Last year was, to put it mildly, rather difficult for retailers on the high street, with popular chains such as GAME, Clinton Cards and JJB Sports all entering administration as a result of reduced consumer spending. Unfortunately, it seems that 2013 may not be any easier for stores desperately struggling to survive as two well-known high street retailers have already been forced to enter administration.
HMV has followed photography chain Jessops’ in announcing it will be entering administration, following several years of falling sales and mounting debts with creditors. This move has placed the jobs of over 4,000 employees in jeopardy less than a week after the demise of Jessops cost 1,300 British workers their jobs.
HMV has failed to keep up with progress
Administrators at Deloitte will now begin the search for a buyer to take over either all or part of the business leaving the future of HMV’s 230 strong commercial property portfolio hanging in the balance.
Yet complications may arise from this potential sale. For example, consumers have reacted with fury over the news that gift vouchers will no longer be accepted as payment in any of the stores or online, meaning that whoever places a rescue bid will have to honour the value of vouchers or risk a consumer boycott.
It is understood that the Royal Bank of Scotland and Lloyds, the lenders for HMV, refused to put up a further payment of £300 million in order to allow the chain to alter its business model and pay off the most immediate debts to suppliers.
This could have saved the business in the short term, and has attracted heavy criticism given that both banking groups received a taxpayer bailout during the height of the financial crisis.
Suppliers also failed to lend HMV the funds it urgently required to remain afloat, largely due to its recent poor sales performance. Many suppliers had already purchased stakes in the chain and given stock on a sale or return basis in order to prevent the now inescapable administration process.
Angus Campbell of Capital Spreads says; “Unfortunately, HMV is a sad story that tells of a company unable to foresee the winds of change within its industry and before it reacted it was too late.
“The household name was once massive with almost everyone looking to buy any sort of music walking through their doors and then ending up spending far more than they’d originally planned.
“It was one of the ultimate browsing venues but most of the shoppers now will probably not remember the last time they went into an HMV store. Not even Christmas could save them.”
It certainly seems to be the popular consensus that HMV failed to keep up with the trend of online shopping – a factor which ultimately led to its demise. Internet companies such as Amazon and play.com were able to reduce prices, offer items as either physical or downloadable content and allow consumers to shop from the comfort of their own homes before the high street retailer could jump on the relatively new internet shopping trend several years ago.
By the time HMV had cottoned on to the idea and begun catering to the online community, it was already too late.
Managing Director of Conlumino, Neil Saunders, certainly agrees that a failure to keep up with progress has placed the firm in the position it finds itself in today.
He says; “While many failures of recent times have been, at least in part, driven by the economy, HMV’s demise is a structural failure.
“In the digital era where 73.4 per cent of music and film are downloaded or bought online, HMV’s business model has simply become increasingly irrelevant and unsustainable.”
The next few weeks will be a tense time for employees uncertain whether or not they will have jobs by the beginning of February – or, for that matter, whether the chain will be able to remain operational during the administration period at all.
While the possibility of a record label intervening to bail out the stricken chain has been mentioned by industry experts, this will only work if such help is forthcoming in a matter of days.
Should no knight in shining armour, with an even shinier bank balance, step forward, it appears that the face of the high street in Britain will change once again. And, with the British Retail Consortium (BRC) warning that one in nine high street commercial properties stands empty in the UK, analysts are warning this could be a change that spells the end of retailing in this country as we once knew it.
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