When the boss of a retail chain responsible for 20 per cent of an entire sector's sales resigns and cites the web as a major factor in its declining fortunes, you know the company's new e-commerce director has an important job to do.
It is the challenge facing Gideon Lask, once a key player at collective buying dotcom business Letsbuyit, and now the man charged with turning HMV, the country's biggest high-street music retailer, into an online success story.
Last year, HMV chief executive Alan Giles brought forward his retirement to coincide with annual results that showed a 6.1 per cent drop in sales at its UK stores. Giles blamed an economic slowdown, supermarkets, piracy and internet sales for the slump, all of which he said contributed to a 10 per cent drop in the market.
At the time, critics were less than sympathetic. They pointed to growth at Virgin Megastores and online rival Play.com as evidence that HMV had simply adapted poorly, particularly to the rise of the internet.
Now under a new group chief executive, Simon Fox, who arrived from electricals retailer Comet in July, HMV is preparing for renewal, a large part of which will be a fresh digital strategy under the new e-commerce director, a UK board-level role. Lask, who begins his new job the day after we meet, can do little about the economy, Tesco or online piracy. But, when it comes to online sales, and with Fox's backing, he is convinced that a new era for the business is beginning.
In the HMV boardroom, at one end of which hangs one of the few copies of the original 'His Master's Voice' oil painting, he is also aware he needs to be diplomatic about HMV's past online performance. "Alan had done a phenomenal job in bringing us to where we are today," he begins. "But I think bringing someone like Simon in to take us through the next phase is great. Simon has done some really good things at Comet, looking especially at its e-commerce play. He has brought a new kind of energy and zeal to the group and is deeply passionate about e-commerce, which is fantastic for me."
Having started at HMV in 2004, Lask has witnessed - and taken a lead role in - the company's online upheaval. And, having seen the lack of attention paid to digital channels back then, he is happy to not be taking on the new challenge against a backdrop of only bad news. Today, he can point to a 300 per cent increase in online sales compared with last year, and a digital sales team that has increased from 12 in 2004 to 150 when you include fulfilment staff. He can also highlight a major advertising campaign in September that promoted the company's online store HMV.co.uk, which has just been relaunched for Christmas, as well as a revamped HMV Digital, the digital music download service first unveiled in 2005.
These are major steps forward from when he first became head of internet at the company in the summer of 2005, responsible for all online sales.
Lask says: "One of the very first things I did when I took over (as head of internet) was commission some research; some usability studies to look at people using the site and see what they thought. Two things were very clear, and not a huge surprise to us. A, they didn't know that HMV had a web site and, B, when people got there, they didn't like what they found. We were charging for delivery, which is a big no-no, our prices weren't very competitive, and it didn't represent the kind of theatre that you get in our stores - that passion and dynamism that is so evident in our staff. None of that came across in our web site."
The latest version of the site builds on a six-month redesign project by agency Code Computer Love that was relaunched in March 2006. HMV also launched a major ad campaign to build awareness of the site in October 2005 to announce that postage and packaging would - from then on - be free. Also, the site was boosted with a major inventory hike to make more than 500,000 products available. As a result, Lask says that, within a year, sales through the main site have increased to about 10 per cent of HMV UK's £1 billion-plus total annual revenues from "a tiny fraction".
But, this is nothing compared with the ambitious targets he has set. Lask wants to double HMV.co.uk's share of the total online entertainment market to 30 per cent within 18 months. To achieve this, he has the daunting task of overtaking rivals such as Amazon and Play.com, which dominate both in terms of online brand awareness and customer experience. He says: "I'd love to be sitting here in 18 months' time and be bigger than both of them."
But, while HMV's high-street strength might bring brand presence and retail experience, Lask admits it has some way to go to be thought of as a multi-channel brand.
"I think it's fair to say that if you were to stop an average customer in the street and asked them about HMV, they'd talk about our stores," he comments. "More and more, they're talking about our internet site and our digital play, but, in a year's time I want them to talk about all three in the same breath."
That could mean a cut in the number of HMV high-street outlets. Electricals giant DSG announced earlier this year that it would axe the Dixons brand from its shops and relaunch it as an online-only operation (cover feature, Revolution, June 2006). Stores are a heavy cost base to bear and, as customers move online, many major retail brands, including banks, are reducing their presence. The same approach looks likely for HMV.
However, Lask insists that a complete withdrawal from the high street is out of the question. "HMV will always have stores, but what we sell and how we sell will change. What is without doubt is that we will be investing very heavily in our online presence. Online is a long-term play and a very strategically important one, but I don't think anyone could, or should, write off our store base. What will be interesting is how our internet play, which has been a hothouse to date, leverages our store experience and how we can strengthen our stores by using what the internet is all about too."
One example of this integration is already on trial. A new service, HMV Delivers, aims to offer an experience something akin to its London Oxford Street flagship store to all. Launched last month, it allows customers of any store to order any product from HMV's entire inventory, either through a counter service, or through in-store kiosks, 15 of which are being trialled in selected shops this month.
"The reality is, if you're in Llanelli or Inverness, you can't get a 50,000 sq ft shop, you have to have a 5,000 sq ft shop," says Lask. "So how do we present that feeling of authority and range and depth of choice without that space? With HMV Delivers, we bring the entire HMV store catalogue to all of our stores."
But the sale of physical product such as CDs, games and DVDs is not the only challenge facing retailers like HMV, particularly in its core business of music. Digital formats, such as MP3, are increasingly popular and likely - as Lask admits - to supersede CDs in the long-run.
Jupiter Research predicted in March that, by 2011, digital music would account for 16 per cent of total recorded music revenue. In 2005, it already represented 2.2 per cent of European music revenues, while record label EMI said that digital revenues represented nine per cent of music sales in the first half of 2006.
Lask says: "I think there will be a point definitely where digital product does replace physical product."
So, how can HMV - a traditional retailer built on the concept of a physical sale - adapt to this new age of non-physical business? Lask thinks it needs to establish the same connection with new music fans that it did with previous generations. "If we look back to our first experience with music - going into a record store and buying your first single with mum or dad (Lask's first purchase was Adam and the Ants' Prince Charming) - that's a really defining moment. Kids today have that defining moment via a mobile phone or downloading it via a computer.
"We need to connect with these customers in the same way that we connected with ourselves when we were young, and HMV has a huge opportunity to do that - that's what we do best, that's what HMV is all about. It's about helping customers find the entertainment product that they want. I think we do that incredibly well with the physical product and I want us to do it just as well with the digital product."
The first step was the launch of a digital download service - HMV Digital - in March 2005. A new version - one that doesn't require users to download any software to their computers - was launched last month. But, Lask's vision - and one that would make more sense to consumers - is a site that enables fans to buy content in whatever format they choose. Lask hopes to have this 'one-stop-shop', where CDs, digital downloads or mobile ring tones come from one place, up and running some point in the first quarter of next year.
To deliver that, he is likely to restructure his team which, previously, had a head of internet (Lask), responsible for e-commerce sales, and a head of digital (Mark Bennett, who left the company recently), responsible for the download service. It will also take a huge effort in web design, inventory management and cross-company thinking to get going. Lask is, once again, both optimistic and determined.
"Very high on my agenda is bringing (HMV Digital and HMV.co.uk) together. I'm a great believer in offering one face of HMV to the customer across multiple channels and that includes having our digital offering all in one place. We're now in a good position where our IT team is strong, is resourced, is experienced and the market is also right for it to have an integrated proposition."
In the meantime, he can also call on experience from elsewhere in the HMV group. In Japan, for example, HMV is the dominant online entertainment retailer, "the Amazon of Japan" as Lask puts it. Book retailer Waterstone's is also part of HMV, and a new site was launched to its customers last month.
Still, analysts and commentators will rightly focus most on the UK operation and, following the previous chief executive's parting shot, on how it goes about delivering a better response to the digital challenge. So, the new e-commerce director has a major role to play in HMV's future success and, given the new CEO has a good track record in online retail strategies, will do well to avoid the sharp end of his own master's voice.
HMV: A BRIEF HISTORY
July 1921: British composer Sir Edward Elgar opens the first HMV store at 363 Oxford Street, London, which aims to cater for the emerging demand for recorded music.
May 1962: HMV technician Jim Foy hears Beatles manager Brian Epstein making demo tapes featuring the band in the Oxford Street store studio and recommends them to record producer George Martin.
October 1998: Expansion of the HMV chain culminates in the opening of a new, 50,000 sq ft flagship store at 150 Oxford Street - at the time, the world's largest record shop.
1997: HMV launches its first web site, www.hmv.co.uk, selling through the site for the first time in 1999.
March 2005: HMV Digital, an MP3 download service launches. It is revamped as a web-based service in October 2006.
CV: GIDEON LASK
1998: Management consultant for Ernst & Young working on e-commerce projects for financial services companies.
2000: Joins collective buying web site Letsbuyit.com in charge of UK business development.
2003: Leads management buyout of Letsbuyit.com.
July 2004: Joins HMV as head of marketing promotions with responsibility for e-commerce.
June 2005: Appointed head of internet responsible for HMV's UK e-commerce sales.
November 2006: Named e-commerce director, in charge of all digital and web site operations.