
  • ‘competition from supermarkets’

So which one of these was a surprise?

Given the financial problems that we are all aware of, which of these could have been predicted?

Answer? All of them.

Any business studies student and certainly any director should have been able to see the logical next steps following a global recession.

So, the boards, strategists and certainly most of the people in the company knew that these conditions were coming, but were unable to save their companies. There is no doubt that times are tough and the High Street is facing an onslaught from supermarket and online competition, but do these companies share any other characteristics when compared against their competition that makes them more vulnerable?

I think they do, and it is something that should also scare a lot of retailers.

The problem

They are all average.

They are boring.

They are all companies that are middle tier players, neither discounters nor quality leader, selling undifferentiated products, have at best acceptable service and are a functional place to purchase products that you may often want, but don’t need, and rarely care about.

Ouch!

Think about it though?

– Did anyone every buy anything that they really cared about at any of these stores?

– Did anyone ever get outstanding service that they could not hold back from telling their friends about?

I doubt it. I never did.

These companies are by definition ‘average‘. And I think that this is the core problem.  Shopping in these stores is a functional, anonymous task that is often a chore. Service is rarely personal or rewarding. The experience for many people is that shopping at these companies borders on unenjoyable. And for retailers, that is a huge problem.

Shopping should never be anything less than a pleasure.

pleasure, fun, enjoyable, exciting.

I cannot imagine shoppers at these stores using any of these words about these stores.

It doesn’t have to be this way. Shops can be enjoyable, fun, have knowledgeable staff, be polite, efficient, helpful, and share experience about their products. Many small retailers do, and they always get my business. The sale is not simply the transaction of money, but in most cases part of an ongoing relationship of shared value.

But that is not the only problem.

When money is tight, and it is, the economics and behavioural patterns of shopping change. People analyse much closer what they are buying and where they are buying it from. They look to reduce spending, they search for discounts, but also search out quality items that have greater durability. Unsure of future incomes people want products that will cost less or last longer. Given that people have less to spend, they want to enjoy where they spend it. Whilst people are flexible about balancing the experience of shopping in exchange for cheap prices, average products at average prices with average service will lose out every time.

Personally, I want to reward shops that care about me, and actively NOT spend money at those that put no effort or care into my visit. Ignore me, give me poor service, sell me an inferior product, give me second rate support and I’ll try my best to not spend money with you. And I’ll tell my friends too. Alone I can make no difference to you, but I am your customer base. I will win.

The Solution

Help me, show me, inform me, talk to me, sell me quality products at a competitive and fair price (not the cheapest) and you have the chance to create a loyal shopper and the opportunity to cultivate a raving fan. If you treat me well, you are very likely to treat me friends well, so I’ll recommend you. Don’t just have a fix-it program for customer service, but LIVE it, employ people who care, empower them to deliver and be the company YOU would want to buy from.

  • My local butcher knows this, and has a shop that is always busy
  • My local sweet shop knows this (yes, we have one of these in a small town, which shows you excellence in service can pay)
  • My local newsagent knows this
  • My local delicatessen knows this

But this is not just about local.

  • The Climbers Shop in Ambleside knows this
  • Numerous smaller shops know this all over the country; Needle Sports (another climbing shop in Keswick) LIVES THIS ethos!!!
  • John Lewis knows this
  • Apple knows this … WOW do they know this

One final point, things will go wrong, so make sure your after sales service is second to none.

Get this wrong just once and you lose me forever and create a raving hater.

So no long list of recommendations, just one.

Don’t be average. Be excellent.

In everything that you do.

That’s it.

I mean everything.

This is not about having a state of the art shop, expensive fittings, the best tills, beautiful uniforms and expensive bags (whilst we are on that, don’t try and charge me 5p when I have just spent £50). It is about having a retail experience that adds value, is a pleasure, is worth looking forward to, is fun, is enjoyable. If you do have the capital, by all means create a great physical store, but this is not the priority; the experience and service is.

It is about being the type of shop that you want to visit and will talk about. Be an experience.

Employ people who care. I mean really care. REI in the US continues to knock me for six with their service ethos. I’d be loyal to any store in the UK that had a fraction of this ethos. This starts with hiring people who care, people who want to serve and help their customers, whether they buy or not. REI takes a long term view, it wants to win not just lifetime loyalty, but generational loyalty. Parents bring their children, grandparents bring their grandkids, that cycle of loyalty builds and builds. I wonder if anyone from Blacks ever visited REI, because if they did, none of this is reflected in the current Blacks shopping experience.

This is not just about the front end though. At the back end, retailers need to know their products. Sell quality products, don’t sell junk that has a good margin, because this approach may cost you your business. Find new suppliers, seek out niche suppliers and emerging designs and products. Build relationships with suppliers and know the products. Keep the products relevant to the season. Start your sales before the next season starts, so I have a chance to pickup a bargain in season. Be selective about what you stock, make sure it fits together as a whole. Sell an end to end experience. Understand your market, your customers and their needs. Where you can, surprise me, reward me. This does not have to be expensive, but show me THAT YOU CARE ABOUT MY BUSINESS!!!

Connect locally, support your community, contribute, reward loyalty, be kind, give back. Contribute to what your company cares about. It is not about big pots of cash. Can you help a local school or business by sharing experiences and advice.

Virtually every company can learn from Patagonia in terms of managing and presenting social responsibility, but this is a massive global retailers, there are many more examples at a local level. If you sell food, do you CARE about food? How would your customers know? Are you supporting local suppliers? Are you committed to healthy living, or exciting food experiences? Do you support causes that you and your company care about? Can customers see what you are doing? Can they get involved?

It doesn’t matter what area you are in, you can get involved:

  • Food – healthy living, sustainability, local farming and production, reducing waste
  • Books – reading, literacy, learning, diversity, any number of specialist themes (home cooking, travel etc)
  • Outdoor – environmental awareness, travel, sustainability, open access, development
  • Fashion – sustainability, reuse, recycling, customisation and personalisation of clothing, positive self identity, diversity

You have no excuse, because this is not about time, but effort and caring.

If people apply for a job and don’t care, don’t employ them. Simple as that. Take time to find people who care. Build networks, relationships and fans. Reject average. Low wages don’t help, but high wages are not required either. Pay fairly, be flexible in conditions and excellent in treatment of people, not STAFF. People, humans with families, not anonymous staff.

Now re-read this article and think how much of this applies to the companies that failed.

I cannot think of one company on this list that gets a fraction of this right. So where is the surprise that they failed.

This was completely predictable and there is a tranche of other companies closely behind them that has survived for now, but are on corporate life support. They are dying, because the lifespan for the business model that they are following is already dead.

Of course, this takes time to get right, costs money, takes effort, but then the alternative is pretty clear too … no business, no job, no income.

There is no middle ground.

Middle ground = average = loser

Excel or lose. Your choice.

This article is Part 1 of a 3 part series.

Part 1 – The experience

Part 2- The internet

Part 3 – The strategy

HMV part 2 … Waterstones

If you didn’t know, the people who own HMV also own Waterstones, the bookshop. So are they in the same position as HMV?

The problems and pressures facing the company are very similar, but in my opinion there are some differences, sadly for Waterstones not enough to counter a strategy of denial and inaction.

Neil from Interacter responded and asked about my thoughts on Waterstones. Here is the reply post:

[Slightly with some additional detail]

Agreed on HMV. Dead unless they change, and I don’t think they will change enough. The evidence so far is denial of the inevitable. If you work at HMV, print out these comments (I doubt they use the Internet!!) and leave on the desk of exec team with a post it note saying “read this if you want to have a job in 12 months”. Seriously. Do it.

Waterstones … interesting. Here is why. I’ll stick to 5 points.

1) Experience: Waterstones ‘gets’ experience much better than HMV does. It could do much more in terms of being more social, focusing on the environment (more chairs, changing book layout [to show covers, not just spines], and adding more tablet layouts with recommendations, bit is a league ahead of HMV. So, overall a C+ or even a B-, but it needs to push the boundaries more. Drive card benefits more, incorporate social media better and KNOW ME and reward me. In terms of people – generally good. People in Waterstones love books, but needs to better publicise and leverage the expertise and knowledge that it has. The people are a huge asset, so use them better. I like Waterstones, but I don’t love it. That is your challenge. Make me into a raving, passionate fan. Also, get serious about technology. Book finders need to be much better … and be accurate. ‘We may have that book’ is useless. Sort out your stock control. RFID could help here with tracking. INNOVATE! The website is is need of a major haul as well. One example, one of the best sellers of the year, Steve Jobs book has NO bookseller comment or review!!! This shows that Waterstones website is about flogging books (and is not great at that). What it needs to be is a place for those passionate about books to learn, connect, explore AND BUY! Website marks: 1/5, almost no social media, no external links of reviews, limited information, nothing to attract me to explore deeper, no seasonal content that I want to read. Completely generic selling site.

2) Pricing: This is a joke at Waterstones. Full price for everything outside of discounted top sellers (or it feels that way). In many cases this means up to TWICE the price of Amazon. This is unsustainable as a business model. It doesn’t need to be a discount retailer, but full pricing is not sustainable when my iPhone can scan the barcode and allow me to order from Amazon in less than 10 seconds. The solution – REWARD ME – as a regular purchaser and BIG book buyer. You don’t need to be the cheapest, but also, don’t rip me off. I recognise I need to pay more to have the book now, but if the cost is less than £2.80 (the cost of Amazon postage), you will lose my business and I will wait until tomorrow. If I have Amazon Prime, good luck – no chance.

3) Stock: Needs some real thinking and innovation here. Where are the special editions, smaller publishers, local content, self-publishers? INNOVATE. Amazon is building relationships directly with authors … what is Waterstones doing? They have a huge asset in the shops to use this. The online/offline experience needs fixing. What happens if they don’t have the book in stock that I want? Once I ask about this in store you need to offer to ship to me next day and match Amazon pricing on this. If you don’t, then you don’t just lose the sale, you lose the customer. When I last looked, the speed was from years ago … “we can get that book in 6 weeks”?? Really?? Or I can order on Amazon and have it at my house tomorrow. Start with some core use cases and nail these. Embrace technology – fix the supply chain, but innovate. Where is ‘print on demand’. Waterstones should list 20 million books in each store and be able to supply any one in an hour. Is ‘print on demand’ the answer? I don’t know, but supply chains measured in weeks are certainly not. HMV should have nailed this too, but with downloads growth, this may be too late now.

4) Business model. Needs to innovate and build loyalty much better. What about returns, buy-backs, selling my books for me? I don’t have the answers, but see no innovation from Waterstones in this area. The model needs to evolve – not completely reinvent, but evolve. Try new things and test concerns locally. Empower managers to try things. And whilst I am talking about local managers – give them responsibility for the store. Allow them to innovate, to invest locally, to build connections with customers. I have a more social experience in Starbucks with its book groups and community events than I do in Waterstones!!! Wake up. Start small, engage the community.

5) Long term future: Much harder to call than HMV. The problem is the business model is changing from underneath it, and I see no response from Waterstones that gives me confidence. The pressures are the same as music (i.e. supermarkets, online, electronic channels), but there is a greater affinity and love for bookshops, so there is a window to change. Books will endure, but bookshops may only exist in niches, so Waterstones needs to define what a big retailer can do and show the way. Learn from Borders. The writing is on the wall unless you make these changes. Borders in the US was kicked into touch by Amazon, but at least today Barnes & Noble is surviving. It embraced technology, innovates, discounts and builds strong loyalty through a reward scheme. Its online presence is well integrated and they are driving social strategy … so what is Waterstones doing … not all of this, in fact almost none of it.

Conclusion:

Same problems as HMV – dying business model and an unwillingness to boldly innovate. Without a willingness to change, the outcome will be the same as Borders. Even more than HMV, I really hope this doesn’t happen. The ball is in their court though. Lets hope they start to make changes now rather than do what HMV has done and ruin the brand and the stores.

HMV … dead man walking

The following post is a guest comment that I made on Neil Hopkins excellent Interacter site. The original spark came from a Facebook post by Marketing Week linking to a story about yet another completely predictable HMV profits warning:

The worst thing is that this is not a new problem. HMV has been a dead man walking for years now. Look at Tower records … what is the HMV strategy – copy Tower as closely as possible? HMV has joined a race to the bottom in music retailing. Time is running out and I am amazed that there is no sign that anyone in the leadership team understands this. It is not about falling sales, it is about the end of your whole business model.

HMV has done well to survive and the cut pricing has no doubt helped the cash flow – but this can only ever be a short term fix. Over the longer term it becomes a weight that will drag you down, as you play a game that you cannot win. Online retailers will win any price war. As they expand outlets, HMV can only lose following this model.

HMV needs to (as the article absolutely gets right) focus on designing and implementing a new experience. This needs to be a high quality music lovers social experience. It also needs to be partner centric. HMV should not do this alone. Find a few number of partners and build new experiences together. There are examples of this being successfully done in whole range of retail sectors. Look at Apple, REI in the US, even Dixons is doing much better recently – but there are myriads of smaller companies that really excel in being experts in their domain and providing pleasurable and enjoyable visits for customers. Shopping at HMV today is far from this. Instead of it being a destination store, a place you look forward to, on the rare occasions that I do visit I don’t look forward to it. I want to get in and get out as quickly as possible and hopefully spend as little as possible as I don’t want to reward any company for caring about their customers as little as HMV does.

BUT – this is not what I want. I am a PASSIONATE fan of music and a I want somewhere to immerse myself in music, learn, enjoy, and PURCHASE it.

Reinvention is possible, but time is running out. Perhaps it is already too late. Only the board and the bankers would know the answer to that. HMV needs to understand what it can do, what it can offer, and then build it. If HMV is to survive it is likely to be in a much smaller form, with a fewer number of better and more profitable stores. Given that the cash flow of HMV today is terrible, it is not going to have the cash to invest in large scale refitting, so there is the decision of whether to build a small number of stores in the new model, or try and (cheaply) retrofit existing ones at scale. The second isn’t a viable option of course and will fail, because it will not fundamentally change the perceptions of customers. They will see HMV is a bit better, but it will do nothing to significantly change habits or purchasing behaviour, so if it doesn’t do that, then the ROI on the refit doesn’t work.

The ball is in your court HMV … but I’m not hopeful. It has been in your court for the last decade and nothing has changed for the better.

Additional points to the excellent article above:

1) Send the executive team to visit the worlds top experience stores. Make them personally pay for the visit – reimburse them in 12 months if they launch the UK next generation store. Travel economy … as you are going to need to visit the US, Europe and Japan!

2) Talk to people who understand what is possible. Embrace open innovation because there are a lot of people who want to save music shops.

3) Be bold. Half measures are not possible. Half measures mean that resources are spread too thin to make a difference. You need to make a bang here. The goal needs to be an experience that the world wants to come and see. Get it right and you don’t need PR or advertising.

4) Innovate the experience and the business model. HMV needs to innovate. Partner with others and share ideas, but innovate. I don’t mean copy, I mean look to what customers really want. It took the genius bar three years to be truly successful at Apple, but they understood the problems customers were having and stuck with it.

5) Speed up. Set a hard and fast timetable to do this. Set aggressive timescales and meet them. Don’t lower standards. Drive hard, but show people that you are committed.

And good luck.