John Hirst, HMV’s head of music, has told Music Week that the retailer’s online sales are its “big success story” of 2018 as figures showed that the chain overtook Amazon to be No.1 in the physical market.
As the last bricks-and-mortar music chain, HMV has been under pressure from the declining physical market. But according to the latest data on physical entertainment sales from Kantar Worldpanel, HMV experienced market share growth for the second consecutive period.
Based on music sales for the 12 weeks up to September 23, HMV increased its market share to 28% and moved ahead of Amazon (21.1%) to become the biggest physical music retailer. Gifting sales at HMV were up 21% over the period. Now That’s What I Call Music 100 and Mamma Mia! Here We Go Again proved to be strong physical sellers over the three months.
For overall physical entertainment, Amazon remains the market leader with a 23.2% share (up 1.8 percentage points) compared to HMV's 18.5% (up 0.7 percentage points).
Reacting to the Kantar Worldpanel report, Hirst said: “Everybody at HMV is incredibly passionate about music and particularly the physical product, from our central support operations, through our distribution centres and, of course, in store with our amazing staff delivering gold standard customer service day in, day out. Whilst the customer still wants physical music - and they really do - we'll be here to put it in their hands."
The music chain’s market share success is in the context of a 21.7% slump in physical artist album sales for the year to date. In a challenging market, however, HMV has held its own while other retailers lost ground. Sainsbury’s has had the upheaval of its Asda merger and, along with Tesco, appears to be cutting back on CDs.
“We would always feel that the replenishment and our on-shelf availability and the way we present products knock spots off supermarkets,” said Hirst. “Times are tough in the music market and supermarkets are beginning to wonder whether it’s worth their time and space. We’ve benefited from that but we’ve also been taking share off Amazon as well.”
Times are tough in the music market and supermarkets are beginning to wonder whether it’s worth their time and space
Part of HMV’s market share result is down to taking on the online giant at mail order, which Hirst said they would be looking to “maximise” in this crucial trading period.
“Our website is actually the big success story of this year,” said Hirst. “It was a couple of years before we got back into the online space with HMV.com. It’s quite a difficult area to make money when you’re competing with somebody like Amazon. But we’ve found a way to make it work and it’s been a huge growth area for us - it’s our biggest store by some distance now.
“[Mail order] is really booming - not only do we deliver to homes, we do click and collect so you can order online and it will be in store within 24 hours. We’ve got a partnership with HubBox as well, so there’s 1,500 locations around the country you can get things delivered to. We’re trying to innovate as much as we can. We’re getting some great results on pre-order, for vinyl in particular - vinyl is 50% of our music offering sales-wise online and obviously the value in the margin there is really strong.”
While Hirst conceded that it’s “not been a great year” for physical retail without a release to compare to Ed Sheeran’s 2017 blockbuster, there’s been an improvement over recent months - in particular for National Album Day - and he’s optimistic about Q4.
“From an HMV point of view, we’ve comfortably outperformed the market all year,” he told Music Week. “We could really do with Q4 comparing favourably to last year and then if we can outperform the market, as we have done for the rest of the year, it will put us in a really positive place come the end of the year.”
HMV is banking on a strong Q4 performance from new releases by Rod Stewart, Little Mix, Olly Murs, Take That and Michael Buble, as well as The Greatest Showman (a strong performer for the chain in 2018), Mamma Mia! Here We Go Again and George Ezra’s Staying At Tamara’s.
“There could be some surprises as well, such as The Kingdom Choir, if it can get off to a good start and build on the momentum,” added Hirst.
There’s also strength in depth in this year’s Q4 schedule, with potential gifting releases from Def Leppard and Fleetwood Mac, as well as the Queen Bohemian Rhapsody soundtrack and an Eric Clapton Christmas album.
“It was such a step down last year,” said Hirst. “It would be stupid to deny that consumer behaviour is changing, but last year was particularly bad because of the release schedule. When one of the biggest albums of Q4 is Ball & Boe, [Q4 2017] was never going to do what the previous years did.”
At ERA’s AGM recently, BMG’s CEO Hartwig Masuch suggested there were signs of a plateauing of the decline in physical sales as labels targeted fans with well-produced deluxe releases.
“We’re in a position to focus on that higher ticket price, well-presented stuff like the White Album reissue, as well as deluxe editions in general and vinyl,” said Hirst. “In catering to fanbases, we’re in a better position than most to do that - especially with a growing online business as well. We’re certainly confident we’re going to be around for a while yet.”