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The quick and the dead: HMV and the demise of the high street

By Ed Cox

January 15, 2013 | 4 min read

The demise of HMV is a reminder of the brutality of the marketplace these days.

In another blow for the high street, HMV has called in administrators

The pace of market change is relentless and to quote one media agency boss: "There are two types of business - the quick and the dead."

The fact is, HMV has been on its last legs for a while and you don't need to be a City analyst to know why - the inability to adapt to the digital age.

It’s been reported that a previous CEO said of music downloads, back in 2002: “It'll never catch on." But I don't think the blame can be put at a single CEO’s door.

Year after year saw steady shifts in shopping habits to the internet and declines in sales of physical formats - and yet HMV still failed to invest sufficiently and find the right formula. Perhaps it was always doomed - who needs physical stores to sell digital formats? And the recent move to sell electronics seemed curious as that was also a market that was struggling in the high street.

And yet some businesses are thriving in a multichannel world. John Lewis recorded a 13 per cent increase in sales over Christmas, including a 31 per cent increase in electrical goods; Next is bucking trends and recorded a 3.9 per cent increase in sales, bolstered by an 11.2 per cent surge in its online business.

John Lewis and Next have both recognised that the stores and the web are symbiotic, not competing businesses. It’s well known that store managers at John Lewis are incentivised on all sales in a certain catchment area – regardless of the platform. This simply aligns the business with the way that consumer behaviour has moved on – customers like to move seamlessly between stores and web for browsing and shopping, choosing their personal balance of experience and convenience.

As recently as 11 years ago, HMV was valued at £1bn and the business was once investigated by a Commons select committee over its huge profits. Its rapid demise should be a lesson to us all that even in a dominant market position, the changing consumer landscape can have a terminal impact on your business.

And the rate of change is showing no sign of slowing down. Technology is driving this consumer change and businesses must act now and seek to understand how technological and human behavioural change might impact their business.

In fact, I believe we are in another transitional period every bit as impactful and disruptive as the advent of the internet – it’s all down to the location-aware connected device in your pocket.

Mobile can fundamentally change the value proposition for a business – from offering customers the chance to place bets on the football while in the pub, or arrange last minute travel insurance in the airport, to finding money off vouchers for restaurants in your local area.

The worrying fact is that many businesses are ill-equipped for mobile usage as it is now – let alone for the emerging trends such as mobile wallets and NFC (near field communication). Less than 40 per cent of the UK’s top websites are optimised for mobile devices – but this should be table stakes by now.

Over the next few years mobile will be just as disruptive to business models as the internet has been. We may well see internet business failing, just like we see the high street suffering now. Let HMV be a lesson. Don’t rest on your laurels. Be quick – or be dead!

Ed Cox is joint head of digital at Arena Media, which works with brands such as Eurostar, Dominos and ESPN


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