January 05, 2007

The High Street takes a hit, and it's their own fault

Just as the post-Christmas blues seem to be a great time for people to declare bankruptcy, it seems it’s the same for businesses too, especially if they’re High Street retailers.

Music Zone have gone into administration as Amazon rake in millions of orders. HMV are facing similar problems.

Today Games Workshop issued a profits warning, with its margins kindly described as ‘wafer-thin’. Little Chef has made heavy losses and has also gone into administration.

The first three can all blame the internet, but maybe there’s another factor which explains the fall from grace of all four.

HMV and Music Zone have both tried to meet the challenge of the modern entertainment industry. And both have failed. Their websites are no match for Amazon or any of the other online success stories. Their stores still offer virtually the same goods as they did twenty years ago.

But importantly, the atmosphere in their shops isn’t good enough to tempt people to pay High Street prices. Where bookshops have caught onto the idea of installing coffee shops in their stores, HMV and Music Zone could have had juice bars where you can sample the latest music. They could have walled off areas for classical and jazz, creating different atmospheres under one roof. They didn’t, and so their shops are little more than warehouses charging relatively expensive prices.

Little Chef failed to modernize too. The decor, logo and style is very 1980s, but their prices have risen with inflation. The food they turn out isn’t good enough to justify the prices.

And it’s the same story at Games Workshop. Although there is a more interactive element to their stores, prices are still too high in relation to internet stores. The shops don’t look very modern or inviting, and they’ve been going backwards – in image terms – for years.

All four have image problems to overcome, but show little sign of doing much to make themselves interesting. I’d be surprised if more than two of them were still in business in 2008.

- 2 comments by 1 or more people Not publicly viewable

  1. HMV may be experiencing short term trading difficulties but as a company they have a strong balance sheet, positive cash flow and net assets overwhelmingly positive.

    They won’t be “declaring bankruptcy in a while”. In fact while the lemmings are selling HMV shares it might be a good time to buy for the long term.

    06 Jan 2007, 00:32

  2. Alun Hughes

    HMV will follow Music Zone down the pan because the mix of price cutting and bland stock is not the way to go for the UK’s premiere music retailer. SPQR demands stock turn velocity and the latter will gravitate to the net. HMV need to become service orientated and make more off less. They need to abandon the ‘yoof’ arena and reinvent themselves as a specialist, not a poor man’s Tesco/Music Zone

    27 Jan 2007, 20:27

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