Music and Video Retail - You Can't Touch This!

Tuesday, August 11, 2009 | 12:50 PM

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Tough times on the high street plus the terminal decline in CD sales have wrought major changes for traditional music and video retailers. Copious column inches have already been dedicated to the decline of such retail stalwarts as Woolworths, Zavvi and Fopp, not to mention the pessimism of a commercial music industry where artists now offer their music for free. As besieged as traditional music and video retail has been, recent Verdict research shows an increase in the proportion of customers now shopping for music and video online.

Verdict's recent study How Britain Shops 2009: Music and Video reveals that 49.9% of all British adults aged 16+ shop for music and video, an increase of 6.7% over 2008 and a rise that bucks a gradual year on year downward trend since 2005 [1]. Moreover, the success and healthy profits reported by HMV since loosing significant high street competitors would show that periods of adversity can be when market leaders make serious headway and deliver real innovation to their customers.

Not so long ago your average music and video retail specialist was only a lively and comprehensively stocked, if not necessarily competitively priced, in-store experience. Today that picture is as passe as a pair of MC Hammer's voluminous parachute pants. HMV, who are two years into a three-year restructuring plan, have embarked on a bold round of diversification reflecting the wide range of platforms music flans use to hear and consume music. Ticket sales, expanding its fashion range, venue sponsorship, new loyalty schemes for "money can't buy items" including back stage passes and signed memorabilia, plus vigorously promoting their own online and download offerings, have all helped define their new strategy.

The role of DRM-free downloads should not be overlooked in spurring on the recent upward trend in music and video shopping. Verdict posit that by giving shoppers the freedom to play downloaded music on any device has expanded the potential customer base of download operators [1]. Again this has proven beneficial for the UK's largest music and video specialist, HMV despite harsh price deflation from online pureplays and previously unforeseen competition from supermarket chains like Tescos.

Verdict's research also reveals some key developments in the ongoing fortunes of the premiere pureplay music and video retailers Amazon and Play. Following the ever greater penetration of high speed internet connections Amazon has increased its visitor and main user share. Meanwhile Play, has achieved the highest ratings among all music and video operators for price and service [1].

The new world of music and video retail undoubtedly presents businesses with fundamental challenges and questions. The apparent growth in the sales of digital media coupled with specialist retailers determination to diversify into new sales channels would seemingly show the path of its future. Nevertheless, one factor remains as enduring as ever; namely the importance of maintaining customer loyalty. Price, service and range are the key drivers for loyalty in music and video retail. So, while it may be tempting to reduce that back catalogue of old, hard to find albums or curtail your stock of niche indie hits in favour of selling a new fashion line, their importance to customers remains undiminished.

[1] "How Britain Shops 2009: Music and Video" Verdict July 2009