It is encouraging to see HMV embracing a new multichannel strategy in an attempt to capture a higher share of the digital market, and to focus on discoverability, which can be one of the challenges of selling music online.

It is encouraging to see HMV embracing a new multichannel strategy in an attempt to capture a higher share of the digital market, and to focus on discoverability, which can be one of the challenges of selling music online.

Figures from the UK Entertainment Retailers Association show an 11.4% increase in digital entertainment sales last year to account for a quarter of the UK market, and this is set to continue growing.

I downloaded HMV’s iPhone app last night and had a quick look. The sound and image search functionality looked good. It is innovative and worked well. However, the results did not give me a price for the download (perhaps because it is yet to launch?) and there is no easy way to browse in the store either. It is early days though and I’m sure they will tweak it along the way.

The challenge HMV faces will be marketing this strategy to customers and persuading them to convert, as many shoppers are now in the habit of searching first on iTunes or Amazon when they are looking to download digital music.

Music streaming services such as Spotify also pose a significant threat, particularly among younger customers, which is the group that HMV is targeting. Many teenagers are now favouring digital music subscriptions over digital or physical purchases.

A major factor in the success or otherwise of HMV’s digital strategy will be down to pricing. If HMV is able to match iTunes and Amazon on price then it may persuade some customers to convert. If not, then it will be challenged torival them on convenience and the fact that both have digital lockers already set up on customers’ mobile devices – iTunes and Amazon Cloud Player.

The other threat to HMV’s digital strategy and HMV’s business in general is Amazon’s AutoRip music bundling service. This was introduced to the US at the beginning of the year and to the UK in June and offers customers a free MP3 download of eligible CD and vinyl purchases, bolstering the usage of Amazon’s Cloud Locker functionality. Customers also receive free downloads of past purchases to their Cloud lockers as part of Amazon’s marketing drive.

Planet Retail believes that AutoRip will be popular with customers and is likely to help strengthen Amazon’s market share within the entertainment sector. As digital music matures, bundling is a key area that retailers such as HMV need to focus on in order to compete.

HMV’s weapon against Amazon and iTunes should be its multichannel approach, and making its stores destinations by landing in-store guests such as Sir Paul McCartney should help generate a buzz.

It won’t be easy competing with the big boys, but HMV is making a step in the right direction.

Lisa Byfield-Green, retail analyst, Planet Retail

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