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How HMV missed a critical opportunity to innovate

Sticking to physical goods was its downfall, writes Martin Hickman

To observers of the music industry’s response to the tidal wave of technology overwhelming the traditional business of selling CDs and records, HMV was the last house standing on a fast-eroding cliff.

Worse even than books or newspapers, the record industry – major labels and retailers alike – failed to see the web’s potential for downloading the digitisable and for the delivery of physical products at more competitive prices.

The question is, could HMV have done anything differently – and will any bricks rather than clicks “record shops” survive? The answers, glibly and with the benefit of hindsight, are “maybe” and “yes”.

Instead of seeing the arrival of disruptive technology only as a threat, HMV could have grasped it as an opportunity. The US bookshop Barnes & Noble marketed its own e-reader, the Nook, to rival Amazon’s Kindle, but HMV did not leverage its brand and wealth to create a British version of Apple’s iTunes.

Instead, the most famous name in music retailing and its yesteryear competitors – Our Price, Virgin Megastores, Borders, Zavvi – clung to fat margins on physical goods. HMV’s shops remained formulaic aisles of stacked CDs, DVDs and, latterly, video games.

With no high street rival and 600 stores just two years ago, its management may have felt that it could subsist on the shrinking but still sizeable physical market; 69 per cent of album sales were still on CD last year.

But why - even if you’re not an iPhone-waving downloader - bother braving the high street when, by barely lifting a finger, someone else (Amazon) will deliver a CD to your front door for less?

If physical retailers of digitisable content – and this goes for bookshops, whose numbers have halved in five years – want to co-exist with the internet they have to offer something different and better.

Innovation is crucial. Why didn’t HMV have coffee shops, in-store performances, themed shopping days based around musical genres, groups or Hollywood films, personal shoppers (“if you like X band, you’ll probably like Y”) and, at its most elemental, excitement? It was selling boxes when it should have been selling music.

According to the former HMV marketing executive Philip Beeching in a blog posting last August, the chain’s failure to adapt was down to “hubris, arrogance, a feeling of invincibility”. Unless it can emerge from administration (and one hopes it does, for the sake of its shopfloor staff), we can’t know whether a smarter high street music chain could ever survive in the 21st century.

But that’s emphatically not the case with smaller independent record shops. While their numbers have shrunk from 2,200 in the 1980s to just under 200, many are thriving. Shorn of bloated high street rents and headquarters, they are community-based enthusiasts, for vinyl often, sometimes for niches such as indie, rock or blues.

Quirky, eclectic and easy to browse, they exist because they are special. The lesson of HMV – and Our Price, Borders, Zavvi and the rest – is that if you only offer more expensively what the web does more conveniently, you’re heading for a fall.