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HMV: Revival of the top dog

HMV: Revival of the top dog

Summary

HMV, established in 1921, has long been the leading UK high street retailer in the music and video market. The company, with the slogan “top dog for music”, had an edge over other entertainment retailers with exciting in-store events, huge back-catalogs, and backing from the music and film industry. However, following a period of revenue decline and profit losses, the company found itself on the brink of collapse, officially going into administration in January 2013. In April 2013, Hilco UK announced that it had acquired HMV and subsequently embarked on a strategy to turn the company around. This case study looks at HMV in the early days, analyzes the problems that led to its near collapse, and examines how the business has been revived following the Hilco purchase.

Key Findings

Looks at the rise of HMV and the reasons for its subsequent decline into administration.
Examines the market conditions that impacted the company.
Looks at the acquisition of HMV following administration.
Examines the new methods employed by HMV to turn the company around.

Reasons To Buy

Why did HMV fall into difficulty?

What factors led to administration?

What new strategies have been employed?
How successful has HMV been in staging a turnaround?

Key Highlights

The rapid growth of DVD sales in the UK in the early 2000s helped to propel the growth of HMV, with the retail chain accounting for around 30% of the UK DVD market by the end of 2003. During the same year, the company was the market leader in music sales, accounting for over 25% of the UK market. HMV’s market share of both music and video continued to increase in 2004. However, for the first time in the autumn of 2005 these trends reached a plateau, with HMV losing market share in the UK to supermarkets and internet retailers.
Amid declining sales and mounting debt, HMV struggled to recover and officially went into administration in January 2013. The advent of digital technologies, increased price competition from mass merchandisers, and weakened supplier links coupled with a failure to react quickly and sufficiently enough, spelled disaster for the company.
On 5th April 2013 Hilco UK announced that it had acquired HMV, saving 141 HMV stores and taking the company out of administration. The company has gone on to stage a comeback, with profits reaching almost GBP17m ($26m) just 11 months after it was on the edge of collapse. The company’s strategy has involved effectively going back to its roots, with a renewed focus on in-store events, rebuilding links with the music industry, and increasing footfall in its stores to drive sales.


>Overview
Catalyst
Summary
From ‘Top Dog’ to Administration
HMV expanded to UK stores with a growing turnover
Difficulties in led to a year transformation plan
HMV switched focus to video games for temporary relief
HMV thrived in late s due to price cuts and ecommerce push
Falling sales and mounting debt prevented recovery
Changing Market Conditions Spelled Disaster For HMV
HMV did not react quickly enough to the rise of digital media
HMV's slow digital adoption sealed its fate
Increased price competition impacted HMV
Showrooming accelerated HMV's decline
Mass merchandisers also caused HMV problems
Hilco pulled HMV out of administration and back into profit
HMV has gone back to its roots
Hilco focuses HMV on in-store offering and core products in bid for profitability
HMV reconnected with suppliers following administration
Vinyl revival boosting high street footfall
Early indications are positive for the company
Conclusions
HMV is back in the game but must remain relevant
Sources
Further Reading
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Disclaimer
List of Figures
Figure 1: Number of HMV stores in operation in the UK 2001-2010
Figure 2: HMV Group Turnover 1999-2006 ($m)
Figure 3: HMV Group Turnover 2006-2012 ($m)
Figure 4: Number of HMV stores in operation in the UK 2007-2012
Figure 5: UK Music & Video Market 2008-2012 ($m)
Figure 6: UK Music Streaming Market 2008-2012 ($m)
Figure 7: Digital Media and Physical Media Share of UK Music & Video Market in 2009 and 2012 (%)
Figure 8: UK Online Retail Market Value 2008-2012 ($m)
Figure 9: Market Share of UK Music & Video Market Q4 2010 and Q4 2011 (%)
Figure 10: HMV Flagship Store in its Original Location, Oxford Street, London

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