Last week we held an event where we explored one of our ongoing themes for this year – the future of the high street. We had a lively debate involving our expert panel: Philip Beeching (ex HMV Agency Head), Robin Bresnark (ex-music journalist), Faisal Galaria (ex-Spotify and Tesco Digital), and myself. Via live link we were joined from across the pond by Stephen Godfroy (co-owner of Rough Trade Retail) from his new store in Williamsburg in Brooklyn, New York.
We looked at why traditional retail models, exemplified by HMV proved unsustainable and how companies like Rough Trade are staying ahead through experimentation, innovation and customer intimacy. You can see the slides that set the scene for the evening here.
A few weeks ago I shared my own thoughts on the demise of HMV and pondered if there might be a future for the brand. We didn’t want our event to be a negative take on where HMV went wrong, rather an opportunity to consider what we might do with the brand given a clean slate. The discussion inevitably broadened to consider the future of the high street and the challenges traditional retailers like HMV face unless they think differently.
Deloitte, HMV’s administrators, had set Monday 25 March as a deadline for agreeing the sale (the date being the day retailers pay rent for the next quarter). Over recent weeks there has been speculation about what Hilco might do and whether supermarket chain ASDA might make a play for the brand.
It seems that the process for agreeing the terms of HMV’s restructure with landlords and suppliers has been complex. The suppliers, record labels and film studios, are inevitably keen to ensure a high street distribution channel to challenge the supermarkets, streaming services like Netflix and Spotify, Amazon and Apple.
While I recognise HMV’s future will be in part shaped by the record labels and film studios, I hope the restructured business will be able to rediscover itself unencumbered by the slow and risk adverse take on innovation that has caused both the film and music industries to struggle with digital in recent years.
Hilco have experience with entertainment retail having bought HMV Canada in 2011 and had some success with sales over Christmas 2012 increasing 1.4% to C$65.4m (£41.4m). However, Canada is a very different market to the UK with a slower move towards digital downloads. What they have done in Canada will not be enough to save HMV in the UK. If Hilco want to provide more than palliative care, they will need to be more innovative in their thinking and practical in delivery, being prepared to experiment, learn and adapt.
My fellow panelist Philip Beeching has shared his take on our discussion and its well worth checking out. Here are some of my observations:
Understand your customers, embrace being niche
Pure music and entertainment retail is not a high street activity. To survive HMV will need to accept that they cannot be everything to everyone. It is not about stocking everything. That is what Amazon is for and iTunes is for. Instead they need to understand who their customers are, what they like and build experiences with complimentary products around them.
To do this they need to play to niche audiences and not be afraid of experimenting to see what works, keeping the experience and product fresh. Music and film fans like discovery, they like hanging out in stimulating environments with interesting people. Make the stores somewhere where people want to linger and then make money from the products and experiences. Be it in-store gigs and screenings, using recording equipment and instruments, or just being a place where people want to meet up. This is something that Rough Trade do very well and has seen the business thrive while others have failed.
Physical is not dead – it gives you a unique edge
While the sale of CDs and DVDs continue to decline, under pressure from digital formats, there is still a desire from consumers for physical products and experiences. Vinyl sales are on the increase. Digital only music formats cannot provide the whole experience that physical product such as vinyl can. Vinyl was never just about the quality of the recording; it was also about the artwork, the liner notes, and the experience of playing it.
The same could be said for books. While it might be convenient to have download eBook, something tangible is lost. Just as we have seen a rise in vinyl as a format, I think we will see a similar trend towards beautifully bound hardback books.
A revitalised HMV should focus on offering augmented physical products – buy the vinyl album but also provide the digital version with additional content; provide a digital layer with personalised offers, recommendations and experiences.
Think like a gallery or museum, and learn from culture
In recent years gallery and museum spaces have reinvented themselves as engaging interactive experiences. Exhibitions are curated. Taking a curators approach to retail appeals to music and film fans – that’s what we do ourselves with our own collections and is key to discovering something new. Curating experiences will force you to rethink the use of flexible physical space and how it can be augmented by digital.
Encourage your staff to curate and embrace fan culture to host themed experiences with related product. We only have to look at the success of Kraftwerk at Tate Modern or the massive ticket sales for the Bowie exhibition at the Victoria and Albert Museum.
Don’t rely on just Generation X
Boomers and Gen Xers are easy wins. They understand and have shaped entertainment culture and retail behaviour. After all, they invented and evolved the record store. They are nostalgic and are warm to brands like HMV. They also have money to spend.
But what about younger consumers? They are likely to have no association to HMV the brand or an appreciation of the store experience. They discover music culture through Tumblr and YouTube. They expect product to be free.
Brands like HMV need to think about how they can ensure longer-term survival through engaging with younger audiences. They need to make their brand relevant to them. Perhaps HMV should host hackathons and embrace maker culture. They should be places where kids can hangout after school learning to code, making stuff, mucking about with instruments, recording stuff, and editing a film. Wrapped around this, provide the knowhow and the tools to rent or buy.
The high street is not dead. Our desire to engage with lifestyle products continues to grow. But brands need to be more inventive in how they engage with consumers both physically and digitally in order to survive.