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.