HMV continues to diversify its offer but will its new ventures pay off?

HMV is to launch an area dedicated to fashion called The Studio in all its stores as it attempts to build clothing and related merchandise to 9% of its sales mix by 2013.

The entertainment market leader revealed the plans last week as it also outlined its strategy for reviving beleaguered bookseller Waterstone’s, which group chief executive Simon Fox admitted had taken its eye off its customers as it grappled with supply chain difficulties over the past year.

Fox envisages that within three years technology and fashion combined will account for the same proportion of sales in HMV as CDs. HMV has recruited fashion buyers from retailers including Fat Face, Marks & Spencer and Arcadia to support the push. Initially it will stock band and film merchandise, but the aim is also to capitalise on the trend for artists such as Lady Gaga and Liam Gallagher to collaborate on their own fashion ranges. “We sell their music, we think we can sell their fashion,” he said.

The Studio is being designed by Dalziel + Pow and will debut in the Leeds store at the end of next month, with shop-in-shops in up to 40 of the biggest stores and a smaller range in the rest by the end of summer. Meanwhile technology is expected to double as part of HMV’s sales mix to 12% by 2013.

Hub now working

On Waterstone’s, Fox admitted that problems with its new distribution hub had distracted the business. “We have been focused on the nuts and bolts of the warehouse, and it has been a very painful 12 months, and yes we took our eye off the customer. Now it is working, we are focused on re-engaging with the customers.”

New Waterstone’s managing director Dominic Myers said he would hand more power back to store managers to promote books they knew would sell well in their local communities. “The more inspirational element you might expect from a bookseller has not been there,” he said. “We don’t convey the excitement of the books that we sell.”

Waterstone’s is set for a complete rebranding based on HMV’s successful “Get Closer” relaunch, although the actual logo and strapline have yet to be finalised. The campaign is due to kick off in May. Myers has restructured the buying team so that buyers focus either on campaign or range, and is giving 30% to 40% of the promotional space - which typically accounts for the first 35% of the store - back to managers to choose what to display.

A deal to open stationery concessions in 20 large stores is close, while a new marketing campaign and e-book store powered by digital media business 7digital - in which HMV bought a 50% stake last year - are also on the agenda. Fox said there would be no further acquisitions following 7digital and live music group Mama last year, saying that 7digital gave it a strong platform into supporting other digital businesses like Spotify, which uses its technology.

The group’s new ventures beyond its core retail activities will also be the focus of further investment, with plans to sell 3 million concert tickets a year within three years, plans to open three additional live venues every year, and a total of 20 cinemas in surplus space in stores, at a rate of up to five a year.

Fox said there were no plans for a major reshaping of the property portfolio, adding that while the new joint format tested outside Newcastle in a former Borders store was going well and might be tried on some high streets, it is not a “core part of the strategy”.