For HMV, Britain’s last major high street DVD and CD chain, the music is about to stop. Nipper, the mascot dog who has looked quizzically down the gramophone trumpet in store windows for more than 90 years, will no longer hear His Master’s Voice.
The company that opened its first shop on Oxford Street in 1921 is expected to call in administrators from Deloitte today as the 250-strong chain becomes the latest casualty in the battle between online and traditional shops, bringing uncertainty for a workforce of more than 4,500 at 240 HMV stores and nine Fopp outlets.
The failure of the only surviving national music store follows the disappearance from the high street of other similar retailers such as Our Price, Virgin Megastores and Tower Records, along with other established high street names in recent times – Woolworths, Comet, JJB Sports and most recently Jessops.
These once-cherished brands – many of which have disappeared from the high street – have all faced fierce competition in recent times from online competitors. Fashion sites such as Asos and DVD specialists such as Play.com are among the firms asking questions of traditional models of retailing – but it is the mighty Amazon that has cast the biggest shadow.
Andrew Sentence, the music fan and economist, last night suggested there could be more high street failures as internet firms continue to take business from traditional shops. “Comet & Jessops: now HMV. Is there more trouble in store?” the former member of the Bank of England’s rate-setting committee, tweeted.
“Since 2007, the [internet’s] share retail sales (excluding motor fuel) has risen from less than 4% to over 10% – with internet spending growing at around 25% per annum in value terms.”
On Monday evening one supplier to HMV said the firm’s failure was “regrettable but inevitable”. He said: “They missed the internet boat. Amazon are eating up their physical sales [hard copy CDs and DVDs] and iTunes are eating up their digital sales.”
He said film studios and music labels had done everything they could to keep HMV alive, agreeing a year ago to take some of the company’s solvency risk to allow it to keep trading. In particular, they have been desperate to keep competitors to Amazon going. “All of my negotiations involved playing people off against one another. As a supplier, those options are fast disappearing now.”
It remains to seen what the impact will be on the film companies and record labels that rely on its stores for their sales. Despite its troubled position, the retailer still sells 27% of all DVDs and Blu-Ray and 38% of the physical music market.
Veteran retailers and City analysts are now looking at which section of the high street might be next to fall prey to internet competition.
The bookselling industry has long been seen as vulnerable. In the run up to Christmas, James Daunt, the chief executive of Waterstones – which had only been sold by HMV months earlier – delivered a vicious attack on Amazon, describing it as “a ruthless, money-making devil” and “the consumer’s enemy”.
More recently retailers have publicly attacked the dominance of the US web rival, taking issue in particular with what is seen as the unfair tax advantages its has. John Lewis chief executive Andy Street said that online multinationals such as Amazon were “destroying the UK tax base”.
Mothercare chairman, Alan Parker, said he supported the view of the John Lewis boss: “Our objective is to beat our competition to provide the best possible value to our customers. Unfair pricing from international UK tax dodgers puts our long-term ability to survive and grow under threat.”
Some City analysts have suggested weaker high street chains in sectors ranging from gambling to holidays are also losing ground to online rivals.
Greg Johnson, of Shore Capital, recently noted debt-laden Thomas Cook has “suffered from low online sales but in addition a bloated high-cost structurally declining UK high street retail estate”.
Meanwhile declines in high street betting on horse racing have been masked by the lucrative impact of new slot machines, but some industry veterans fear even the high street bookmakers may soon start to feel the pain as online competition marches on.
HMV’s failure comes after years of fierce competition from supermarkets that sell CDs and other music lines. It has been struggling with debts for over two years and while banks have revised the terms of their loans it was thought to been handed a lifeline after its suppliers, including Universal Music, EMI, Warner Brothers and Disney, were handed shares in exchange for improved commercial terms.
But they were said on Monday to have refused to agree to provide additional financing, leaving the retailer with few options to find the extra resources needed to keep trading.
HMV’s website was still advertising its 25% off sale on Monday. The chain had been attempting to shift out of films and music and into accessories such as headphones. But it has not been enough to counter the decline in conventional sales, which even two years ago forced the then chief executive Simon Fox to warn that the bank was being smothered by its mountain of debt. He jumped ship to Trinity Mirror last year to be replaced by Trevor Moore, the former boss of Jessops which itself collapsed last week.
The photographic retailer closed its 187 shops for the last time on Friday and made 1,370 staff redundant. It is one of several high street names to go to the wall over the past year, including the electrical retailer Comet, clothing chain Peacocks and JJB sports.
HMV is arguably the highest-profile name to collapse during the prolonged economic down turn and changing shopping habits that also forced Woolworths out of business five years ago at the start of the banking crisis. Ironically the collapse of Woolworths had initially helped HMV which enjoyed a peak in sales shortly afterwards before the competition escalated from supermarkets and online retailers.
A weak economy in the runup to Christmas has exacerbated the woes of retailers struggling with business models that have been overwhelmed by technological changes such as the explosion in camera phones, which destabilised Jessops, and the explosion in internet downloading which undermined demand for CDs and DVDs at HMV.
With consumers less keen to spend over the key festive period, which is a make-or-break time for struggling retailers, Jessops and HMV have been unable to provide to their financiers that they have a viable business model.
Last month, in the midst of the Christmas trading period, HMV had warned that the tough trading conditions meant it was already struggling despite having installed a new management team in Moore and a new finance director, Ian Kenyon.
‘It’s a shame, but not unexpected’
Clutching a DVD of the comedy series The Comeback, as well as his receipt, Robin Smith was oblivious to the breaking news of HMV’s demise as he left the chain’s late-opening Piccadilly Circus branch on Monday evening.
“I’m not really sentimental about it to be honest, but I suppose it’s a shame, though not really unexpected, is it?” Smith said with a shrug after being told the 90-year-old retailer had become the latest high street casualty after announcing it had been forced to call in administrators.
Inside the store, located on the other side of Piccadilly Circus from the one-time site of a flagship branch of one of the other recent casualties of the dominance of online shopping, Tower Records, the atmosphere was no more funereal than usual.
Standing beside blue and white balloons put up for a “Blue Cross Ssale offering 25% discounts on many products, a manager said she “could neither confirm nor deny” anything in relation to the closure of the company, which employs 4,500 people.
However, music blogger Chris Heasman was left disappointed despite making a dash across London on the tube in a bid to spend two HMV giftcards after learning two hours earlier on Twitter that HMV was to close and that the cards could be worthless.
“They just said come back tomorrow’, although they didn’t seem to be holding out much hope,” said Heasman, 19. “Normally I try to support independent record stores and I’m not really sure if the closure of HMV will make that much of a difference to them. But it does have a historic significance in the sense that it has been going since the 60s and well before. You can’t be too sympathetic about the guys at the top but 4,500 people losing their jobs matter.”
After him came Jeri Jelensky and Zoe Fereday, who had differing opinions about the fate of HMV and other high street outlets.
“They have staved off closure for a while but it did seem like they were flogging a dead horse and towards the end it did seem like the prices were really not attractive,” said Jelensky, who said he preferred to buy online.
Fereday said: “I’m the opposite. I’m more likely to pop into a shop like HMV because you would always just come across something a bit different.” Ben Quinn
4500 jobs at risk at HMV as it calls in administrators after rescue talks fail – The Guardian
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