When HMV fell into administration, the future of record stores on many British high streets was thrown into question. How can retailers adapt to today’s entertainment consumers?

During better times for HMV Blur played on the roof of its Oxford Street flagship

David Bowie shocked the world of music last month when his first single in 10 years was released out of the blue as a video on his website. A week later music retailer HMV filed a notice of intent to appoint an administrator.

The two events - pop music’s greatest chameleon adapting by staging a comeback in a modern way, and Britain’s biggest music retailer crashing off the London Stock Exchange - both highlight the music revolution Bowie forecast in his 1972 single Changes.

Why HMV finally fell into administration is the subject of much debate. Some blame former managements for not moving quickly enough to focus on new categories and revenue streams, while others see the retailer’s reticence to attack the digital download market as the main reason it failed.

Whatever way you look at it, competing with online rivals that sell the same products but cheaper, while bearing the cost of rents and rates, was one of the main factors in HMV’s downfall.

While restructuring specialist Hilco last week bought HMV’s debt, the future of its store base still hangs in the balance. However, many commentators feel that the group could survive in a smaller guise.

Physical and digital

HMV outlived former rivals such as Virgin, Woolworths and Zavvi and thousands of independents to make it to 2013 and, while that alone doesn’t guarantee its existence, it still has a strong brand equity. During its blue cross Sale in the four days to January 23, HMV reported a 45% like-for-like surge which, along with bargain hunters, was said to be partly driven by customer affection for the brand.

If HMV does have a future, it has to adapt. While Amazon and other online competitors grow stronger every day, what will the future of entertainment retail look like? Will it all move online or does bricks and mortar still play a part?

“Retailers in the future will need to align the physical and the digital worlds much more closely,” says Planet Retail analyst Lisa Byfield-Green. “Using features such as browsing online in store, click-and-collect and offering complementary downloads alongside physical releases will be crucial.”

Byfield-Green argues Amazon’s new AutoRip service, introduced in the US last month, might prove a Game changer. Shoppers purchasing physical music will receive a download of the product instantly to their Amazon Cloud Locker and the service is backdated for all purchases made since 1998. The initiative means not only does Amazon arguably provide a cheaper service, but also a more convenient service than rivals both offline and on.

Some record labels do offer free accompanying downloads - particularly for vinyl releases, which are more difficult for shoppers to upload to their computers - but the practice might need to be a required standard for 21st Century retailers.

Diversification

Ollie Patterson, new business director at store design specialist Mynt, believes the music store of the future needs to be more slick and avoid simply being a showroom for Amazon. He says: “They need to be clean, simple, slick environments, which generate large volumes of footfall and obviously in-store sales.

“I don’t think these stores will require a lot of staff nor do I feel they will hold a lot of tangible stock - instead, customers will probably be able to download music, games and films extremely quickly to their own electronic devices.”

He adds: “You can see the stores of the future having extremely powerful wi-fi zones, allowing customers to browse the latest offers and promotions, as well as a complete library of digital stock, before independently making their own transaction.”

Patterson believes mobile phone specialist Orange’s store in Rotterdam in the Netherlands offers a glimpse
of the future in terms of store design. The flagship store features a sofa, casual décor and computers on which to browse to encourage dwell time.

Diversification of range in music stores has proved a continued trend over the past two decades and a contentious talking point in the case of HMV. Some commentators argue former boss Simon Fox did not move quickly enough to roll out technology while others believe the retailer should have kept its focus on music.

With the popularity of home-built recording studios on the increase due to easy-to-access software, instruments and recording technology could prove to be lucrative add-on ranges in record stores. In his book, Last Shop Standing: Whatever Happened to Record Shops?, charting the fall in the number of record stores, former music industry sales rep Graham Jones observes: “With most stores, when they recognised the CD industry was in decline, they realised that to survive they would have to diversify. Musical instrument companies often supply their goods on consignment, so the retailer pays only for what it sells.”

Rough and ready

One retailer often cited as bucking the trend of failing entertainment stores is Rough Trade. The independent retailer, which split from its sister record label in 1982, has two London stores, in the east and west. It has been lauded for its extensive range of music titles, its in-store cafe, a photobooth and frequent live events.

Rough Trade’s east London store has been praised for its appeal to customers

Rough Trade’s east London store has been praised for its appeal to customers

The retailer is to open a third store in Williamsburg, New York later this year. It also opened a pop-up shop in Paris, as part of Fashion Week, collaborating with the clothing brand Agnès B last April. “We’ve not reinvented the wheel, simply exploited our sustainable competitive advantages,” says co-owner Stephen Godfroy. “Our brand has a level of affection, respect and trust with consumers that underlines our recommendation authority, which in turn allows us to recommend ‘the unknown’ and deliver the all-important discovery dimension of being a destination store.”

The retailer has introduced a Rough Trade card so shoppers’ offline purchases will be logged on their online account in a similar method to Amazon’s AutoRip from next month to coincide with the relaunch of its website.
Godfroy says: “This feature will allow us to deliver customers not just digital mirror content but exclusive bonus material, invites, videos - anything we devise with our suppliers that can be delivered to customers digitally.”

Rough Trade has also been able to leverage its links with bands to draw in artists with significant buzz for in-store gigs to generate footfall and revenue. Replicating this throughout a chain and not just in flagship stores might also prove key for future specialists.

Small chains elsewhere in entertainment retail - such as book stores Foyles and Daunt Books, founded by Waterstones boss James Daunt - have also used their product knowledge to get close to the customer, offering high standards of service and building a small store estate through measured expansion.

Worldwide warning

Entertainment retail is not just proving difficult in the UK. The conditions that led HMV over the edge in the UK appear to be being replicated worldwide. Famous names such as Tower Records have gone bust citing heavy debts, online competition and rival discount stores.

Byfield-Green explains: “The trends we see in the US quickly come over to the UK. Retailers from Trans World Entertainment to Hudson are struggling against online competition across the world.”

Where markets have not yet matured and Amazon’s stranglehold is not as tight, there are still sales to be made in entertainment retail. For example, HMV’s Canadian business - owned by Hilco - reported a 1.4% uplift in like-for-likes over the festive period.

French retailer Fnac has introduced online listening booths in its stores along with click-and-collect

French retailer Fnac has introduced online listening booths in its stores along with click-and-collect

French entertainment and consumer electronics specialist Fnac aims to push forward innovation in music retailing. Although the PPR-owned business is performing poorly as a whole, new stores developed under a franchise model have been praised. The shops feature online kiosks that allow customers to listen to music, click-and-collect services and themed areas for kids, homewares and music.

Reinventing browsing

As services such as streaming sites Spotify and Last.fm, as well as YouTube, become more popular, and broadband becomes faster, consumers are increasingly comfortable not owning a physical music product or even a downloaded file.

One option for online operators is to ink deals with telecoms specialists that now play a huge part in how consumers listen to and view products. Brazilian telecoms operator GVT has launched Pay-TV, supported by French telecoms specialist and retailer SFR and Canal+ Groupe, in partnership with Universal Music Group to offer a portal of news, music and video streaming for broadband customers called Power Music Club.

One of global retail’s biggest names, Apple, also remains a powerhouse in music innovation. The company launched the iPod in 2001, iTunes in 2004 in the UK and opened its first store here the same year. It has reinvented in-store browsing, encouraging shoppers in store to use the internet and try out its products simultaneously. With its redesigned iTunes store and tablets still selling strongly, Apple will have a big part to play in the future of entertainment retail.

Browsing a music shop will have to deliver an experience with a focus on discovery, because shoppers looking for something specific will probably prefer to head to Amazon or iTunes.

Godfroy argues that offering “credibility, discovery, celebration, expertise and performance, all wrapped up in an environment that appeals to young and old, male and female, whatever their tastes” is vital. “The common characteristic of our customers is that they are curious of mind,” he says.

High street entertainment retailers are experiencing a fundamental shifting of the goalposts on a pitch that was once theirs to own. What might work in a flagship Oxford Street store might not necessarily be applicable to Swindon high street or an out-of-town shopping centre. But innovation and a flexibility to encompass new ideas will be vital in a world where even the 66-year-old Bowie has turned and faced the strain.

A Design for life - Le Studio SFR

Le Studio SFR

Le Studio SFR

One retailer making strides in entertainment store design is French telecoms and entertainment specialist SFR. Designed by Interbrand, Le Studio SFR in Paris blends music and digital technology.

The centrepiece of the 1,600 sq ft store is its live music studio, which hosts events with a capacity of up to 200 people against the backdrop of its slick, neon design. The store also features its own restaurant and internet lounge bar.

The shop offers free wi-fi, as well as music downloads and a ‘sonic shower’ where customers can test out technology.

Howard Saunders, creative director of retail trends businessEcho Chamber, says: “Every opportunity has been taken to play with time and create ‘stay-and-play areas’ that shift the focus from being a space simply for transaction.”

How music stores can evolve

In the future, music stores are likely to look very different in terms of design and experience. Key features could include:

  • In-store recording studios Creating a vibrancy and hive of activity in store could be crucial. “Record stores with recording studios for bands to practice and record their latest tracks would certainly drive footfall and increase sales,” says Patterson.
  • Broader product range Fashion, instruments and technology have been creeping into stores for some time but could soon overtake CDs and DVDs in terms of space.
  • Exclusive launches Leveraging links with suppliers to gain exclusives creates a reason to visit a store. “If you can negotiate releasing an album exclusively a day early it would create a buzz,” says Byfield-Green.
  • Multichannel features From tablet browsing in stores to collection points for online orders, embracing the internet remains the biggest challenge for retailers. Equipping staff with tablets and allowing shoppers to discover music online might be the next step.
  • Carefully selected locations “Understanding the importance of paying the right rent in the right location is crucial,” says Godfroy.
  • In-store events and cafes Live gigs, signings and talks, as well as in-store cafes, have become key footfall drivers. “These areas increase dwell time and help to increase sales for the retailer,” says Patterson.