James Moore: Amazon's smile gets wider as it chews its way through the high street - Business Comment - Business - The Independent

James Moore: Amazon's smile gets wider as it chews its way through the high street

Outlook Is it just me, or did the Amazon smile logo get just a little wider as HMV became the latest taxpaying British retailer to give up the ghost? The demise of the business should come as no great surprise. It would have taken something of a miracle to arrest what was a precipitous decline in sales and spare the business from breaching the banking covenants that come with trying to operate under a welter burden of debt.

In truth, HMV faced so many problems it's almost hard to list them all. Many of them were self-inflicted. Start with a diversification programme that led to the business borrowing heavily to invest in a series of disastrous acquisitions.

There were also too many small stores that didn't offer much beyond what customers could get cheaper from their local supermarkets, another competitive pressure. And a lacklustre online offering.

But HMV wasn't entirely the author of its own demise. Brutally high business rates, in some cases exceeding the rent paid for shop space, didn't help. Set by the Government and linked to RPI inflation, rather than CPI inflation (which is lower), these are strangling Britain's high streets and the diminishing band of retailers that ply their trade there.

As an internet retailer Amazon, of course, doesn't face that problem. Nor does it face the problem of paying corporation tax, because its clever accountants get around that and ministers lack either the ability, or the inclination, to do anything about it.

There's that smile again.

Suppliers didn't do much to help HMV's cause, either. As the retail analyst Nick Bubb points out, Universal Music, EMI, Warner Brothers and Disney refused to inject sufficient equity to refinance the business when they had the chance.

Trevor Moore, the chief executive, thanked them today. But he wants a piece of what's left once the potentially healthy bits of HMV, the stores in big retail malls with lots of footfall, are cut out of the diseased body of the business.

Those suppliers need those shops. They need to realise that.

It appears that there is sufficient interest among potential buyers for something to emerge from the wreckage of HMV. His Master's Voice might not be permanently silenced and so at least some of the corps of young, and generally helpful, staff will keep their jobs.

But Amazon offers its customers rock-bottom prices, and you can hardly blame them from taking advantage in the current climate. That won't change with the elimination of a competitor. Amazon would be foolish to test the will of the competition authorities.

What may change, however, is Amazon's attitude to those suppliers. As it eats the high street, the internet giant is increasingly in a position to dictate terms. There's that smile again. It's definitely getting wider.

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