independent

Sunday 20 April 2014

HMV share plunge highlights clout of online stores

THE problems in the entertainment sector were highlighted by HMV. Shares in the company yesterday plunged more than 40pc after the retailer said it will probably breach debt covenants next year amid continued losses and lower-than-expected Christmas sales.

HMV is not alone. Its woes reflect a wider malaise in the music and computer games sector, where retailers have been decimated by online shopping.

Last week there was Cyber Monday. For a big chunk of the population that will mean absolutely nothing.

But according to the UK-based Centre for Retail Research, the first Monday in December saw Irish people splash out €5m online as they ratcheted up their spending in advance of Christmas.

But a report undertaken recently by Irish consultancy group Amarach for communications firm UPC, showed that people here will spend an estimated €3.7bn online in 2012, and 59pc of all Irish adults are now shopping online – up from 15pc in 2007.

What's more, portable internet-ready devices, such as smartphones and tablets, are making it increasingly convenient to shop from anywhere and to compare prices on the high street.

Internet

The internet has and is radically altering the retail landscape. Most consumers now slot naturally into the demographic that is most likely to be an early adopter of new technology and new trends – in other words, keen to buy online.

Also, the types of products HMV and similar retailers sell – albums, movies, games and even gadgets – are just the types of items that consumers don't feel they need to see first-hand before they buy.

Apple's iTunes music service obliterated the status quo for chains, such as HMV and Game Group. And while HMV has focused on selling more gadgets in an effort to attract consumers, it's easy to wonder whether the strategy will have any medium or long-term efficacy.

But it's not just electronics, music, DVDs, books, flights or even hotel stays that people are buying online.

A study by PricewaterhouseCoopers that examined online shopping trends from the US to the UK, France and further afield, found that over 90pc of global online shoppers also bought clothing and footwear online.

But even other categories – such as jewellery, sports equipment and outdoor goods – attracted over 60pc of online shoppers.

But bricks-and-mortar stores won't be just written off.

Toys 'R Us chairman Jerry Stoch predicted recently that physical outlets have a strong future.

"In fact, it's the stores that are going to win in the end because of the physicality," he said, adding that outlets are becoming "mini-distribution centres" that work in tandem with internet sales channels.

However, the UPC report shows that while just 5pc of Ireland's total retail sales this year will be made online, that figure is likely to rise to 7pc, or €5.7bn, of the total retail spend in Ireland by 2016.

It's a number that's going nowhere but up.

For traditional retailers, that means more challenges.

Irish Independent

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