Christmas forecasting and supply chain planning – where did HMV go wrong?

If you were following my top albums of the year, you will know how highly I rated Grimes with her album Visions and Sharon Van Etten with Tramp – numbers 4 and 3 respectively in my countdown.

However, although I had listened to both a lot on Spotify and YouTube during 2012, particularly Grimes, I hadn’t bought the albums as Chirstmas approached. I still like to have a physical copy of my favourite CDs, so it got to the point in the year when I thought I might as well put them on my Christmas present list – something my wife could get me.

Grimes - a brilliant album

A week or so before Christmas she told me that she couldn’t find them in the couple of HMV shops she’d visited. I thought I’d check that out – I’m trying to boycott Amazon as far as possible given both service and tax issues – so I managed to visit a couple of HMV stores, in Camberley and the flagship store in Oxford Street. (I’m also trying to support HMV in my own little way as a music fan, given they are the last remaining major music retail chain in the UK).

But no luck with either album. One assistant said he knew Grimes had been in stock, but wasn’t now  – he wasn’t sure about Sharon Van Etten at all.

Now, these are not exactly minority or unknown albums.  Grimes has been all over the music press and media since Visions came out in the Spring. Tramp won the “Album of the Year” accolade in both The Fly (the largest circulation UK music magazine, given away free at venues) and on the Drowned in Sound website (the most influential UK “serious” rock website) recently.  Visions was the runner up in both the NME and Guardian album of the year lists and featured in pretty much every other list.

So, how many sales did HMV miss out on? There’s no guarantee that another sale would be made in substitution – Jane didn’t just choose a few other albums for me when she couldn’t get the ones I wanted. So the losses might have been a few hundred CDs? A few thousand? We could certainly be talking tens of thousands of pounds of revenue here.

Was the problem the very success of these albums as we described above? There are many music fans (or their friends and relatives) who use the end of year “best of” lists to choose some Christmas-time purchases. I suspect HMV, or perhaps someone else in the supply chain, perhaps the distributor or even the record label, just didn’t forecast the spike in sales of these two albums. That led to the stock-outs and disappointed Grimes and Van Etten fans.

What seems a little strange is that any real music fan – like me – who was following reviews through the year could have predicted that these two albums would be high in many of the “best of” lists, just as it was clear that Frank Ocean and Tame Impala were going to feature very strongly – but their albums didn’t seem to have the same supply issues.  And the Fly came out in November, for instance, time for some additional orders to go in, I would have thought.

Perhaps there’s a job for me here in predicting music demand for the CD supply chain?

Certainly, if that supply chain had been intelligent and responsive enough, the likely and actual demand could, and should, have been met. Instead, HMV  have lost out, at a time when that firm in particular can’t afford to miss any opportunity for revenue and profit.

Voices (4)

  1. Retail Ranter:

    I don’t suppose i’m alone here, but I predicted that HMV would hit the wall back in 2004 – it was the day I walked out of a Best Buy store in Miami clutching my first ever iPod. Why would I need to visit an HMV ever again?

    I remember reading in one of Richard Branson’s books around the same time about the idea behind the first ever Virgin Records, which was essentially to create somewhere that music fans (young people !) would want to hang out, meet up, spend time, and eventually spend money, and I concluded that going back to that original thought was the only way modern day music stores could compete with the digital revolution that was coming. The one thing I can’t get over the Internet is the physical connection with ‘the scene’ – that is the last weapon the HMVs, Virgins, etc have in their war against ‘online’.

    Now I know I’m not the only person to come up with this bright thought – focusing in on one’s strengths is a fairly obvious strategy. But it would seem some bright sparks at HMV didn’t agree and over the last 7-8 years every time I have entered an HMV I have noticed it has become quite the opposite of a focused, specialist, music store. Books, computer games, posters, keyrings…. just general bric a brac shite! Why would any self-respecting muso want to spend their Saturday afternoon meeting up with their buddies to discuss the latest releases whilst standing next to a Sponge Bob Square Pants Gameboy poster and being watched over by an unfriendly looking security guard?

    It’s obvious, but staying squarely focus on the physical customer experience is the only way to compete with cheaper online alternatives. And what is that Amazon app found that the cheapest place to buy those scanned goods was an HMV-owned merchant?? Perhaps it’s also fairly obvious but embracing the competitive model and building it into HMV’s mix would also have been smart.

    Bottom line, somebody moved their cheese and they got caught napping. It’s a crying shame for the British high street and I for one hope other retailers are shaken into action by this.

    Apple made the move the other way, recognising that the physical customer experience was missing from their mix they took the bold and expensive move to go bricks and mortar too. And hasn’t it worked a dream… Apple’s Covent Garden store is reportedly takes more sales per square foot than any other store in the World.

  2. Final Furlong:

    HMV may soon be following Jessops. HMV is currently offering an additional 25% reduction in prices (on top of their post-Xmas discounts) and the markets are seeing this is a significant indicator of a company in trouble. Same thing happened with Jessops – massive discounting just before they concluded that it had to close. And Jessops knowingly took £800,000 off their customers in gift card sales before allowing PWC to tell them that they were worthless.

    You can now download films, music (both digital and physical), games (again, both), and purchase all related accessories, online – it’s just a matter of time, unless HMV can figure out a way of going 80% online within a matter of months.

    In the US, Amazon has created an ‘app’ to support customers who browse products in stores, scan their barcodes, compare them to prices on Amazon, and then place the order (on Amazon). It’s called ‘showrooming’ – the process of browsing in physical stores with the sole intention of subsequently ordering products on line.

    1. Peter Smith:

      Amazon with their app just sticking another knife in traditional bricks and mortar shops. Once they’ve wiped out every music and book shop in the world, then how do we get the chance to actually browse – which some of us like doing? Or will Amazon open up their own stores at that point? Anyway, my idea is that stores should invent app detectors – anyone who tries to enter a shop with that Amazon app would be barred from entering, Or maybe charged a fee… I think it will be another 50 years before we know whether Amazon have been a force for good or evil in the world, and I’m really not sure which way history’s verdict will go.

      1. Final Furlong:

        Having seen the news, I apologise for saying that HMV had months to go 80% online; should have said “hours”. You can’t blame Amazon because HMV, like Jessops, could see the writing on the wall for years and they didn’t change their strategy.

        A shame that our two national ‘specialists’ – in music and photography – are down and out (noting that the CEO who let Jessops go to the wall is running HMV…).

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