At the HMV shop in Whiteleys, a shopping centre in West London that has seen more popular days, it appeared to be business as usual last week. This was despite the group’s announcement that it was calling in Deloitte as its administrators after failing to persuade its creditors to ease its banking covenants. A handful of shoppers browsed through the rows upon rows of on-offer CDs, DVDs, and electrical goods on the shopping centre’s quiet second floor, while music blared in the background.

INTERNET ASSAULT

In the days that followed we’ve seen an outpouring of nostalgia for a company that gained a global reputation as one of the foremost names in music, going back decades, with its iconic logo of “Nipper” the dog and a gramophone, harking back to a far more glamorous era for the company.

The first HMV store on Oxford Street was opened by English composer Edward Elgar in 1921 and over the years had a host of celebrity visitors from Michael Jackson to David Bowie. All a long way from today’s reality: a buyer is yet to materialise despite assurances from senior management. Since the announcement on Tuesday, HMV has stopped trading online and caused somewhat of an outrage (and a couple of scuffles) in Britain after announcing that gift vouchers would no longer be accepted.

HMV follows in a long line of retailers and high street shops that have closed or called in the administrators in recent months, including a well-regarded camera retailer, Jessops, Comet, a chain of electrical stores, as well as the UK arm of Blockbuster. It would be easy to write off HMV’s demise as the inevitable consequence of the Internet-age, and the advent of Amazon, the many legal and illegal download or live streaming opportunities available to consumers, coupled with the protracted economic crisis across Europe.

In reality, HMV was more like the Kodak of the music and entertainment industry: just as the camera maker scoffed at the impact that digital technology would have on its industry, believing that it would continue to ride forward on its past reputation and glory, so HMV shrugged off early warnings of the impact that the Internet would have on its then fabulously-profitable CD, video and (in the early days), its DVD and computer games business.

In a blog post, Philip Beeching, who ran an advertising agency that represented the company for several decades, recalls how a presentation he gave — following the company’s stock market listing in 2002 — on the biggest threats facing it (online retailers, downloadable music and heavily-discounting supermarkets) was met with indignation and disbelief. It was “hubris, arrogance, a feeling of invincibility,” that led to the company’s downfall, he argues.

HIGH OVERHEADS

The company did, of course, try to create a presence for itself online, but these and other attempts to re-invent itself were half-hearted and had limited impact, as the company clung onto the fundamental premise that customers would always want to come into stores to browse and get advice, says Ajay Bhalla, professor of global innovation management at Cass Business School in London.

“They came up with half-hearted initiatives such as kiosks in store where you could listen to music, or get CDs burnt for you on digital format but all these were fundamentally twinned with their very expensive store strategy — and huge operating expenses that they could not swallow,” he says.

The company ploughed more and more into physical assets, even acquiring some of the stores belonging to Zavvi, formerly Richard Branson’s Virgin Megastores, which went into administration in 2008. Other initiatives — including taking on concert venues through a joint venture — failed to make up.

Of course there were other problems too: other retailers have managed to chart a successful route on the high street. Dixons, an electrical shop chain, carved out a niche for itself by offering in-shop services, the whole “experience” element of entering an Apple store (the umpteen gadgets you can play around with through to the often quirky buildings) keeps customers coming — and buying — in their droves.

John Lewis, a successful employee-owned department store chain, continues to weather the Amazon age, with a pledge to match the lowest prices available, and the knowledge and reliability of its staff.

Another company, Argos, a cheap and cheerful chain selling everything from household goods to clothing, continues to confound its detractors with its success by selling online as well as round the corner from most people in the country (the company estimates that 80 per cent of Britons are less than 10 minutes away from one of its shops).

By contrast, by neither being able to match online competitors on price, nor offering the many things that might lure customers to shops (including independents) HMV continued to haemorrhage funds. Two years ago it got a last lease of life when its banks agreed to ease the terms of its loans.

As Kodak did before it, HMV offers many lessons to companies across the world — Bhalla argues that for India, and its heavy expansion of retailing, it offers lessons too on the need to start experimenting early with a business model, and the importance of using disruptive technology to grow rather than be shackled.

It may offer lessons for governments too: as Richard Murphy, the director of anti-tax avoidance campaigning group Tax Research UK argued in a recent blog, HMV’s plight was worsened by the fact that many of its foreign online competitors were able to use the tax advantages wrought by offshore bases to out-compete it on price. “Tax can and does unlevel playing fields. The abusers win. We all lose,” he argues.

( >blfeedback@thehindu.co.in )

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