Not So "Zavvi"

As I may have referenced before, when it comes to personal tastes in music shopping I’ve always been an HMV man. I think every music buyer over the last ten years has been one or the other and for me the Virgin Megastore was the place you went when the shop with the dog didn’t have the particular piece of catalogue merchandise you were after, or if they appeared to have particularly tantalising offers on sale that meant you couldn’t really resist looking inside.

Certainly I never warmed to the layout of any local Virgin store, struggling to find things, always suspicious of the way the product on the shelves appeared to be slightly grubbier than I was accustomed to and oh yes, there was the annoying chumminess that infects just about everything carrying the Virgin brand, the one that means their corporate communications adopt a “we think this is better for you, that’s why we do it” tone that is presumably meant to be an attempt to operate on the same level as the public but which actually just comes across as patronising and annoying.

Having said that, on one of my infrequent trips to London before I moved here, the showpiece Virgin Megastore at the eastern end of Oxford Street was a more or less compulsory destination. More so than any regional branch, it deserved the name “megastore” – the concept of a music shop being spread across four whole levels being something rather marvellous to those of us from the provinces. Plus of course it was the master home of VMR – the networked Virgin Megastores Radio that was heard in every store across the UK and which always seemed to be such a glamorous way to ply ones trade (even if it actually was just a pokey cupboard next to the stockrooms).

Hence when the news broke a few days ago that the efforts to save what was left of the Zavvi chain had failed and that what was once the flagship Oxford Street store was to close, it seemed almost compulsory to go and pay tribute to its location. I went for a shop in there just after Christmas, taking advantage of the frantic discounting going on to snap up a whole collection of CDs, DVDs and DS Lite games but the whole place had such an air of shabbiness and desperation about it that it almost felt like picking over the bones of a corpse.

Wandering past the now closed doors of the store, it became apparent that I wasn’t the only one who couldn’t resist one last peek. Passers by would stop to peer mournfully at the shutters, peek through the slats and shake their head at the rows of empty shelves, the last of the stock being packed away by boiler suited workmen wheeling trolleys back and forth. If this was the reaction its demise engendered in a bunch of random consumers such as ourselves, one can only wonder just what the final day of trading meant to the remaining staff who had served me only a few weeks before.

The saddest thing is that it didn’t actually have to be this way, the demise of Zavvi almost totally precipitated by the managerial incompetence of a completely different company.

Entertainment UK (EUK) was, by common agreement, the only part of the Woolworths group that made any money. Whilst the stores (for reasons we’ve discussed in the past) were by and large utter basket cases, the entertainment distribution company that it owned was a vast and thriving business, dominating the market of music and video purchasing and with contracts that stretched far and wide across the whole retailing sector. Friends of mine who worked there told me that when news of the companies financial woes broke they were not too concerned. EUK was the one part of the group that could be flogged off quickly as a going concern and life would carry on as normal.

Then the Administrators discovered that the strength of EUK was ultimately its weakness. Searching for ways to keep their ailing empire going, the management of Woolworths Group plc had mortgaged EUK against the vast debts they had accrued trying to prop the company up. Those debts were explicitly tied to the distribution business and any potential purchaser instead of inheriting a thriving going concern would actually have had to taken on most of the debt that had brought the parent company down. Needless to say that was never going to happen, and to protect what little assets it still had, EUK was shut down with alarming rapidity.

Doing so was like meddling with the base of a house of cards. So ingrained into the entertainment industry was the company that it left virtually everyone, from major chains through supermarkets to small labels scrambling for an alternative means to get product through the system. First to fall were legendary indie distributors Pinnacle who relied upon the rather larger resources of EUK to help get their clients product into stores. When EUK went under they were left being owed large amounts of money for already supplied stock, plus next to no way of pushing any new product into the stores to cover any shortfall. To the wall they duly went. A friend who worked for EUK confided in me just before Christmas: “If Zavvi survive this, I’ll be shocked”.

The reason? Well the Zavvi brand as I’m sure most people know, was created after the Virgin Group divested themselves of their retail stores and handed them over to a management buyout, the executives in question having to forego the use of the name, in the same way that the new owners of Virgin Radio lost the rights to the brand shortly afterwards. Now whilst major labels were more than happy to advance stock on a sale or return basis to shops backed by the might of the Virgin empire, they were more than a little cautious about agreeing to the same terms to a new startup that had the millstone of the venture capital they had used to make the deal happen hanging over them. The only way Zavvi could function was to embark on what the trade papers dubbed “extreme outsourcing”, handing control virtually everything to EUK, be it the task of procuring and delivering stock to the stores right the way through to head office functions. Zavvi management concentrated on running the shops themselves, the business side of things was all taken care of by third parties.

A friend of mine explained to me that this at first was actually to their benefit. EUK could use its market share to negotiate industry-leading discounts on new issue and promotional product. Despite its limited market share, Zavvi enjoyed the same purchasing benefits as the major supermarket chains and it meant they could retail on a far more competitive basis than would otherwise have been the case.
Ultimately though this was to be their Achilles’ Heel. It meant that Zavvi had next to no dealings with the manufacturers of the product they sold. Everything they did went through their suppliers. When the suppliers vanished almost overnight they were teetering on the edge of a disaster. Whilst they could try to negotiate new supply deals, they were inevitably going to be on much poorer terms – all this during a huge economic downturn. Frankly if they had survived any longer than they did it would have been a small miracle.

As we have seen over the last couple of months, one by one the stores either closed or were snapped up by HMV who are increasingly turning themselves into a CD selling monopoly. Reliable rumours suggest that part of the problem was that despite the sale of the Virgin Megastores chain, the management of Zavvi were being assisted by secret loans from the Virgin group, Richard Branson sentimentalist that he is, wanting to help out his former employees and ensure that the stores carried on, even if his company were no longer directly involved. Any buyer of the chain would not have that safety net and it quickly turned out that without it most of the stores were unviable and had to close, the ultimate result being not only the demise of the Oxford Street location, but also the iconic Picadilly store that was once Tower Records.

Incidentally, the old Tower Records store was apparently something of a millstone around the next of Virgin/Zavvi. When the Americans packed up and went home, the Virgin Megastore enthusiastically took over the lease, despite the fact that there were still several years to run on their lease on the existing store in the Lilywhites building over the road. For the sake of selling music out of one location, the company ended up paying for two prime pieces of West End real estate just a few hundred yards from each other. Utter madness.

So if EUK had survived, would Zavvi still be with us? Who can say for sure, maybe some other disaster would have befallen them, or the rapidly changing conditions for music retailing would have necessitated an inevitably consolidation of the market. Even as a lifelong HMV man I have cause to regret the fact that suddenly the high street competition for my music purchases has shrunk away to almost nothing. As passers by and confused tourists walked past the shuttered doors of Zavvi Oxford Street, a bag lady sat in the doorway and rattled a tin of coins asking if we would buy her a cup of tea. It was almost too appropriate.

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