HMV | Consumer and business analysis

1. BRIEF/ TERMS OF REFERENCE

The story of His Master`s Voice (HMV), as a retail brand, began in July 1921. Sir Edward Elgar, British composer, opened the first HMV store at 363 Oxford Street. Nowadays, HMV is part of HMV group plc and is the UK& Ireland`s leading retailer offering a range of products from DVDs, CDs, Video games, books and technology products. The retailer is ultimately modern, has a long history and an experience in this flourishing industry. HMV has become an entertainment giant in the UK which operates around 200 modernized stores in key shopping locations, offering a selection of more than 150,000 music titles, collection of DVD and Games titles. (hmv, 2009) Additionally, it has an online store at www.hmv.com which enables customers to obtain information and buy online.

2. Market / competitor / consumer analysis

This section provides a market analysis, competitor analysis and consumer analysis for the region in which the HMV store is located. The selected HMV retail outlet is: HMV Leeds City Centre. The address of the store is: 1 Victoria Walk, Headrow Centre, Leeds, LS1 6JD.

2.1. Market Analysis

According to McGoldrick (2002), while conducting market analysis, the researcher needs to focus on the target area, the kind of visitors, stores available, market trends, etc. In this case, the area is identified as the Leeds City centre and specifically the area around Victoria Walk, Headrow Centre, Leeds.

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Upmarket areas like the Leeds city centre can be expected to attract better placed customers. The city centre is the central business district of Leeds, as well as, the city has eight colleges and two universities with a total student population over 200,000. Generally, the city centre is a prime shopping centre with variety of shoppers including serious and window shoppers (Leeds Online, 2009). People who come to shop around the city centre includes; teens, students, young professionals, middle aged and elderly. Furthermore, people who live or work in Leeds are very inclined to come to the city centre because of supporting stores such as; reasonably priced restaurants, cinemas, bars, etc.

As it is known, customer needs and trends are changing along with frequently developing and renewing technology. In the past, individuals were going to theatres, live shows, open-air cinemas and concerts. However, trends have changed in time and various individuals nowadays, prefer watching DVDs or concerts while lying on their couch. Thus, demand for music CDs, DVDs and video games is increasing swiftly. During 2008/09, DVD market in the UK grew by 2 percent and is the leading product category of the retailer with being 45% of its sales. However, due to piracy and illegal downloading, sales of music albums/CDs have declined 3% but the retailer is still holding 85% of the total retail market. On the other hand, growth of technology products slowed in 2009 and represented 18% of total HMV group sales. Same as technology products, the UK book market has declined 2% in 2009. (hmvgroup,2009) As a result, 2009 was a very good year for HMV UK& Ireland with an operating profit of £53.7million (hmvgroup,2009).

2.2. Competitor Analysis

According to Gilbert (1999), competitor analysis for large firms requires careful consideration. Large organisations such as Tesco, Toyota, HMV, Borders, McDonalds, and others typically offer a range of multiple products. A competitor would be any firm that offers some or all of the products sold by the larger firm. Typically, smaller firms become niche players and offer some of the products that large firms sell but this activity still makes them as competitors. HMV is in the business of retailing products such as CDs, DVD of music and music, gaming CDs, Blue Ray discs, tickets to music shows, iPods and so on. Any firm that offers these products would essentially be a competitor to HMV. HMV at Leeds Central has competitors in two locations, one is in the Headrow Shopping Centre itself and the other location is outside the complex in the nearby areas. The nearby areas also have discount stores where CDs and DVDs are available at about 50% if the price sold at HMV centre. Additionally, users have access to the huge online shopping stores such as Amazon, eBay, iTunes, HMV online stores and so on. Some of the stores in the area that can be considered as competitors are (Kelkoo, 2009):

Crash Leeds at the Headrow Centre: This shop is located in the Headrow centre and offers a good range of music at lower discounts than that of HMV.

Debenhams: A large retail store offering a wide range of music and gaming CDs

Harvey Nichols: A premier high street store with a wide collection of music, gaming CDs, gaming devices, peripherals and others.

House of Fraser: Another excellent high street store that offers good music, knowledgeable staff and the store is particularly known for its classical music.

thehut.com& amazon.com: A very large online store for music, gaming CDs and devices, DVD, Blu-ray and other products sold by HMV. The rates are about 40-50% less than that offered by HMV.

Borders: Direct competitor, sells a wide range of music and movies CDs, books, eBooks and many other entertainment products. The store is located in the same complex and draws sufficient footfalls.

Game station: For gaming CDs, playing equipment such as PS2, Gamecube and PSP up to PS3, Xbox 360 and Nintendo Wii. The store is a niche product seller of games and gaming devices, gaming peripherals and a major competitor for HMV in the gaming section.

Comet: Merchandise and household items store along with CDs, games and other items sold by MV. Direct competition, low cost store with discount sales and draws the middle-aged customers and bargain seeking customers.

Virgin: This store offers a very large collection of all genres of music, downloads, books, mobile phones and accessories and many other products. This is a large competitor to HMV and located just a few streets from the Headrow Complex.

Argos: The firm has recently opened up and is a huge discount store, offering a wide range of DIY products, hardware items, video games, music and other products. Bargain and discount seekers would find this place very attractive

There are a number of other music stores such as Leeds Discount Warehouse Leeds; City Varieties Music Hall; another HMV store at Lands End;

2.3. Consumer Analysis

According to McGoldrick (2002), while carrying out a consumer analysis for a particular store, factors such as location and the economy of the place has to be investigated, this is especially true in the case of lifestyle items.

According to Leeds city council, there are more than 750,000 people living within the city as well as nearly 100,000 people come from different cities to work at the city centre. Moreover, thousands of tourists and shoppers at any age visit Leeds for shopping and entertainment. (Leeds.gov, 2009)

In 2009, total employment in Leeds is projected to be 443,600 and it is expected to grow 6%, creating additional 28,400 jobs till 2019. Despite the global economic crisis, the total unemployment in Leeds in 2009 is estimated to be 9.7% which is lower than some other big cities. (Leeds.gov, 2009) In 2008, average weekly earnings of low, middle and high class workers who are Leeds residents were, £122, £384 and £823.(Leeds.gov)

Retailers have to segment the markets in which they operate to be more specific in meeting frequently changing customer segment needs, however, for a retailer like HMV dividing the markets into segments by looking at individuals` music tastes, DVD and computer/console game selections will be very hard. Thus, generally, it can be argued that the retailer is trying to serve to the whole market. In order to serve to the whole market it is offering almost all of the Music, DVD, computer/console games and technology products that the entertainment industry is producing for each and every segment. For some customers, music albums and DVDs will be highly priced because the retailer is targeted at individuals who can pay premium prices for its products.

An important point as far as music is concerned, HMV has music dating back to the early 1950`s and classical music, therefore, it is holding the widest possible range of music CDs and albums. Since the retailer is offering more than 150,000 music titles, every music lover will find music albums or CDs that they will enjoy listening. Furthermore, the retailer is offering variety of categories and diversification of DVDs favourable for every film lover. Other than music and film lovers, it is serving to video game players which are 55 percent of the British population. (gamezine, 2009)

3. Retail Marketing Mix

3.1. Retail location

Leeds City Centre and Headrow Centre is literally a shoppers’ paradise. The area is the centre business district of Leeds and has hundreds of shops, large and small as well as department stores that sell a wide range of products. Some of the brands and stores that are located there include Game Station, Marks and Spencer, Borders and many leading brands. The idea behind the park is that when people come there, they can spend the whole afternoon or the better part of the day shopping or browsing through different stores and having snacks or coffee at the local restaurants such as TGF, McDonald’s and so on. The retail area attracts all segments of customers, ranging from teens to the elderly. It can get crowded on weekends and during holidays. The Unique Selling Point of the area is the excellent location and cluster of other shops where people who may have come to buy one product would probably buy other items in other stores. Other than the area specifications, transportation around the city centre is very important. Improvements to public transportation have already been made, however, traffic levels and insufficient parking places are presenting a major challenge for the city and the shoppers. In short, Leeds Central is a prime shopping centre which attracts serious shoppers and also casual strollers who may window shop and then buy something that catches their fancy (City Centre Leeds, 2009). One of the customer responses was: “A nice central location and I always like to drop in on weekends with my friends. There are plenty of other shops around and great food available. So we can have a good look at music and a nice way to kill and afternoon”.

As per the survey, location of the store is acceptable and in a central place that suits all the six respondents. The visibility of the store is good; however, there is a poor awareness among people who do not know the store location. An analysis of the area shows that the Headrow Shopping Centre is considered a prime retail location but selection of customers will prefer other locations because of the insufficient parking space available and the generally agitated environment. It has also been seen that there are a number of other shops that offer the same products sold by HMV. Additionally, there are a number of music stores in the nearby area. As a result, anywhere they go, HMV would find someone selling music. Hence the location does not have to be changed.

3.2. Product Selection and Buying

In the retail marketing mix, products are the reason why the whole network is established and why retailers have opened the stores. In this case, the products are music albums from famous artists and singers, books from famous writers, various categories of DVDs and related technology products such as; iPods, headphones, docks and speakers. There is huge variety of products in the HMV store even though the retailer is managing its stock perfectly. The product ranges available in the store appear to be greater than its competitors.

New releases, popular albums and DVDs can be found in any major retailer, however, if you are looking for older titles, outmoded albums/DVDs, or if you want to find a DVD, you watched years ago, HMV is the only store which will have it in stock. Furthermore, if you cannot find the solution for your need in the store, then HMV`s website should be the second point to look at.

The store is offering choice of music genres such as; Pop, Rock, R&B, Dance, Classical and more. They also have variety of books, TV series, DVD and Blue-ray categories in their stock; comedy, drama, horror, kids, thriller, sport and etc. Additionally, there are HMV exclusive products, special edition DVDs and also box sets in its stock. Moreover, the store is selling technology products of numerous brands such as: Apple, Logic 3, Exspect, Maxell and so on. (www.hmv.com)

3.3. Retailers Own Brands

“A major cornerstone of retail marketing has been the development of the retailer`s name as a brand, rather than simply a name over the shop.” (Mcgoldrick, 2002) Additionally, Several different types of retailer brands have been identified by Bhasin,A.,R. Dickinson and S.Nadan in 1995.

As it is made clear, HMV is one of the most well-known music and video retail brands in the United Kingdom. However, the entertainment giant only sells a classical range called HMV classics under its brand name. The retailer first launched the HMV classics in 1990s and is still offering the range to its customers. The latest launch of the HMV classics was in 2008 and it was a collection of 50 budget-priced classical CDs. The collection was called “The Full Works” and it was produced by UCJ Music, Classic FM and HMV. The range was taken from the seminal catalogues of Decca and Deutsche Grammophon and included a collection of greatest and most popular classical songs. (hmv.com, 2008) In 2007 and 2008, sales of classical music at HMV stores were 5% and 3% of total sales. However, according to the spokesman of HMV, classical music is an area which has strong growth potential. (retail-week, 2008) Therefore, the key reason for producing this collection was to take classical music to the masses, otherwise numbers of classical music listeners will keep decreasing. Tony Shaw, specialities manager of HMV said: “We want to reach people who, up to now, have enjoyed classical music, but perhaps only because they may have heard it on a film soundtrack or in a TV ad.” (retail-week, 2008) Furthermore, HMV stocks variety of exclusive products which are not truly own brands but products exclusive to the retail chain. The retailer makes agreements with manufacturers or intermediaries to be the exclusive channel for their specific product or products. By doing this, HMV creates a zero-sum situation where it`s gains are guaranteed together with its competitors` losses. There are various HMV exclusive products such as: limited edition albums, special edition DVDs and TV series. Moreover, latest games, albums or DVDs will be exclusive for a limited time. For example; at the moment HMV is the only retailer in the UK selling special edition of Michael Jackson`s latest film “This is it”.

3.4. Retail Pricing

The respondents strongly believe that prices of items at the store are higher than the ones in discount stores. As indicated in the survey, customers are aware that there are other retailers and websites which they can buy new releases, Blue ray DVDs, box sets and CDs at a cheaper price. Thus, some individuals prefer looking at discount stores, other retailers or websites initially for new releases and if they cannot find what they are looking for they go to HMV stores afterwards. On the other hand, various individuals will prefer buying from the HMV`s own website because a number of CDs, albums, DVDs and books can be found at a cheaper price on the retailer`s website.

The store offers bulk and quantity discounts such as buy 1 CD get another CD from a lesser-known artist free. The store also introduced membership cards with loyalty points that can be redeemed after a certain value of merchandise has been purchased by the customer, as well as, it is offering 10% discount to students.

As a result, the company’s prices are relatively high compared to other brands, but such ethics can add to costs as the company is offering superior quality and great services. Getting into a price war with the cheap and economic discount stores is not advisable but the retailer must realise that individuals are ready to pay some premium but not too much.

3.5. Advertising and Promotion

HMV is using sales promotion techniques in order to boost its sales, to attract more and new customers, to meet its sales objectives in short-term and also as a reaction to competitor activities. The store introduced membership cards with loyalty points that can be redeemed after a certain value of merchandise has been purchased by the customer as well as it is offering 10% discount to students. Holding a membership card will be a reminder of the retailer to the customer as well as it helps the retailer to analyse customer behaviours in order to find out changing tastes of customers and respond to those changes. In addition, the store is offering bundled products of slower moving goods (selected items) and offers them at discounted prices.

Other than sales promotion techniques, HVM is using a different and very effective communication tool; public relations which help the brand to develop stronger bonds and maintain mutual understanding between the organization and its customers. HMV has selected CLIC Sargent to be its nominated charity partner for 2008-2010 and more than £27000 was raised by 250 HMV stores until October 2008. (Clicsargent, 2008) Moreover, HMV has launched plastic bags from recycled bottles and the money raised from the bags will be given to the nominated charity. As a result, with some help from the local media, the brand creates a positive image and strong bonds with current and potential customers.

HMV set up its own website and it is being updated regularly. The company is aggressively promoting itself through online media. The website provides information on: Locations, prices, products, trends, events, legal information and promotional material on all their new products in order to keep the customers up to date. Additionally, customers can obtain products delivered free to their homes or they can download music for a nominal fee.

TV advertising is the company`s largest channel of introducing new products because the prestige and status of a product or organization can be enhanced significantly by TV advertising. Moreover, celebrities are featured in their advertisements to make the advertisement more attractive and unforgettable.

3.6. Selling Environment

“The retail store environment exerts an influence upon shopper behaviour at several different levels, including the overall design of the store, its atmosphere, the arrangement of its layout, and the displays.”(McGoldrick, 491, 2002) Therefore, in 2008, the retailer decided to re-design 15 of its stores including the one in the Headrow shopping centre. (Timesonline, 2008)

The HMV store in Headrow shopping centre is one of the largest stores in the UK. The store has two floors and two entrances. One of the entrances is in the Headrow centre and the other one is on the Lands lane. Five out of six responses indicate that window display is properly arranged and attracts the customer. Generally, the store is very fresh, up to date and has a comfortable and relaxed shopping atmosphere. When entering to the store, first thing that stands out are the darkness and then the layout of the store. HMV has chosen the Grid pattern layout for its Leeds city centre store. This layout is usually economical to install and maintain, also wastes little space. Long rows of parallel fixtures, with straight aisles and no opportunity to pass between aisles, other than going to the end of the aisle, are the main characteristics of this layout. However, there is more than enough space for customers to walk around the shelves. By encouraging the circulation around the whole store, the merchandise gets the maximum exposure. (McGoldrick, 2002) Another interesting characteristic of the store is its darkness. The use of the black wall paint combines with the long rows of shelves and gives the customer an impression of entering a gold mine of music and entertainment.

As it is mentioned, the store has two floors. There are stands at the entrance of each floor which is the most appropriate point to attract and inform the customers about products on sale, upcoming products and new releases. In the first floor there are selection of music CDs, magazines, computer & console games and books which are in alphabetical order and located in different groups such as: Rock, R&B, Pop, Dance and etc. The second floor is the DVD section which is also divided according to their genres and categories such as: action, drama, horror, musicals and etc. Same as music CDs, DVDs are presented, positioned perfectly and put in an alphabetical order. The grouping of the products makes it practical, accessible and much easier for the customer to find what they are looking for.

You can listen to music in the store on headphones, and that gives you a chance to listen to a song or album before you buy it. Moreover, there are screens around the store that plays music clips or movie trailers to entertain and to make customers feel that they are getting value for the money they are spending. However, fast tempo and loud music in the store will affect several customers negatively. According to McGoldrick (2002), the manager has to base their use of music upon any systematic research rather than playing noisy and loud music because it will affect shopper behaviour negatively.

From the responses gathered, it is clear that the store has a good reputation among the customers. Responders strongly agree that the overall ambience in the store is good. The shop environment is liked and appreciated by all as warm, friendly and encourages people to buy.

3.7. Retail Service

The retailer is providing a high quality service by engaging well trained, experienced and knowledgeable member of staff to get around the shelves and help or inform customers. The retailer has enough empowered staffs who are fully informed of product prices, features, stock levels, guarantees and etc. Moreover, according to customer responses; service levels are adequate, staffs are courteous, happy to help and encourage visitors. Most importantly, as it is known, many shoppers prefer to avoid engaging in discussions or conversations when they are browsing or window shopping. Fortunately, two of the respondents mentioned that the staff will leave you by yourself when you are browsing and they don’t crowd you or expect you to buy. On the other hand, variety of customers complained that the service at the pay desks will be very slow at the weekends and peak times. Time flies if you are stimulated, yet time drags when you are bored, therefore, more temp staff can be hired or more checkouts can be opened when queue lengths reach specific numbers of customers.

As a result, People are happy with the retail service HMV is providing and it is clear that employees of the retailer is creating sales force and demand for the company`s products.

According to Bizhelp24, “there are no laws restricting the trading hours of businesses between Monday and Saturday, however stores with floor area larger than 280 square metres can only open for a maximum number of six hours on Sunday.” (bizhelp24, 2009) Therefore, the HMV store is using this opportunity as a competitive service unlike its competitors. The store is open seven days a week. Between Monday and Saturday the store is open from 8am to 7pm and Sundays from 10.30am to 5pm. Compared to its competitors in the Leeds city region, the store opens before and closes after its competitors. This gives an opportunity for busy workers to visit the store after their work as well as it gives a competitive advantage to the retailer because most of its competitors would take down their shutters by that time.

4. Strategy for improvement in next 12 months

* The store should use quality and variation of its products, its location and prices as a strategic tool to increase its sales. It should offer more discounts, reduce its prices and upgrade its loyalty points and so on.

* The store can be promoted by sponsoring local music concerts and bands.

* The store should offer customers the chance to create their own albums by mixing a certain number and type of songs. This strategy will help to bring in different customers

* Atmosphere of the store is excellent but more checkouts or more staff for place of payment must be recruited.

* The retailer must base its use of music upon any systematic research rather than playing noisy and strange songs.

5. Leeds Shopping Week

The Leeds Shopping Week that was conducted from 15th to 25th October 2009 was a huge success. Large crowds turned up almost every day, more so on weekends. There were a number of competitions also and lucky winners could get nice gifts and vouchers for food, clothes and other items. The impact of the shopping is that shops have to take extra effort to increase their promotion, location, advertise the products they offer, loudly proclaim the discounts and other offers they make so that people will seek out the store to shop. The one best way to attract customers is to advertise and promote and Leeds shopping week is a perfect opportunity to utilize. Discounts, special offers, half price items, two for the price of one offer and other such promotions attract attention and visitors. The next shopping week is again scheduled in October 2009 and shops have a full year to plan their activities (Leeds Shopping Week, 2009).

6. Conclusions

The paper has performed the marketing research related tasks for the Leeds City Centre branch of HMV stores. The target was to frame the strategic plan for the branch. A market analysis was first performed for the branch and the area was analysed for the type of people who visit, nature and quality of the shopping complex and the type of customers. Next, a competitor analysis of the firms placed in the shopping complex and in the surrounding area was performed. The complex and the surrounding area had a number of shops that offered the same products as that of HMV store. Six customers were interviewed for their views on the store. The replies indicate that people were happy with the store location, service quality and ambience. However, people felt that the prices are higher than the ones offered in other stores and websites. Lastly, a strategy was drafted for further improvements.

7. Bibliography

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