Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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restore HMV to health was that Hilco took over a much leaner operation — 120-plus stores in the U.K. at this point, down from 220 in the chain's pre-ad- ministration days — Deloitte having al- ready closed many of the money-losing stores and renegotiated the leases on others. To date, there is no talk on any front about any expansion, but the chain's recovery is noteworthy enough. "The lower fixed-cost base achieved by lower rents and store closures has done a lot to improve the financial via- bility of the business and cash flow," said Nick Bubb, a member of the KPMG/ Ipsos Retail Think Tank. And Hilco executives have pointed to a market- ing strategy that brought fans back into the stores through the scheduling of some 250 album signings and in-store gigs. Some of these included live perfor- mances at the company's landmark store at 363 Oxford St. that were streamed online. At the same time, some 300,000 people signed up for the revamped loy- alty card during the year, lured in part by front-of-the-line access to these events. But Bubb is skeptical about the im- portance of the new marketing strategy, noting that the chain has long featured personal appearances by musicians. "A lot of people are interested in live music, but 'old HMV' wasn't able to make a go of owning concert venues and selling concert tickets, so it would be wrong to exaggerate the impact of a few live bands in stores," he said. Three external factors appear to have played in HMV's favor as well. First, the big grocery chains, which had been for- midable competitors to HMV (Tesco ac- tually sold more music and videos than HMV in recent years), have lost some of their market share to hard-discount re- tailers, analysts note. People who might have picked up a DVD while grocery shopping in a large-format Asda, Sains- bury's or Tesco hardly have the same opportunity in the frugal aisles of an Aldi or a Lidl. Second, a sizable number of British consumers have never stopped buying physical recordings. Year on year the market continues to decline, but physical sales are still a major market. Digital may be rapidly becoming the dominant mode of media consump- tion, but even last year British consum- ers bought nearly 30 million physical al- bums, 49 percent of all the albums sold, according to the British Phonographic Industry trade association. Then, too, vinyl records are increasingly fashion- able, and there is some speculation that younger buyers used to streaming are buying albums as a keepsake. HMV sold some 350,000 vinyl albums last year, more than twice the number of the year before, and the chain's highest level since the mid-1990s. HMV's timing seems to be good, ac- cording to Tony Rigg, director of the Laboratory Project, a Manchester-based music label and consulting firm. In the old days, it was a big deal for a band to get its first LP in a big music store like HMV, says Rigg, who formerly was op- erations director of independent U.K. record label Ministry of Sound. That ca- chet went away with digital downloads, he says, though it may now be making a comeback. "Vinyl is cool again, and if your music is available on this format, it means more than a digital release," Rigg said. Vinyl sales are still limited, he cau- tions, but vinyl's renewed popularity, combined with live performances, could "create an ideal opportunity to reconnect audiences with the notion of physical products, be it music or merchandise. It is entirely possible that such a practice could impact positively on recorded mu- sic sales, even in a world where music can easily be obtained for free. It could even become a career milestone again for mu- sic makers to have their first official mu- sic release on the shelves of HMV." But not even the recorded-music industry is ready just yet to say that the future looks bright. "Time will tell if this represents a longer-term dynamic in mu- sic consumption, as consumers increas- ingly look to the discovery, connectivity and seamless convenience of the grow- ing number of streaming services for their daily music needs, but still like to buy, own and collect on physical format when it comes to artists and recordings they love," said Gennaro Castaldo, a spokesman for the British Phonographic Industry. "If this new narrative does in- deed take root, then this is likely to pres- ent a perhaps unexpected opportunity to HMV … to focus successfully on a more simple physical-based retail offer, and which may help it remain part of the mu- sic ecosystem for some time to come." Bubb, though, remains unconvinced that HMV has got its groove back for good. "Despite the growth of digital, the physical-entertainment market is still quite large, but the evidence that HMV simply downsized a bit too much two years ago should not be taken as proof that the business will survive forever in its current form," he said. "There is still just about room for a specialist in the market, but Amazon and the supermar- kets remain a formidable threat." S C T r e T a i l i n g T o d a y J u l y 2 0 1 5 / S C T 29 Digital may be rapidly becoming the dominant mode of media consumption, but even last year British consumers bought 30 million physical albums.