HMV: excited at the possibilities

Retailer of Distinction: HMV CanadaReason: Merchandising'We don't have a formal merchandising plan,' says Paul Alofs, president of music retailer HMV Canada.'We have a guiding philosophy, and that is, first of all, to bring excitement and entertainment to the store,' Alofs says.At...

Retailer of Distinction: HMV Canada

Reason: Merchandising

‘We don’t have a formal merchandising plan,’ says Paul Alofs, president of music retailer HMV Canada.

‘We have a guiding philosophy, and that is, first of all, to bring excitement and entertainment to the store,’ Alofs says.

At the company’s flagship store in Toronto, a 36-screen videowall plays the latest music videos. Listening posts are located throughout the store, allowing customers to try before they buy, and an in-store stage plays host to live bands.

‘Building a display is about 1% of the overall merchandising of the store,’ Alofs says.

He says the company believes the oft-repeated maxim that two out of three buying decisions are made in-store, and, therefore, spends much more money close to the point-of-sale than on mass media advertising.

‘If we can get people comfortable, if we do a good job in terms of arranging and selection, they’re going to buy,’ Alofs says.

Q. In what order of importance do you place the following categories: merchandising, trade and supplier relations, product innovation, customer service, advertising, database marketing and staff relations?

A. Staff relations, customer service, trade and supplier relations, merchandising, product innovation, advertising and database marketing.

I say this because, only by looking after your staff can you truly look after your customers. Retailers in Canada, on the whole, don’t look after their staff. They treat their staff like they are the least important part of the business, like they are going to rip them off at every turn.

The kind of crummy customer service you see everywhere is nothing but the result of senior management’s attitude.

Our philosophy is decentralization and empowerment Finding, hiring, training and continuing to look after the people on the retail floor is the most important part of our agenda.

We spend a lot of time on our staff. Our senior management spend a huge proportion of their time in the stores with staff at all levels, reinforcing our philosophy, our core values. We believe you have to trust people. That listening to your staff and your customers is the key to success.

Q. From where do you get your inspiration?

A. We get it from the newest part-timer we hired in Red Deer, Alberta. He had a burning desire and love of music. We get it from our staff. We get it from our chairman [Stuart McAllister], a former Outward Bound instructor who holds a doctorate in psychology and is a former rock and roll singer.

‘To seek, to serve, to strive and not to yield’ is the motto of Outward Bound, and that’s something that inspires us. And the fact that the old boys’ network in music retailing has taken so many shots at us. That gets us all fired up and excited and energized and inspires us to be better than our competition.

Q. What have been the most startling changes in retail over the past couple of years?

A. That people have not seen the startling changes in the consumer, the new consumer of the ’90s. The consumer who believes that less is more, as opposed to the ’80s, when more was more. Where value is the catchword, but defining value is more than just price.

Q. What trends can you see on the horizon that will most affect your business?

A. I see new international competitors coming to Canada – Tower Records of the u.s. or Virgin Records from Europe. I see substantial rationalization as the number three, four and five retailers in many categories disappear. I see substantial growth of retailers who are not located in major regional shopping malls. I see the continual decline of regional shopping centres.

Our site location strategy is to look outside regional malls. I’ve taken store managers to the best Tower stores in the u.s. and Virgin stores in Europe. We’re building a business to compete with the best in the world, not the guy around the corner.

The rather insipid competition we currently face is not going to be anything against the aggressive international competition we’re going to see in the next five years.

Q. How do you stay on top of your concept?

A. It’s more than just using research and having vision. I think senior management has to live out there with the consumer of tomorrow. You have to be so far in front of where the consumer is, by the time they have become the consumer of tomorrow, you’re already there. Our program today is based on research of what our core customers are going to want five years or 10 years out.

Our product is non-differentiated from our competitors. You can buy a Madonna album anywhere, so why are we generating such loyalty? That’s the question we have to ask, so we can continue to expand our base of loyal customers.

Q. Tell us how the recession has affected your business.

A. It’s been great because people are staying at home more. We sell small, self-indulgent products or gifts. We sell things that are lasting.

We’ve made tremendous gains during the recession – we’ve been able to sign property deals during the recession and leverage that to the maximum. We hit the market at full sprint.

I’m a runner, and I have always believed that the best place to pass someone is on a hill, because they stay passed. There’s a certain building of your own self-confidence and it’s very de-motivating for the person you have passed.

We’ve doubled our sales in the last 18 months. By the end of the fiscal year, we’ll be in excess of $120 million in sales.

I feel sorry for people who are looking for the end of the recession to see an upturn in their business. These are the ‘good old days.’ Things are not going to get better if you’re not doing well now.