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Kelvin Wu speaks during an executive interview at the second SCMP Game Changers event in Hong Kong. Photo: Wallace Chan

Kelvin Wu defends HMV's position in Hong Kong amid continued challenge from iTunes, Spotify

While many may see music and video stores as a dying business, AID Partners' Kelvin Wu thinks different. The owner of the Hong Kong and Singapore outlets of the iconic British retail chain HMV argued this week that there is still room for an in-store customer experience.

Speaking at the second South China Morning Post Game Changers forum on Thursday, Wu was bullish about the chain's new online-to-offline (O2O) strategy, which he said would help bring customers back to HMV's brick-and-mortar outlets and away from digital only e-commerce solutions such as iTunes or Spotify.

Moving into O2O "is going to be a very cool thing for HMV," Wu said.

Founded in London in 1921 as a shop selling gramaphones, HMV became a leading music and video retailer but suffered greatly in the last decade as digital media replaced CDs and DVDs for most customers. The firm entered administration in January 2013, and AID Partners bought its Hong Kong and Singapore business a month later.

Speaking at the time of the purchase, Wu said that he envisioned HMV becoming more than just a music store by expanding into lifestyle products that can appeal to the younger generation.

"We want to do something more innovative. Otherwise, everybody knows the music retail business alone is tough. It's even tougher than making movies these days," he told the Post.

The firm has expanded into in-store events and concerts, and begun selling premium vinyl records for music aficionados. On the digital side, HMV has partnered with Tencent, one of mainland China's largest internet companies, on its Joox music streaming service. Hong Kong customers can get a free month's subscription to Joox if they make a certain amount of purchases at an HMV store.

Beyond entertainment, HMV is also diversifying its approach to its brick-and-mortar outlets, with the mobile-friendly concept HMV Ideal store and HMV Kafé, a partnership with local food and beverage brand Coffee Academics to offer music-themed coffees and snacks to shoppers.

The revenue of AID, HMV’s holding company, rose to HK$56.1 million in 2014, according to the firm's most recent annual report. 

“The increase in revenue was mainly due to the sales of goods and food and beverages from HMV Ideal Group”, the report said.

HMV is also in the process of finalising its new flagship store in Causeway Bay, bringing the total number of outlets in the city to nine.

Moving away from its core business of CDs and DVDs is a natural step for HMV, as sales of physical media have plunged in recent years. According to the latest figures from the International Federation of the Phonographic Industry, digital sales surpassed physical for the first time in 2014, as sales of CDs and other physical media fell to US$6.8 billion worldwide, down from more than US$11 billion in 2009.

DVDs have been similarly hit, with sales of DVDs and Blu-ray discs in 2014 falling to US$6.93 billion, a 10.9 per cent drop on the year before, according to a report by the Digital Entertainment Group.

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