Late Friday night, news broke that HMV Canada would be closing all 102 of its stores, and was put into receivership. It marks the end of an era for a generation of music lovers, and an interesting sign for the retail community.
HMV Canada has been in business for 30 years, having opened its first store in Canada in 1986. The company was a subsidiary of HMV U.K., though it operated on its own since 2011 until being sold to British retail restructuring company Hilco for US$3.23 million.
Interestingly, U.K.-based HMV Retail Ltd. overtook Amazon last January to become the largest retailer of physical music in the U.K. Meanwhile, HMV's Hong Kong and Singapore businesses were sold to private equity firm Aid Partners in 2013, and all HMV stores in Ireland were closed down that same year when the company went into receivership there.
When digital downloading became the dominant form of music acquisition and listening, we saw several music stores shut up shop in the early ‘00s, including Music World, a&b sound, Sunrise Records, Tower Records, and Toronto's iconic Sam the Record Man.
But HMV managed to prevail, reacting smartly and quickly to the changing trends. Seeing that physical disc sales were bound to continue on the decline, HMV began to reinvent itself. Rather than fight the trends, the retailer joined the party by selling gear like iPods and headphones. In an effort to offset declines in CDs and DVDs, HMV added more music- and movie-related paraphernalia to its offerings, from T-shirts to coffee mugs, books, collectibles, and toys. Gaming products were added to the mix, then replaced with more higher-margin merchandise. New and innovative initiatives were added in hopes of attracting more customers, like the customer rewards program that was introduced in 2010.
Unfortunately, HMV was unable to finalize an agreement with its major suppliers in order to "sustain HMV's operations and support a recovery." HMV's sales dropped to $214.4 million in 2015 from $225 million in 2014. For 2016, sales were projected to have fallen further to about $190 million. Consider that in 2010, HMV reported annual sales of $360 million.
Remaining inventory will be liquidated - the Website currently shows that all inventory is selling for up to 30% off. Stores are set to close by April 30, and the majority of head office staff has reportedly already been laid off. According to the filing, HMV owes major suppliers, including music labels and media studios, $56 million.
It goes to show even that following trends and moving with them is not a sure-fire recipe for success in the retail business. The music industry has undergone massive changes over the past few decades - so massive that the entire model has been turned on its head. Musicians have fought digital sites and illegal pirating, legitimate streaming music sites have attempted to ink deals that are both fair for consumers and musicians and profitable for them, and manufacturers have been working hard to develop products that will accommodate the new musical landscape - from smartphones and high-end headphones, to hi-fi portable music players.
Already, less than a decade after digital downloading took over, the industry is shifting once again to streaming. But interestingly, there is one area of music where physical product is going strong: vinyl. Customers, both young and old, are lining up to visit niche independent stores and locate those "hidden gems," eclectic, hard-to-find records. HMV did, in fact, try to jump on the vinyl bandwagon and sell records in a bigger way. But there's just something about buying a used vinyl disc from a small, local shop that adds to the experience versus stepping into a chain store in the shopping mall to find something. Sometimes, trends just don't fit with a particular retail strategy. That doesn't point to a failure on the retailer's part, just a desire it simply can't fulfill on the consumer's end.
All hope is not lost. Retailers like Indigo have most of their eggs in an arguably dwindling physical media basket - printed books. Yet the company remains profitable thanks to not only major book franchises like Harry Potter and 50 Shades of Grey, but also by pivoting to offer everything from housewares to toys, games, and other products, including the very e-readers that are eclipsing physical book sales. And let's not forget the strong online presence, an area in which one could argue HMV was lacking.
Nonetheless, it hurts to see HMV, the last remaining major music retailer, close its doors after three decades. As a silver lining, independent music retailers will now become that much more valuable to enthusiasts who prefer to shop in person than buy online.
HMV stands for "His Master's Voice," a take on the popular Technicolor SA trademark. Though in Canada, it was often referred to as being an acronym for "hot music values" to avoid issues with licensing.
Whichever is the true meaning, those three letters will become part of music industry history.