Wednesday, 30 January 2013

The Demise of HMV: Part 3 - Lack of Clarity of Vision

When the very first HMV opened in 1921 its vision was about one thing: gramophones.

But the entertainment industry changed and with it the vision of the brand expanded and evolved. But unfortunately somewhere along the line the vision of what the company was about either got lost, or it grew so flabby it could no longer keep up with the pace of change. And so gramophones became records, became records and tapes, which became records, tapes and video cassettes, which turned into records, CDs, tapes and videos and which continued to add things all falling under the banner of entertainment. Records were phased out but DVDs, Blurays, computer games, t-shirts, books, mugs all got added. And the chain started acquiring bookshops adding Waterstone's to Dillon's and later bringing in Ottaker's too.

So to return to the question, what exactly was the vision of HMV? Did they express it any more precisely than to be the leading retailer of entertainment products?

Such a broad range of stock doubtless worked well at the big stores, but at the smaller stores it was fatal. The stores stayed the same size, but whereas originally they had housed two or three types of product, they ended up selling many more. Stores went from being half full of CDs to having to squeeze out the CDs to accommodate the DVDs, games, books and mugs which meant that those that went in to buy a CD had a much smaller choice. Fine if they were desperate for anything. Or if they wanted to support the high street despite having no real interest in the product, but long term the cloudiness of HMV's vision meant that they were compromising on their service. No longer able to offer a significant chunk of the spectrum at the very moment the spectrum was broadening rapidly.

Looking back the decision to takeover Waterstone's and then Ottaker's looks particularly foolish. I'm not sure how they acquired Dillon's in the first place, but it was clear by the time that HMV took over Waterstone's in 1998 that book shops were going to be in as much, if not more, trouble than music stores in the long run. Amazon were up and running and the memory required to transfer the text of a book was always going to be less than that required for a CD.

But it was always the decision to reduce the amount of space dedicated to music, particularly for games, that I think was the most costly. They never really went for it - games were always at the back of the store, and the variety of formats and consoles and the speed of change meant it was a bad area to get into. Ever bought a computer game from a supermarket?

The lesson is to keep your vision lean and focused. Diversity is not necessarily a bad thing. The main supermarkets have diversified more and more without hitting the buffers. But HMV's vision didn't account for critical factors, such as store size and ultimately what it thought it stood for differed from what its customers thought it stood for.

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