Essay title - HMV Group Music
HMV GROUP – HMV Music – Electronic Commerce Report
Introduction
The changing technological environment has increased activity on the internet and as a result businesses are evolving by taking their products and services to the net. The concept of ecommerce as a result is becoming very popular in the local as well as in the international market. “Simply put, e-commerce is the online transaction of business, featuring linked computer systems of the vendor, host, and buyer. Electronic transactions involve the transfer of ownership or rights to use a good or service.” (‘What Is E-Commerce?’) Ecommerce essentially can take the form of e-tailing, gathering and using information pertaining ton demographics on the internet, as well as electronic data interchange whereby different business can exchange information with each other through online portals.
The categories of ecommerce take the form of transaction between businesses and consumers, transactions between trading partners, information and data gathering and processing as well as the dissemination of information. In the business and consumer category the business and customers interact over an online portal in public networks through which the business seek to provide information, services as well as sell products to the customers. The most common of such portals is the online shopping option.
The category of trading partners pertains to the use of electronic data interchange in order to exchange information as well as to trade products and services amongst businesses. Marketplaces can take the form of such online options. In the information gathering and processing category, the ecommerce option is used to conduct research and employ it for problem solving and decision making. Moreover it can also be employed in other business functions like customer relationship management and supply chain management. The information dissemination category however pertains to businesses sharing information with consumers with the internet of marketing and advertising their products and services to them.
This report however is drawn up in accordance with the HMV group and their HMV online ecommerce website. The purpose of this report is to provide an analysis of the current ecommerce sit hosted and managed by the company and provide how further improvements and changes in the ecommerce option can provide HMV with the much needed extra value and competitive edge in the market. The trend in the music industry in the recent years has depicted that the customers are going online to access their favorite songs and tunes. As a result the HMV Music and Video stores and benefit by targeting this market.
THE HMV Company
The HMV Group is a company which is predominantly active in the retail business. They have stores situated in UK, Canada, and Hong Kong, Singapore as well as in Japan. The company deals with music and books, the music business is dealt through the HMV record label while the books are managed under the name of Waterstone’s.
The retail stores of the company are branded flagship stores and are present in the high street markets of the above mentioned market regions. “HMV Group is primarily engaged in the sale of books, recorded music, pre-recorded video, DVDs, and electronic games under two brand names. The company primarily operates in UK, Ireland, Canada, Japan, Hong Kong, and Singapore. It is headquartered in Berkshire, UK and employs about 13,000 people. The company recorded revenues of £1,894.5 million during the fiscal year ended April 2007, an increase of 3.8% over 2006. The operating profit of the company was £32.6 million during fiscal year 2007, a decrease of 61.5% as compared to 2006.The net profit was £16.1 million in fiscal year 2007, a decrease of 71.4% as compared to 2006.” (‘HMV Group’, Data Monitor Company Profile)
The company has a history of mergers and acquisitions and despite the established name of the brand, the company still is undervalued in the market. As a result the company tends to remain under the constant threat of takeovers and biddings. ‘“In July 2007, HMV Group agreed to sell its HMV Japan business, which operates 62 stores and through the hmv.co.jp website, to DSM Investments catorce Co., Ltd. In the same month, Gerry Johnson appointed as an Executive Director of the group.” (‘HMV Group’, Data Monitor Company Profile)
Initially the company used to only operate through its retail stores in the high street markets. However in the past few years, the company has established websites for its business as well resulting in the three main ecommerce based websites www.hmv.co.uk, www.hmv.co.jp, and www.waterstones.co.uk. These handle the books as well as the music business for the company.
The Music business is carried out by HMV through its retrial stores as well as through the online website while the book trading business is carried out by Waterstone’s through its own respective retail outlets and its separate website. The report however deals mainly with the music business of HMV and how ecommerce solution can enable the company to attain a competitive edge in the market while establishing itself more strongly with the consumers.
The Target Market and Current Customers
The target market for HMV includes people who like to listen to music and watch movies. They can belong to a diverse demographic however they are restricted geographically to United Kingdom, Canada, Hong Kong and Singapore only. Through the ecommerce site however the HMV is targeted a much wider audience which is not catered through its retail stores in the high streets.
The targeted market includes females as well as males and pertains to an age group of 18 to 40. While the content available is suitable for people above 40 as well but the aesthetics and the set up the site is more targeted towards the younger generation. The color schemes and the layout are set so as to appeal to the hip and young crowd while the content which is advertised on the homepage is targeting the same audience as well.
The main categories and products that are sold through the ecommerce site pertain to CDs and DVDs of music, videos, games and special events. Aside from this trailers and clips of songs are also made available for promotional purposes. The media sold online is divided into its generic categories as the content and the themes.
As a result of the observation and the analysis of the website it can be said that the navigation of the website is user friendly and the set up of the website is admirable as well. However the website does not directly cater to the needs of its customers. The customers want to be able to download music and load them onto their iPods. The consumer trend has changed from buying CDs and DVDs of music to simply downloading and loading them onto their music playing devices. HMV has to take this into perspective and offer specialized services as per the changing requirements of the target market.
Competitor Trends
The main competitors for HMV include the ASDA Group, Borders, Tesco Corporation, Virgin Group, WHSmith, Wal-Mart Stores, Inc., Amazon.com, Inc., Woolworth’s Group plc. Most of these companies have retail stores in the high streets of the markets as well as established online ecommerce sites as well. In the book trading business, Amazon.com, WHSmith and Woolworth’s are the market leaders with Amazon.com being the market leader in the ecommerce and online sales. In the music and media business however the leaders are HMV as well as Virgin Groups. However with the changes made by Virgin to capture the online download market, the Virgin Group has an edge over HMV.
It was also announced in 2007 that “Virgin Megastores will launch a high-profile online marketing campaign. To be handled by MG OMD, the campaign includes the takeover of major portals in support of the re-launching of the company's Web site in late June 2007. The company, which faces competition from e-tailer rival HMV, has signed deals with AOL, Yahoo! and Virgin Digital for the use of their home pages. Promotions manager Stephen Lynn added, partnerships with Virgin's sister companies Virgin Money and Virgin.com may be forged to broaden the company's consumer base. Simultaneous affiliate campaigns for Virgin Megastores are being handled by Affiliate Window.” (‘Virgin Megastores backs site revamp with portal takeovers’, 2007)
The internet is a more cost effective way of targeting the market and providing the customers with the desired products and services especially in the media and music market. This is mostly because the customers find it much more convenient to purchase music and media online. The business also are available to take advantage of the low costs for operation and the investment required for an ecommerce business, therefore providing customers with better rates and deals on the products sold.
HMV as a result is threatened in the market as more and more companies trading tin the music and media business come online following the suite of the Virgin Group. This is the main reason as to why the sales for HMV are being recorded at low levels as well. “Even more troubling is the gradual decline of music retailing in favor of downloads. HMV's CD sales dropped by almost 20% last year and with the iTunes store and other sites continuing to grow sales and diversify into movie downloads; the long-term future for traditional music and DVD stores is cloudy. HMV is trapped between a rock and a hard place; and it does not get much rockier than iTunes or harder than Tesco.” (Ritson, 2006)
The HMV Website
The HMV website has a definite hip hop and appealing theme of white, black and pink. This is consistent with the brand as the retail stores in the high street also depict the same aesthetic and color schemes. However while the products sold on the web portal range for hip, rock, retro to classical, the target market which actually purchases these products is very diverse while the aesthetics and the set up of the website for the company is very limited, targeting only the young generation with inclination to pop, hip and rock.
The promotions that are displayed on the home page are directed at a diverse audience. However the presentation is limited to a certain target market as mentioned above. As a result the company is actually targeting a very limited market through its ecommerce while this market is actually very dynamic in term of what it wants form an online retailer of music. The main tracks, records, for music as well as videos and other media are sold by CDs and DVDs, while the market being targeted by the HMV Company is shifting towards electronic downloads on the internet. This is why the sales of the company are decreasing both in the retail stores as well as on the electronic online portal.
Aside from this the home page of the website leads to the different section of the website which pertain to albums, singles, DVDs, games gadgets, soon to be released music and media as well as special offers. The navigation to these taps is very easy for the user, however once in a page, like the products page no history of navigation is provided making it confusing for the user to determine where in the website the user is. Moreover the buy button is very complicated and camouflaged. The hot pink color of the button is very prominent but it gets camouflaged with the other hot pink items and tabs around the button.
The Ecommerce Solution
The company strategy for HMV pertains to providing exceptional quality of products and customer service to the market in highly competitive environment. The key objectives of the strategy include “Apply the HMV Blueprint across the group; secure leadership in chosen markets; deliver unrivalled authority; achieve superior financial performance; exploit new product opportunities; embrace alternative distribution channels and technologies; and optimize store portfolio.”(‘HMV Group Plc’, 2007)
The fact that the company is open to different and dynamic distribution channels indicates that the ecommerce option for the company is a highly viable option. The ecommerce site for the company predominantly has sold CDs, DVDs, music and media paraphernalia as well as music equipment and records. However, now the company has also launched an HMV Jukebox service which is targeted at the electronic download market. This service allows the customers to subscribe to the service and buy download rights to tracks available on the HNMV site on a monthly basis. The company’s strategy as a result has also evolved and includes “flexible pricing structures, a focus on album sales (the service has co-operated with publisher's wishes to only make certain music available on an album basis), an emphasis on exclusive material only available through the service (such as tracks of live in-store performances being made available for download only), to maximize the catalogue of music available (1.3 million tracks on start up) and strategic partnerships with the device manufacturers to ensure player compatibility.” (‘HMV re-launches online music service’, 2005)
In terms of success, the HMV Company has been a very successful cyber merchant in the past few years, however in the current market and scenario the company is facing major problems, even with its current ecommerce option. This is mostly because the customers find it much more feasible to download music form iTunes to load onto their portable music devices like the iPods. Currently the ecommerce option for HMV does not include a competitive service which can attract this market. As a result the company is suffering 70 percent loss in its profits.
In terms of customer relations the company offers discounted pricing to its loyal customers through the HMV card which was launched in 2003 and is akin to a loyalty card. The customers as a result can avail loyalty based discounts and special prices at HMV stores.
The Ecommerce Proposition
As mentioned earlier, ecommerce is the exchange of information over the internet for the purpose of business. The transactions usually take the form of selling or trading of products and goods. The music industry, as observed in the past few years, has been incrementally going online in terms of its sales, its operations and its interaction with the customers. The music industry has a wide range of customers who want access to music depicts the boundaries of their political states and countries. The ecommerce option in these cases provides the customer with access to music, anytime, anywhere. Aside from this the customers also seek portability and convenience when it comes to music and media, and the online ecommerce option is able to provide them with the required benefits.
The HMV music stores in terms of the physical retail sales as well as in terms of their online sales have been extensively loosing profits for their operation. This is because of the increase in taxes, the increased competition in the online market as well as the changing consumer interests and trends. “According to HMV their financial problems are being attributed to decreasing compact disc sales and its market share being taken by supermarkets and online retailers. HMV is reportedly planning to enhance its online delivery platforms and tailor its inventory for specific outlets.” (Koranteng, 2007) The consumers now want music files which they can download and run on their portable players. The other sites like iTunes and Virgin are providing such facilities to the customers, while HMV is currently restricting itself by only allowing monthly subscription based download for music through The HMV jukebox which requires the customers to run them through specific application as well. In such a dynamic environment the HMV Company needs to be proactive and reach out to its customers by providing hat they want in terms of an efficient, and updated music and media download service.
Advantages of Ecommerce for HMV
Ecommerce is one of the fasted growing and increasingly popular method of business and customer interaction. The instant access and the dynamic characteristics of ecommerce make it a highly viable solution for business that have limited resources in terms of funds and it requires comparatively less amount of capital investment.
The ecommerce solution is beneficial and advantageous for HMV as:
- It allows the company to increase its customer base by targeting those customers as well who are not serviced by the physical retail stores. Moreover those customers which are not within the geographical range of the local market can be targeted through the ecommerce site as well. This translates into increases sales and profitability in the long run for the business.
- The commerce solution provides an increased visibility for the HMV in terms of exposure. The HMV Company can directly market to its customers with a more efficient return per advertisement if they place their ads through marketing campaigns on the internet. Moreover the HMV company can also build customer loyalty through the ecommerce option
- The ecommerce solution is usually much less costly to develop, initiate and maintain than the physical retail stores. Moreover the invisible inventory also allows for minimization of costs of operation and storage for the company. Moreover the marketing and advertising costs are also reduced.
- The ecommerce option also enables the HMV e-store to be open to customers 24/7. This continuity in terms of the open timings of the stores enables the HMV Company to increase its sales on a per day basis as well.
- The ecommerce transactions eventually result in the storage of customer data. This customer data can be employed in a CRM suite and can be used for marketing and research purposes by the HMV Company. This would give the HMV company competitive edge over its competitors as it will have more insight into its customers and can proactively as per the changes due to take place in its target market.
The most beneficial aspect of the ecommerce website for HMV is that it provides the company with exposure to a wider market and allows the company to increase its revenue. Moreover the company can also provide its customers with a value added services like special promotion discounts and free preview of the media that is available online etc. The company can also decrease the intermediaries present in the other wise physical market between the business and the customers, resulting in direct interactions with the customers. Aside from this the societies and marketplaces the likes of MySpace and Facebook can also be used to target specific niche target markets.
In 2007 the HMV Company planned for integrating its retail stores with its ecommerce website. These stores are due to be launched in 2008 and “will feature social hubs that offer free computer access, digital kiosks that allow customers to download content, and access to HMV's online store. Additionally, in-store concessions from 3, a mobile phone company, as well as a technology section selling digital radios, portable DVD players, and a games demo pad, will be offered.” (‘HMV to span generation gap with new-look stores’, 2007)
Limitations of Ecommerce for HMV
The limitations of ecommerce for HMV pertain to the following
- The ecommerce option lacks the element of touch and feel and the experience of the product and service
- The high cost of hiring technicians and ecommerce/ internet advertisers and experts
- The increased risk to the site form hackers and malicious third parties
- The restriction imposed by government to adhere to the rules and regulations for ecommerce operations.
- The lack of privacy on the internet.
“The greatest limitation of ecommerce is the lack of touch and feel online. People can not physically inspect products. The Internet is cold, faceless, and impersonal. The lack of human interaction subtracts the emotional elements in the sale. It is impossible to interactively persuade or overcome objections. A website must communicate those emotions that empower people to buy. It must also direct visitors to take action because the Web is more a direct marketing process than it is a medium. All boils down to words. They must appeal to specific buyer motives, impel and compel action, make websites (and their offers) truly irresistible.” (Fortin, ‘So What's in it For Me?’)
Some managers regard ecommerce is a fad and not a permanent thing. However this is in fact not true as ecommerce is definitely a viable and permanent alternative of retailing. As a result HMV’s investment in its ecommerce website is worthwhile and beneficial in the long run, especially as its competitors and taking over its markets share by offering their services through ecommerce websites.
Future Trends in Ecommerce
The HMV group has been able to increase its revenue and sales in 2007 by launching a revamped ecommerce site for its online operation. As a result the company received a 200 percent increase from growth in sales form ecommerce sites for HMV as well as Waterstone’s. However for the music website the HMV Company still faced the same problem. “The fundamental problem remains - the method of delivering recorded music is changing and the same will soon be true for DVDs and perhaps books as well.” (Hall, ‘Reducing the Impact of E-Commerce’)
The traffic online in terms of ecommerce and trading websites is growing at an exponential rate as most business want to take advantage of the benefits that ecommerce has too offer. As a result there is increasing competition for standalone ecommerce sites. “The booming e-commerce activities in Great Britain have prompted retailers to boost their online presence or enter the market. According to latest statistics, online sales worth £3.47 billion were posted for April 2007, a 55% growth in the Interactive Media in Retail Group index. However, in the rush to get online, retailers often forget about merchandising their online store and the fact that the journey a prospect takes via a website is as significant as the journey that got them there. When planning a site, it is important to ensure that the consumer can easily navigate their way from the product to the checkout, explains Solomon Degia, ecommerce manager at HMV. Another important factor in ecommerce is access in online retail.” (Brooks, 2007) Therefore in order to differentiate and offer better quality of value added services the companies are forming integrative and association based ecommerce sites. These ecommerce sites have live feeds in communities and forums like MySpace, Facebook as well as in blogs. IN the future due to this integrative technology the customers in the communities will be able to share and ‘gift’ music to each other which will be hosted and provided by the music vendors. Virgin has already taken the initiative in this market and HMV would be proactive to do the same.
Keys to Success in On-line World
The key success factors that are important to mark the success of a website in the online world pertain to developing a creative and innovative website for ecommerce which is customized for the customers and is updated at regular intervals. Moreover as the internet medium is not very secure form malicious third parties, there also needs to be infrastructure and firewalls set up to protect the ecommerce website as well as the customer data collected from malicious tampering. Additionally the business needs to increase the promotion through online as well as traditional marketing medium to boost the exposure of the ecommerce website and build traffic. Specific website promotion tools and strategies can be employed. Moreover the business also needs to evaluate the traffic at the site and store customer information in a CRM for research purposes. This will enable the company to be proactive as well as provide the customers with what they want in an efficient manner.
Conclusion and Recommendations
Conclusively, it has been determines that the HMV company has to change its ecommerce website, making it more customized for its customers as well as streamline its technical problems pertaining to unloadable pages, corrupted inks and other website repairs. The company also needs to provide the customers with downloadable music and media tracks which can be loaded onto independent portable media players
The company also needs to change its image as per its current ecommerce website. This is because while the content on the website is aimed at a wider audience with an age range of 18 to 45, the aesthetics and the outlook of the site is more appropriate to the younger generation of 18-25 year olds. As the 18 to 24 aged market downloads 84 percent of the online music, the 60 plus downloading only 7 percent, the needs to increase its younger segment of the market, while aiming for an increase in all segments as well. For this the company can provide a specific/ customized portal for the young generation/ customers while a generic portal can be used for the rest of the segments targeted by the company.
Additionally the company can also form collaborative agreements for business with Microsoft MySpace and Facebook to promote its services and offer its products to the customers through the platform of market place in these communities.
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