How HMV’s rescuers might innovate their way back…

I’ve been thinking a fair bit about the future of retail recently, as have a lot of people since the demise of HMV, Comet and Jessops, for obvious reasons, and so I thought I’d write a little bit about what kind of change I think might be needed to make such firms relevant and viable again…

I’m going to look at HMV as it seems like a good example, although many of these ideas apply generally I think. I don’t know a huge amount about the detail of HMV’s business (I was quite close to working with them a couple of years ago, but never got a chance to get into the nitty gritty), but I do often wonder what kind of combined online/offline strategy might be effective in principle. Of course I have no idea whether any of this would have been successful let alone whether it would have helped them avoid administration — these are just some avenues I think they should explore and learn about in order to move forwards.

But first, some basics:

Here’s how advertising exec Philip Beeching describes the HMV board’s attitude towards digital technology in the early 2000s:

“…we stood in the boardroom in front of the new MD, Steve Knott and his directors. For some time we had felt the tides of change coming for HMV and here was our perfect opportunity to unambiguously say what we felt.
The relevant chart went up and I said, “the three greatest threats to HMV are, online retailers, downloadable music and supermarkets discounting loss leader product”.
Suddenly, I realised the MD had stopped the meeting and was visibly angry. “I have never heard such rubbish”, he said. He accepted supermarkets were “a thorn in our side” but not for the serious music fan.
“As for the other two,” he continued, “I don’t ever see them being a real threat. Downloadable music is just a fad and people will always want the atmosphere and experience of a music store.”

On the one hand what happened to HMV is a textbook example of what Clay Christensen described in “The Innovator’s Dilemma” — it failed to adapt to new technology and existing customers’ unstated needs — but I think it’s worth thinking about this a little more. The problem may be ignorance, but I don’t think it’s of an obvious kind. It’s not that HMV executives didn’t understand the new technology (I don’t know whether they did or not), but that they didn’t realise how much of their own preferences and beliefs were in actuality derived from a myriad of learned behaviours that in turn are determined by the format in which the music is presented. Or put another way, much of the image they had of a ‘music lover’ was in fact a set of learned behaviours and practices that resulted from the format in which the music was presented, not the love of the music itself. The ability to scan the racks in a music shop and not be overwhelmed, the ability to flick rapidly through records or CD cases, the ability to quickly release a CD from its crystal case without damaging the tiny pronged ring in the middle, the ability to recognise bands instantly just from a glimpse of a logo or the graphical style of the sleeve…all these things have zero to do with the music, but everything to do with being a music-lover. But these are all learned behaviours — much as they are valued by those that posses them, they are not strictly necessary. More than that though, they take time and effort to learn. Years later we remember the ability, but we will have forgotten the process it took to learn it. This holds true for a great many things.

And so, when the format changes, the behaviours relating to the earlier format don’t get learned and new ones do — you can moan about children not being able to tie shoelaces all you want, but it’s not going to make any difference and it’s certainly not their fault that they are more used to velcro fasteners…

Pretty obviously, the main question that anyone resurrecting HMV is going to be faced with is what to do with all the high-street retail spaces. If HMV gave them up and moved their whole operation online, they’d be competing with Amazon, iTunes, Spotify and the rest directly. I think they would lose — they are too far behind, too irrelevant and it’s not obvious to me how they might leapfrog the others in that space. So the question then becomes how to use the physical spaces to compete better despite the cost overhead they represent. This might be an impossible circle to square, but then again maybe not. I would suggest that the retail spaces should be entirely directed at increasing HMV’s relevance to their community of customers by allowing them to experience and learn an entirely new set of behaviours around music. Instead of shops, the stores become highly sophisticated interactive experiences that allow people to discover, engage with and experience music, and that process of engaging incentivises them to place orders for music with HMV rather than with other retailers. Meanwhile it also provides them with the presence, community and technology to create new services that ultimately replace their traditional revenue stream.

Here’s what I mean in a little bit more detail:

1. Develop *music* experiences, not ‘retail’ experiences.

In my mind this means getting rid of all the stock (apart, perhaps, from some high quality exclusive items which are only available in store).

Develop interactive experiences that allow people to discover, review, sing along to, remix, review, rate, share, compete, learn and socialise. And I don’t mean put in some Dance Competition arcade cabinets, I mean a hugely information-rich set of experiences that are connected to each other and all share data. That are integrated into a single flow instead of individual activities.

Make sure there is a balance between group activities and personal ones, and that both can be expressed publicly. For instance if there are stations where people can discover music, make visible what the people to the left and right are listening to and show music that combines styles or bridges the gap between them. Give people a chance to meet and interact with each other. And maybe give them ways of choosing or influencing the music that’s playing in different areas of the space using directional speakers.

Make the act of engaging fun — not just swiping touch screens, but experiment with different interfaces, perhaps gesturing in thin air or flying a craft though a landscape of music. Make the enormity of the catalogue visible and tangible, but also comprehendable and inviting. Create an equivalent of flicking through records, but one that is orders of magnitude more efficient and not easily reproduced at home.

2. Reward engagement.

Of course customers can purchase music wherever they encounter it in the ‘experience’, in whatever format they want. That may mean that it is instantly available to them on their mobile device, but also arrives in a physical format in the post a day later. And of course the purchasing process needs to be incredibly slick, either using a physical card or biometric identification. No long process of shopping trolleys, just “I want that track” — done.

And in addition to this, engagement should be rewarded: participation should earn discounts when people buy products through HMV online. This is a key piece of the strategy — use the offline engagement to give a reason for people to choose to buy through HMV online rather than through Amazon or iTunes. The balance of this is of course crucial, but acknowledging the value of high quality customer engagement and content is perhaps also a weakness in the models of other online retailers.

3. Build vibrant local music communities.

These HMV music spaces should be places people go to experience and engage with music, rather than simply to buy it. They should be places for people to meet, especially young people who perhaps don’t have as many places to meet up as once they did, or don’t have much reason to go to the high street any more at all.

They should be places for bands, musicians and dancers to meet fans and perform. And not just ‘stars’, but other professionals as well — promoters, choreographers, sound engineers and people who design lighting rigs for huge stadium shows… location and context targeted messaging, via Facebook Graph Search for instance, can reach micro-communities that make this viable, and every city in the country has creative skills strategies and local organisations who can facilitate such things.

They should curate the local music scene — either independently or in collaboration with local venues and music publications. This means making sure all local gigs are logged and that information is made available in compelling ways digitally, not just posters on the wall. And make sure the activities of local bands are displayed as well — when they’re on tour or when a new release is due, etc. That information should be available online and offline though great interfaces. And should also provide feeds into other 3rd party information providers, for example ensuring that Songkick and the like have fully up to date gig lists.

4. Build brand quality.

There’s so much history in the HMV brand that it should have much more currency and authority in our swirling, uncertain connected culture than it currently does — I think it’s lost a lot of gravitas over the last couple of decades. It should do deals with bands and labels to produce HMV co-branded, high quality special issues that are only available in store. Perhaps get rid of the current HMV logo entirely and simply use the iconic dog and gramophone image. Make it mean something. When someone gives someone a physical item as a gift and it has the logo on it, that has to mean something like “I didn’t just order this online, I physically went into a shop and chose it for you”…

This is an extremely rough outline, obviously, and I could list many more ideas for exploiting the space between on and off-line. It also sounds like a huge expense with no guaranteed return, however the point is to regain relevance and create new behaviours in order to then capitalise on them subsequently. The physical-space experience needs to work incredibly well and not lose too much money, while in the meantime HMV essentially becomes an information company rather than a retail company. But I think the only way to do that is understand the customer to the point of creating them anew…

This situation applies to Jessops as well, and Comet to a degree. In all three cases a huge boom in consumption — in music, photography and consumer electronics — is taking place but is being mediated online leaving high-street retailers in the cold. The trouble is I haven’t seen any of them *really* fighting back by changing the purpose of their retail spaces and radically re-imagining how people engage with them.

Some well respected Internet investors believe that physical retail is not going survive at all. However, I think people still need destinations, not primarily to buy things, but to commune with things and people and creativity in general. And many retailers are failing at this. I also think it is possible to create rewarding behaviours that are impossible to experience at home and that people will crave, and that that is a viable business, despite the competition of ultra-low-margin behemoth Amazon. The truth is, the only way I see *anyone* competing with Amazon is by leveraging an asset that they have no experience in: physical spaces. The experience would have to be absolutely heart-poundingly amazing though, and how many firms can pull that off…?

(HMV image by yoppy)

Originally published at