HMV Replay Promotion – Desperation

I was listening to an ad on TalkSport. Something about HMV giving people credit for their old games consoles.

This strikes me as desperate.

I mean, do HMV really want to get involved  in the logistics of taking and valuing peoples old electronics and then get involved with the logistics of then moving the electronics on?

It sounds like a complete nightmare of a scheme to me, let alone for a company that is not focussed on recycling logistics.

I am also at a loss to see how HMV customers will benefit from taking their electronics to their local HMV store rather than putting them on Ebay or in the local small ads.

It also sounds like a headache for the customer, especially as they will be carrying their old stuff into shopping centres without knowing what price they are going to be offered for it.

Personally, I can’t see people going for it for the above reasons.

Okay. This is what I understand from the radio ad, lets take a look at the HMV website.

http://hmv.com/hmvweb/navigate.do?pPageID=5441

Okay, they seemed to be offering a fixed price for the consoles at least.  HMV say they will give 80GBP for a PS3.

What HMV are going to do with a used PS3 when they get one is anybody’s guess.

The 80GBP they are giving is fair if you look at the prices they are going for on Ebay but I am struggling to see the benefit from HMV, in fact I can only see HMV’s costs increasing with this program.

Unless of course HMV are going to start selling using electronics and games in their stores. They could be doing this, it’s been a while since I have been in a HMV but the thought of going in and seeing used consoles and games is not particularly appealing to me.

I always thought HMV was a cut above other retailers.

So in summary I can see this replay promotion increasing HMV’s operating costs in two ways. Increasing the workload of their staff and increasing their logistics costs.

I cannot see a big benefit for the customer considering the extra hassle involved compared to selling on Ebay.

With this promotion HMV are entering into the Ebay market which I believe is unwise as HMV cannot bring anything new to the table. HMV are also entering Blockbuster market with used games which does not fit with the HMV image.

HMV are also asking people to come to their stores with their used stuff.

I fear with this HMV will be destroying their reputation as a premier and serious retailer of music.

This promotion shows that the company, in my opinion, is desperate to drum up sales in its stores because the normal selling proposition of having a nice store, with a nice environment with nice music si no longer enough to get the punters in.

Which it probably is not in this day and age. People can now site at home in complete comfort and listen to music on demand and buy if they like it, with minimal hassle.

You can see that HMV need to radically change their business model but their website does not give you that impression, the impression that they are doing something radically different.

My initial impression of the HMV website is that the brand is being diluted.

Music is not even the main menu item, its tucked away on the right after DVDs and computer games.

Something interesting on the HMV website is video on demand. HMV are offering free delivery on their CDs which is a bit 1990s.

HMV does have a music download section which for someone reason they have buried out of sight.

This is a massive shame because it absolutely rocks. The best part of the HMV website is hard to get to, crazy.

If I were advising HMV on their strategy the first thing I would suggest is to bring their music download section up front and centre and not as it is now which is about number 12 on their list of priorities.

HMV are known for music, HMV are known as a music specialist, HMV help people to source hard to get and unusual, turning people onto stuff they have never heard of, the internet is a prime platform for HMV to do what they do best, yet not only do they not highlight the variety of music they have they do not even highlight that they sell music.

Something is clouding HMV’s strategic vision and I think that something is panic.

HMV revenues are shrinking fast. This is entirely normal. I believe the days of being able to pay for the overheads of a high street location by selling music are gone.

Something which HMV appears to recognise as they are moving into high price electronics. This is my mind is a mistake. There are many generic retailers out there offering electronics.

With HMV “diversifying” they are jumping into the crowd rather than standing apart.

HMV has a stand out reputation and that is knowledge of music. No other company in the UK is so famous for its knowledge of music. This is HMV’s key to future success.

Which brings me on to my second recommendation. HMV stores are on every major high street. You have to ask, is this something that can be continued and maintained?

Depending on how bad HMV’s finances are, assuming they are bad, I would immediately look into scaling down their high street presence and start stepping up their online presence.

I believe the online medium is perfect for HMV. It is something that HMV can exploit to its advantage over and above any other retailer.

HMV’s management may however be reluctant to start cutting back on their high street presence. They have massive debt and to service the debt they need high turnover.

Even if profitability increases with an online focused model, if sales reduce HMV may not be able to service their debts.

I feel their pain. However if HMV can show its investors that there is a larger plan which will lead to growth and sustainability, dominance and future proofing the bitter pill may be something investors will swallow.

HMV does not need to simply disappear from the high street, simply moving to smaller premises would lead to massive savings. Less staff costs, less stock costs, less overhead costs, less logistic costs etc.

With an online model, does HMV really need to keep stock of CD;s in its stores anyway? Could HMV not make the CD’s for its customers when they visit their stores?

Could customers to the new look HMV store listen to music clips in store or come in with a list of tracks they want to listen to and get the staff in the store to make a custom album for them with super high quality equipment that gives far superior sound quality to your cd writer on your PC?

If there is one thing that has gone out the window with the music download revolution it is sound quality. The sound quality on the cd you burn on your computer is not a patch on the quality you get from a proper music CD, HMV could use this to their advantage, superb sound quality on downloaded music burned to CD.

HMV could accept the new landscape of music download. Acknowledge how it is hitting their business. And instead of avoiding the question or avoiding the problem if you like by moving into other areas and not addressing the core issue HMV could say yes, this new music buying reality has the potential to destroy our company and that’s fine.

But instead of looking at the music download as the enemy HMV need to accept the new reality, understand what people are now doing and say, how can we improve the experience of the consumer that downloads music.

This is how the company was started, people are buying music but how can we make the experience better. The management team at HMV now need to look back and find out why the company was started originally. I am positive the original motivation for starting to HMV is still valid today, the management team need to look at their roots.

Unfortunately I think the current HMV website shows how detached the current business is away from its roots.

Established in 1921 through its landmark store in Oxford Street, and famous for its iconic ‘dog-and-gramophone’ trademark,

This is it, an 80-year-old company with one of the finest reputations in the music retail industry and the current website donates only one line to the history of the company. To me, that says a lot, it says the company has lost its way and is losing or has lost it’s identity.

HMV need to say to themselves, what are the weak points of the current music download experience and how can we improve it?

HMV have the reputation and the resources to revolutionise the download music market.

Burning CDs in store on high quality equipment would be a start. It would be a service no other retailer offers, the running costs would be low, it would reduce logistics costs and it would reduce the floor space the stores require yet offer the customer a massively increased selection of music.

HMV need to focus on music and video, there are to many generic stores doing video games and does HMV want to work in the dross (musically speaking) which is ASDA and Tesco?

HMV need to promote their music store more heavily because it is excellent. You don’t need to register to see the selection, it is fast and you can play decent lengths previews. This is a prime weapon in the HMV arsenal, why they are not exploiting it is a mystery and a waste.

HMV could offer free wi-fi hotspots to give customers or passersby ultra fast and free connection to their download website.

Internet connections today are extremely fast. Super fast internet connections on the move are expensive and not necessarily fast.

HMV need to maintain their reputation by supporting music festivals and supporting up and coming bands, which they appear to do.

HMV has huge power which could enable it to become a record label in its own right.

What HMV could view as a negative at the moment, ie the ease of access to music and people not needing to enter stores. HMV can use this to their advantage.

HMV is one of the most respected retail brands in the UK and with access to music now so easy HMV could easily promote new bands which it has signed. Distribution costs would be tiny and the word-of-mouth-power of the internet is huge.

The download revolution changes the music landscape massively and it would be foolish of HMV to try to swim against the current.

The music download revolution closes doors for HMV but it arguably opens many more, whether it be through expanding its music services and/or increasing efficiency. The possibilities need to harnessed and not avoided.

In summary

1. HMV online music store is phenomenal. It should be upfront and centre not buried like it is at the moment. Do people even know they can download music from HMV?

2. For people listening to music on CDs there is a huge unserved market for high quality sound on burned CDs. HMV could make custom CDs in store or they could supply via mail order, the possibilities are huge.

3. The download revolution has made it easy to promote, sign and distribute new bands and artists. HMV has the brand recognition, reputation and the resources to really exploit this possibility. The revenue stream from selling music available exclusively from its website is huge.

4. HMV needs to acknowledge that music downloading has closed many doors but HMV also needs to identify the new possibilities. Music downloading is here to stay, HMV should not think of it as some kind of cancer on its business but rather look at the new reality and ask how they can improve the music downloading experience.

5. HMV are a music and possibly video company. They should focus on these areas and not drag themselves down to the level of non specialist retailers like ASDA and TESCO. Gaming is like coca cola, music is like fine wine.

You can get coca cola anywhere but if you want the best wine you go to a specialist. HMV need to exploit their knowledge.

6. HMV need to acknowledge that reducing their high street presence does not mean they have to disappear from the high street and they should not look at it as a sign of failure, adapting their presence is just that, adapting to the new environment they find themselves, that is a sign of strength. Smaller cheaper premises in less prime locations could be the way forward, especially if the company is looking to slash costs

7. Stock. Does HMV really need to have so much stock? Can they not burn CDs and DVDs in store on demand? If so this would obviously be a massive cost saver as well as giving customers more products to choose from by some magnitude. There is no reason why every HMV store could not offer the largest range of music in the world.

No more waiting to order unusual music from the distributor or being told the music is not available. Evey song from every artist available immediately in every store. No retailer offers that.

8. And to state the obvious, I believe this replay offer has nightmare written all over it. HMV need to concentrate on their core competences.

So while music downloading has harmed the traditional music retailers, HMV seems to have not moved its thinking on.

The key to the strategy I recommend is HMV acknowledging this new reality and look at ways to exploit the new technologies to improve the experience of music downloading consumers.

HMV has the reputation and recognition to be the master of online music, the question is does the management team have the insight and vision to use it. I for one hope they do, the world needs HMV.

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