HMV into admin tomorrow. Who next?

[GingerBeerMan]

Fair enough, but they don't always make a profit and if they do, it is not much based on their turnover. Amazon UK - 74m profit based on sales of 3.35bn in 2011. Amazon US $274m loss on turnover of $13.18bn in Q3 2012.

What the hell are they spending money on? The whole point of internet business is they have very low overheads, 74m profit on 3.35bn revenue is awful, and maybe a good example of a company that would go bust when more efficient companies come into the market. All I know is that the futures very bright for consumers, prices are only going to fall for us.

 

[KZNSeagull]

What the hell are they spending money on? The whole point of internet business is they have very low overheads, 74m profit on 3.35bn revenue is awful, and maybe a good example of a company that would go bust when more efficient companies come into the market. All I know is that the futures very bright for consumers, prices are only going to fall for us.

Yup. I don't get it at all. All I can think is that they want to get rid of the competition and then screw the consumer at a later date to turn their market dominance into hard cash.

That is a vast amount of money effectively being taken out of circulation. Suppliers get screwed, shops cannot compete. Either their business model is global domination, or I am missing something, but I do not have the intelligence or information to work out where they are going with this, or what can be done to combat it!! I dunno

 

[sten_super]

Amazon do not make a profit, so why will they open loads of collect branches?

Cannot see collect points myself. People like the convenience of having stuff delivered - hence one reason why High Streets are dying. They are too busy/lazy to go shopping, apparently, hence the rise of Supermarket home deliveries etc.

They already have a load of collect branches, called 'Amazon Lockers'. They are basically shops (typically the small supermarkets and convenience stores) that presumably reserve a certain amount of their storage space to receive Amazon goods. I suppose it's aimed at those that cannot receive packages during the week. I'd be very surprised to see dedicated Amazon collection points on the High Street, certainly outside of major city centres I can't see it being worthwhile - even then they wouldn't stock anything, but would simply be a central point for ordered items to be delivered to (by specially arranged delivery rather than Royal Mail, I assume).

There's a bit on 5 live at the moment with some dinlow that bought HMV vouchers for Christmas. Given the trouble all elements of the high street are in, who in their right mind bought vouchers for Christmas this year? Idiots.

This was my first thought - given the coverage of vouchers in other shops that have closed down (Comet, etc.) people really should have realised. I've never seen the point in vouchers rather than cash as a present anyway...

Secondly, one of the experts on the BBC News website has written a piece trying to explain that historical recessions teach us that before the marketplace can fully recover, all of the slack needs to be removed - i.e. the weaker businesses need to fall so that stronger businesses may emerge in their place.

It also seems that some of the HMV business will survive. This is because some, not all, of the stores were profitable. In addition to this, there is a lot of people in the music and film industries that believe stores such as HMV are important for their own industries to survive (people don't browse amazon, they simply search for what they want to buy, and purchase it). Therefore there may be some short term support from the film and music industries to entice a buyer for the successful HMV stores.

The theory was put forward by Robert Peston, and I'm not sure it stacks up. It's one way of explaining the 'productivity puzzle', and has been jumped on by journalists, but looking at the data it's difficult to see. It's also not really relevant in this case because they're not an inefficient business that's been usurped by a more efficient version (e.g. Comet losing out to PC World) but a change in consumer practices (away from the high street and into digital). This has bought to the fore the difference in tax structures between digital purchases (with sales tax paid at headquarters in low tax locations such as Luxembourg) and physical sales.

It may well be the case that the price that consumers are now paying for digital downloads would not be feasible if VAT was being paid at 20% (rather than 3% in Luxembourg), and that in fact HMV would be a credible business if all organisations were paying the same tax rate. It's rather surprising that the government haven't closed this massive loophole which has massively disadvantaged British businesses (and probably cost British jobs).

 

[Lady Whistledown]

Soon all High Streets will look like:

Costa -- Next -- Starbucks -- Topshop -- Nero -- Primark -- McDonalds -- H&M -- Tesco Express -- Hollister -- Sainsbury's Local

With the exception of Hollister, most of them already look like that, plus a few pop-up calendar stores around Christmas.

Hollister have a sufficiently pretentious branding strategy that means you'll never see them opening branches in towns like Crawley, for example.

 

[sten_super]

Yup. I don't get it at all. All I can think is that they want to get rid of the competition and then screw the consumer at a later date to turn their market dominance into hard cash.

That is a vast amount of money effectively being taken out of circulation. Suppliers get screwed, shops cannot compete. Either their business model is global domination, or I am missing something, but I do not have the intelligence or information to work out where they are going with this, or what can be done to combat it!! I dunno

Bezos (the Amazon CEO) is on-record saying that he believes that the online retail sector (both physical and digital) is still a massively developing market with a long way to go. His strategy is therefore to grab as much of the market as he can by pricing hardware at cost, making relatively low profits on a lot of the quickest-moving and most competitive markets such as digital downloads of music and investing profits into new business ventures and buying out existing businesses so that years down the line Amazon has a significant market share of what will inevitably be a huge market. I think it's a great strategy, even if some of their decisions to create their own ecosystem I find very frustrating. I'm sure that in time they will reposition themselves - the recent decision to only allow Lovefilm streaming on Kindle Fires (and not other Android tablet) is one example of the way they might move; I'm surprised they haven't yet done something similar with ebooks - I'm sure they will try once they are ubiquitous enough.

 

[HovaGirl]

Why do we need the High Street?

Because having to buy your books, records, DVDs, shoes, clothes, hair accessories, spectacles, undies, lingerie and all else in Tesco's is boring. It stops you shopping around for something nicer, in a better size, at a different price, in a different colour. Their CDs are limited, so you are not going to find that old Esther Ofarim record from 1973 in there, or that boxed set of Steptoe and Son (have they made one?). Books are cheap there, but you're not going to find, or be able to order, the 14-volume "The Oxford History of England" or anything other than best-sellers. If you go to the High Street, you might use the bus, which keeps the bus service going, and keeps the Greens happy. If you go to the High Street, you might use Costa Coffee, which keeps them happy and all their Polish waitresses in jobs. If you go to the High Street, you might meet your friends for a catchup, instead of studying their latest photos on Facebook, and they might use the bus and Costa Coffee as well. If we all sit on our bums and do our socialising and shopping online, there will be no need to leave the house. We'll all become socially isolated and our children, and their children will be even worse. Maybe, by the time our great-grandchildren are born, they will have bigger bums for cushioning while they sit all day, enormous mouse-clicking thumbs, and no legs, because they won't need them. They might even be able to order their made-to-measure baby online. (We lost the use of our appendixes through lack of use, so our species could easily lose other bits of our bodies which we don't use.)

 

[beorhthelm]

It may well be the case that the price that consumers are now paying for digital downloads would not be feasible if VAT was being paid at 20% (rather than 3% in Luxembourg), and that in fact HMV would be a credible business if all organisations were paying the same tax rate. It's rather surprising that the government haven't closed this massive loophole which has massively disadvantaged British businesses (and probably cost British jobs).

alot of what is sold through Amazon is in fact smaller independant across the country, they are often cheaper than Amazon themselves and certainly cover wider range of goods. so the VAT is still due. also the loophole has been closed, hence the closure of Play as a retailer, continuing only as a market place for thrid parties. and Amazon still employ thousands in the UK, only a basic HQ/account staff is Luxembourg.

 

[HovaGirl]

I hate it the way they are allowed to get away with this. It's like they are saying, 'We've got your money, we don't care if you have anything to show for it'.

I was given one for my birthday at the end of last month, was going to use it to get an xbox game when I got paid next week. f*** em now if that's their attitude.

Too late. They're already f***ed.

 

[HovaGirl]

What will these core high street and large shopping centres sell then? There is only so much coffee one person can drink. Job creation is a rather important role of the high street and it is the best way of keeping communities alive by circulating your hard-earned, locally. This should not be underestimated.

Absolutely, not forgetting the Saturday job which traditionally gave 16-year-olds their first taste of independence and sent them running round the record shops and boutiques. (Couldn't afford the coffee shops when there were so many other goodies to buy.)

 

[HovaGirl]

the shops will be those in demand. if thats coffee shops, clothes retailers and a branch of Amazon Collect, so be it. shops do not exist to create jobs, that is a nice secondary effect, and it doesnt matter much if its the current shops or new shops does it?

In a way, shops do exist to create jobs. The staff take their wages to the shops nearby, just as the staff from the shops nearby take their wages to all the other nearby shops. It's the knock-on effect and that is being killed by the internet.

 

[KZNSeagull]

Bezos (the Amazon CEO) is on-record saying that he believes that the online retail sector (both physical and digital) is still a massively developing market with a long way to go. His strategy is therefore to grab as much of the market as he can by pricing hardware at cost, making relatively low profits on a lot of the quickest-moving and most competitive markets such as digital downloads of music and investing profits into new business ventures and buying out existing businesses so that years down the line Amazon has a significant market share of what will inevitably be a huge market. I think it's a great strategy, even if some of their decisions to create their own ecosystem I find very frustrating. I'm sure that in time they will reposition themselves - the recent decision to only allow Lovefilm streaming on Kindle Fires (and not other Android tablet) is one example of the way they might move; I'm surprised they haven't yet done something similar with ebooks - I'm sure they will try once they are ubiquitous enough.

Thanks for that. Very interesting. Kindle format ebooks are only readable by Kindles, are they not, orr can other readers read Kindle now?

It's a great strategy for them, but not for everyone else. Consumers are gaining at the moment because they are getting great deals, but I know that some suppliers are getting screwed by them. I cannot see how this is healthy for the economy as a whole. If suppliers have to supply Amazon at not much more than cost, quality goes down or they give up completely. Eventually, consumers may have cheap products to buy, but they won't have the vast amount of choice they have at the moment.

 

[HovaGirl]

I wouldn't be quite so sure. Over the last 18 months BHS have desperately being trying to slash costs. This has included making redundant numerous staff including directors ( one of who is a friend ). They have a large footprint of expensive leases and no real brand identity any more. Rough times ahead for BHS IMHO.

I would say that bhs are sliding downhill. As you say, they don't really have a "brand", such as M&S Food or M&S lingerie. When the downstairs restaurant first opened more than 30 years ago, it was fantastic value for money and was always full. Now, it's just another coffee bar. They sell a few clothes, but are always in direct competition with M&S. Now, they sell a mish-mash of unrelated products, which gives no real purpose for going there.

 

[KZNSeagull]

In a way, shops do exist to create jobs. The staff take their wages to the shops nearby, just as the staff from the shops nearby take their wages to all the other nearby shops. It's the knock-on effect and that is being killed by the internet.

That's how I see it too. I cannot believe that what we have now is healthy economically.

 

[sten_super]

alot of what is sold through Amazon is in fact smaller independant across the country, they are often cheaper than Amazon themselves and certainly cover wider range of goods. so the VAT is still due. also the loophole has been closed, hence the closure of Play as a retailer, continuing only as a market place for thrid parties. and Amazon still employ thousands in the UK, only a basic HQ/account staff is Luxembourg.

My post was specifically in relation to digital downloads, rather than CDs/DVDs sold through Amazon. My understanding is that these are classed by the government as a 'service' rather than a 'good', which is why VAT is payable at HQ location (because there's no obvious UK infrastructure to deliver the 'service') not in the UK. I'm not convinced that these digital downloads create a huge number of jobs in the UK, certainly not relative to large chain stores such as HMV (which, ultimately, is who they are replacing). This is the future for published goods in this country, not online trade in hard copies (although that is another area in which small independent operators online-only may be able to undercut high street stores).

http://www.guardian.co.uk/business/2012/dec/03/vat-loophole-digital-sales-olympics This is from December - as far as I'm aware the situation has not changed since then.

 

[SurreySeagulls]

With the exception of Hollister, most of them already look like that, plus a few pop-up calendar stores around Christmas.

Hollister have a sufficiently pretentious branding strategy that means you'll never see them opening branches in towns like Crawley, for example.

You also can't see the bloody merchandise as the stores are so dimly lit!!!!!!

 

[HovaGirl]

The historical recession is true, but I don't think it works anymore when the main competition are huge internet based businesses selling in volume at low profit. I am not an expert, but I do not think that it is a coincidence that this massive high street recession has occurred in the internet age. What the answer is, I have no idea.

The final point is a very valid one - people browse in shops then order what they want on Amazon etc. Once the shops have gone, who fills that gap?

Amazon themselves could well open "samples" shops, with lists of all the CDs, DVDs, books, etc, that you could buy (a bit like Argos), and samples of domestic goods to browse at before ordering online, or inshop.

 

[HovaGirl]

Yup. I don't get it at all. All I can think is that they want to get rid of the competition and then screw the consumer at a later date to turn their market dominance into hard cash.

Yes, a futures market in asset-stripping. That's probably exactly what they'll do - sell up their business for hard cash when they dominate the consumer market.

 

[sten_super]

Thanks for that. Very interesting. Kindle format ebooks are only readable by Kindles, are they not, orr can other readers read Kindle now?

It's a great strategy for them, but not for everyone else. Consumers are gaining at the moment because they are getting great deals, but I know that some suppliers are getting screwed by them. I cannot see how this is healthy for the economy as a whole. If suppliers have to supply Amazon at not much more than cost, quality goes down or they give up completely. Eventually, consumers may have cheap products to buy, but they won't have the vast amount of choice they have at the moment.

Yes, kindle ebooks can only be read by Kindles, but you can also get Kindle apps for smart phones and tablets - I suspect they will let people build up their collections of kindle ebooks and then withdraw the apps for iOS and Android, in an effort to get people to buy a Kindle Fire (and once you have a Kindle Fire you will buy apps and other content, such as music and movies, through Amazon as well).

It depends on the market to an extent. Supermarkets have been pushing suppliers for a lot longer than Amazon has and yet there's still a decent amount of choice amongst things like food and alcohol (assuming you are willing to pay for niche or premium brands). Amazon's impact on the book market has been the complete opposite of what you outline - they've removed incentives for publishers and made it more straightforward for authors to publish their own books on the Amazon website (as long as you are happy for Amazon to take a significant cut of course!) - and consumers have been left with more choice and some difficulty sorting the wheat from the chaff.

In terms of technology, we aren't far away from being left with three ecosystems to choose from; soon enough every media device in your house (with the possible exception of PCs, which are likely to remain outside of the sphere of interest for these firms) could potentially be part of a joined up system provided by either Apple, Google or Amazon. For as long as there's a number of large players (and with different business models - certainly Apple when compared to the other two) then some degree of competition should remain.

 

[beorhthelm]

My post was specifically in relation to digital downloads, rather than CDs/DVDs sold through Amazon.

ah yes, that is different. im not sure Amazon currently make a great deal from their digital download, though obviously a growth area especially for the books. now you mention it, how different is this from Apple and itunes, do they pay VAT or employ anyone on the business unit in the UK. odd how they arent mentioned along side Amazon and Starbuck on this tax avoidance thing.

 

[driller]

thomas cook gets my vote - who buys holidays in a shop anymore?

closely followed by argos - cheap chav shop bound to fold