Thursday, 6 January 2011

A thought about how HMV can turn around its fortunes and a little bit about Microsoft

I've been trying to get my head around the news that HMV are struggling - closing 10% of their stores in order to avoid breaking their debt covenants. It's not news that the shift to digital and increasing popularity of Play and Amazon hurt the traditional retail model, however I can't really understand how it can drive a retailer like HMV - a near-monopoly player on the highstreet to the verge of bankrupcy.

I think the fundamental issue is that the core HMV stores provide a commodity retail experience - pile-em high and sell-em... not cheap enough. I don't buy CDs and games from HMV anymore, because the experience is so horrible - I'd rather get them from Amazon in bulk.

Contrast this with Waterstones (also owned by HMV). Much to my surprise, I've started buying my books there again after nearly a decade of Amazon. Why? Because Waterstones stores provide a personal recommendation service instore, whether through the little cards they place on the shelf-ends or from knowledgeable staff. I can't get that on Amazon and frankly, I'm becoming increasingly irritated by their "Matt's store" algorithms, which seem unable to see past the last item I viewed.

What does this mean for high-street media retail? Well, I suspect that it needs to become more niche - one stop shops like HMV aren't attractive to an increasingly fragmented customer base, able to search, discover and consume the things they like on an ever-more targeted basis. HMV already does this with it's Fopp subsidiary - perhaps it should consider breaking up the megastores into 3-4 boutique-like smaller units, each aimed at a specific demographic and offering a cross-media range targeted at them. That targeting could also extend online and via HMV's under-used loyalty card scheme. So that's what I'd do, if I were HMV.

One other thing that caught my eye today was that Microsoft will produce a version of Windows for ARM. Sounds like a good plan although I disagree with their implication that the personal computer will become less important - I think the personal computer will become more important and less distinguishable from other computing devices. In the future, I believe, the only difference between devices will be their form factor.

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