What's Behind the Surge in U.K. Brick-and-Mortar Stores Selling Music?

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HMV store. 

Music retail lives on, thanks in part to a significant rise in the number of general and non-traditional retailers — like supermarkets and Urban Outfitters.

The number of brick-and-mortar music retailers in the U.K. has reached an all-time high of close to 15,000, according to new figures from the Entertainment Retailers Association (ERA).

The upsurge in physical music retailers suggests that a once struggling sector is again thriving, although the full picture is not quite as black and white.

In 2009, there were around 4,600 music retailers in the U.K., including 273 specialist chains. Last year, that number had more than doubled to 14,727, up from 10,391 in 2014, yet the number of specialist chains had nearly halved to 154 -- the overwhelming majority of which are HMV stores. The remainder are budget retailer That’s Entertainment outlets.

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In their place, there has been a significant rise in the number of general and non-traditional store retailers adding a small range of chart or specialist music product. Notable examples include Argos, Boots, Primark and Urban Outfitters, who all sell a mix of CD and vinyl product and report sales to the Official Charts Company.

The number of supermarket chains selling music has also grown, climbing from around 2,300 in 2009 to 8,500 in 2015. There has also been a small rise in independent music retailers, no doubt fueled by the vinyl boom. In 2009, there were 299 indie outlets in the U.K. By last year, the number had risen to 340.

"Conventional wisdom has always suggested that the internet spelled the end for physical entertainment stores, but these numbers show that traditional retail still has a place, particularly for impulse purchases and gifts," commented ERA CEO Kim Bayley in a statement.

The increase comes despite surging growth in internet sales, with digital accounting for 72 percent of entertainment’s revenues (encompassing music, DVD and video games) in 2015 compared with 28 percent for brick and mortar stores.

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Nevertheless, the popularity of physical music product remains surprisingly resilient in the U.K. with the CD format accounting for 66 percent of all albums sold last year, according to labels trade body BPI. In real terms, that amounts to 53 million units, generating sales of £468 million ($687 million) -- a fall of 3.9 percent year-on-year, but still a far more robust performance than would have ever predicted as recently as 2013 when HMV -- the U.K.’s leading entertainment retailer -- went into administration.

Its well documented slide into near collapse followed on the heels of the U.K.’s other major music retailers Zavvi (formerly Virgin Megastore), Borders, Our Price and Woolworths all exiting the high street since the turn of the millennium.

HMV was saved when it was bought by restructuring specialist Hilco, which also owns HMV Canada, in April 2013. Since then, Hilco has overseen a strong turnaround with the company reporting pre-tax profits of £5.2 million ($7.4 million) for the year ending December 2013, according to records filed at Companies House. Total sales in 2014 were £365 million ($516 million).

Last year, the retailer re-launched its online store, marking its return to selling physical products online in the U.K. for the first time since being acquired by Hilco Capital.