High street entertainment retailing is a viable business model despite the collapse of HMV, according to trade body the Entertainment Retailers Association (ERA).
HMV, which operates 235 stores and employs about 4,350 staff, today announced that its was filing for administration and that trading in its shares had been suspended.
“No one can say this is a surprise, but it is still a shock,” said ERA director general Kim Bayley. “HMV has been part of the fabric of the music and entertainment business for decades.” She added that she believed the administrators could rescue something out of the situation.
“There is a precedent that you can streamline your costs and the number of stores a chain trades from and still retain the bulk of sales,” she said. Videogame retailer Game filed for administration last March but was acquired by OpCapita and is operating with half its original 610 stores.
HMV outperformed many supermarket retailers in terms of market share performance, according to the most recent Kantar Worldpanel figures.
Year-on-year data for the 12 weeks ending 30 September 2012 showed a 0.6 percentage point drop in HMV’s share of the entertainment market (including physical sales of videos, games and music, and digital sales of music) to 16.1%. Over the same period, Sainsbury’s was the only supermarket to gain share (up two points to 6.6%), compared with Tesco (-2.5 points to 12%), Asda (- 1.2 points to 9.9%) and Morrisons (-0.9 points to 2.9%). The biggest gain in share was by Amazon, which rose 3.4 points to 20.3%.
Some commentators have suggested growth in the digital downloads market - which rose 11.4% year-on-year in 2012 while sales of all physical formats fell [ERA] – had played a major role in HMV’s woes, but the ERA suggested this may have been overstated.
“Physical formats like CDs and DVDs still account for three quarters of the entertainment market,” said Bayley. “There is clearly is a viable business model for an entertainment retailer on the UK high street and it is up to the administrators now to do their job and take the steps necessary to make it possible.”