HMV bets on streaming, loyalty and merch

The retailer's president and CEO Nick Williams discusses its plans to fight back in the face of digital adversity.
HMV collectibles

Nick Williams believes he’s unlocked the right strategy for HMV in the digital age.

The president and CEO is in charge of a music-and-movies retailer under pressure from digital alternatives and big-box stores, which contributed to HMV Canada’s former U.K.-based parent company filing for bankruptcy protection in January.

But in Canada, HMV is not just standing its ground in the face of adversity; it’s attempting to fight fire with fire. Williams says the company is ready to make its big push into the digital music arena this month, when it will launch an advertising campaign for The Vault, its paid-subscriber streaming service. The service, which gives users access to a database with millions of songs that they can also download, for an additional fee, has been available in beta mode since December. It will re-launch on April 19 to coincide with the Juno awards, which HMV sponsors. It will also be promoted by an in-store and online campaign, with customers able to, for the first time, purchase subscriptions at one of the company’s 112 stores.

“It’s a fairly hefty campaign that will allow us to start really driving it,” Williams says. He wouldn’t divulge how many subscribers The Vault currently has, but says he aims to have more than 300,000 users in three years.

In addition to rolling out The Vault, HMV has a number of other initiatives meant to attract its wide target market of 18- to -45-year-olds. It wants to grow its Pure loyalty program – which lets members use points to enter competitions to win trips to concerts, or to spend them on signed merchandise or other exclusive items – to between three and five million users in three years from 1.3 million today.

Vinyl is also making something of a comeback in HMV stores. After a successful pilot, the company is expanding the offering to 40 stores, though vinyl records make up only 1% or 2% of the retail mix, at most.

In the meantime, Williams insists CDs, DVDs and Blu-ray aren’t going away in Canada. He says at HMV Canada – sold by the U.K.-based HMV Group in 2011 for $3.2 million to restructuring firm Hilco – DVDs account for more than 50% of the company’s sales, while music makes up 35%. The rest is made up of a mix of gifts, collectibles, t-shirts and technology items. With physical CD and DVD sales slowly declining in Canada, HMV plans to grow the merchandise stream to represent 20% to 25% of its mix.

Some of those merch items are hot sellers. Williams says HMV sold nearly 71,000 items related to boy band One Direction over the holidays, while enjoying its best holiday sales period in five years (reported as $65.4 million). He says HMV exceeded its sales forecast for the first quarter of 2013, with January seeing year-over-year double-digit growth.

The company also opened six pop-up stores over the holidays last year, one of which was made permanent in Quebec. Williams says HMV will look at 12 to 15 more locations to trial this year.

The Vault, meanwhile – at a cost of $4.99 per month to use on a computer or $9.99 to also use on a mobile device – enters a crowded market, with Rdio and Slacker Radio offering similar services at a similar price. But Williams says that HMV has an edge because of the brand’s physical locations where people can have questions answered one-on-one.

“The unique opportunity we have is we can talk to people about it with confidence and tell them what it is,” Williams says. “That’s the big difference, I think, between a retail model and a purely online model.”