HMV, back from oblivion

HMV Oxford Street

In April 2013, HMV seemed to be heading to the scrapheap of big retail brands sent out of business by online competitors. But a recent article by Management Today highlights the turnaround achieved by specialists Hilco since their acquisition of the company, with HMV now poised to overtake Amazon as the biggest retailer of CDs and DVDs in the UK ( How has HMV managed to fight back against one of the world’s most powerful competitors? By a change in the strategic direction of the company. Hilco have rapidly changed the direction of HMV, along three key themes.

Cut down to size

One of the most immediate and noticeable impacts of the Hilco takeover was the firesale of stores, with the organisation deciding to only maintain 125 of the 400 stores that were open at the time of administration. In total, it’s revenue has actually fallen, but it’s profitability has increased as a result of not propping up the operating costs of loss-making stores. It now is on a sustainable footing for the future, and has even added a few additions, including it’s original home on 363 Oxford Street (

The sale has also had a second positive effect; the sale of millions of pounds worth of stock at rock bottom prices drove people back into stores looking for a bargain, reconnecting many consumers with this retail favourite. It helped to put HMV back at the forefront of the shopper’s mind when thinking about media.

Within all of it’s stores, Hilco has taken a ruthless strategy to refocus HMV on it’s core business of CDs and DVDs. At the time of administration, the company has branched out and diversified in a huge number of directions; selling everything from toys to iPads. By cutting their range of goods on offer and focussing on the core products they can excel on, such as band merchandise and CDs, HMV have been able to refocus and increase profitability.

Take the lead from independents

Beyond this resizing, HMV seem to have found their identity as the home of music and film on the high street again, after it had become a little bit lost during the 21st century. Chairman Paul McGowan recently commented that “HMV is re-engaging with music shoppers and getting them back into shops. This is about being an authority in music, not selling music as a commodity.” The understanding has been reached that it HMV has deep industry knowledge that is unparalleled by it’s competitors, and it needs to use it as a competitive advantage. The prominence of ‘HMV Recommends’ sections for each genre and focussing on albums from headliners at festivals during the summer has shown this new approach.

One of the triumphs of the past year has been the way that HMV has been able to reconnect with the music industry itself. Over the past 12 months, there have been more than 300 live performances and appearances in stores, with the likes of Ed Sheeran and Twin Atlantic holding album-launch sessions. Not only do artists do this for publicity, but also due to the long-standing connection to HMV and it’s importance as a revenue generator for the industry. This connection is invaluable for the survival of both parties in the future.

Focus on the right competitors

HMV has changed the way it looks at the media entertainment industry. Instead of looking at all competitors, it has focussed on winning share in the physical market, rather than chasing powerful competitors such as Amazon and iTunes. By ignoring the digital industry almost entirely, they have attempted to grab a bigger portion of a smaller pie – a strategy that has worked exceptionally well. This is an interesting development, opposite to the general trend of brands feeling they must go digital to survive. It may provide an important lesson for other high-street firms; concentrate on what you are good at, being skilled at physical merchandising.

Is this recovery sustainable?

Absolutely. As of 2014, in a very surprising statistic, 70% of music purchases are still physical. The majority of revenue is still flowing through the high-street, and the opportunities remain large to be profitable in this area. HMV’s recovery has been built on being sustainable, and the market seems strong enough to support them once again, with the backing of the music industry and consumers. Recent data actually shows physical sales last month grew by 3%, despite the perception that, with a more digital-savvy population, this figure would be falling.

The key for HMV is to not fall into the same trap as last time, but to stick to it’s core competitive advantages in entertainment media and related goods. By maintaining it’s reclaimed position as the place to go for physical CDs and DVDs, the company should flourish in the coming years.


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