Business

Sunrise Has Plan to Succeed Where HMV Failed: Owner Talks Vinyl Surge, Antsy Suppliers & (More) Expansion

Sunrise Records
Courtesy of Sunrise Records

Sunrise Records

Ontario music retailer Sunrise Records is making swift plans to expand nationwide by taking over the leases of 70 former HMV locations after the chain declared bankruptcy in Canada.

Sunrise has been around since 1977, but when Doug Putman  -- whose family owns Ontario-based Everest Toys -- purchased the brick and mortal stores in 2014 from Malcolm and Roy Perlman it was down to five locations. He has since doubled that number in the province.

HMV is closing all 102 stores across the country as of April 30, after the company said it was losing $100,000 (CAD) a day.  Sunrise will begin opening its newly acquired locations that same month and is inviting the 1300 HMV staffers put out of work to apply for jobs.

Billboard spoke with Putman about how he plans to succeed where HMV could not.

How will you make so many new stores profitable by 2018, as pledged?

It's a few things. One, it's having the right product the customer wants, so definitely a lot of vinyl and a lot of depth in vinyl, or depth in the catalogue CDs and, of course, a lot of pop culture-licensed music apparel. But I also think the way that suppliers and landlords have really come to the table will also help a lot. Everybody was shocked, including myself, about HMV and now that it's out there that there's an auction, everybody wants to support it.

HMV had great restructuring experts [Hilco Capital] and still couldn't get it to work. Besides an increase in the quantity of vinyl, sounds like they were selling similar inventory. Can you be more specific on how Sunrise will make this work?

When you renegotiate rent deals with landlords, there's certainly savings there. When you look at overhead costs, we're just a much leaner company on that.  So product is one of the things, there's no doubt, but the other piece of that is the overhead and the cost of the overhead. I also don't discredit how big vinyl really will be and how much more business there is on depth catalogue. So I don't think there's one specific thing that makes it work. I just think when you've got supplier support, landlord support, added product, new product, all that works out to making it successful.  Any single thing, or even two things, alone wouldn't do it.

Courtesy of Sunrise Records

You didn't grow up in the music business. Your family has a toys and games distribution and manufacturing company. Is there anything in that business that you've taken over to music retail?

No. The people that are in the music business are just the most passionate people about it and that's one of the most endearing things about it. From a distribution standpoint, we look at retail a little bit differently and how important it is for retailers to partner with the key suppliers and make that partnership work.

The list of creditors for HMV is long and there some independent music companies on there that might now be in trouble because they are owed $200K, $250K, one even $1.8M. Is anyone gun shy? Are you purchasing any of the inventory or helping these creditors in any way or is it completely separate?

It's completely separate. There's really nothing that we can do. The inventory is now owned by a liquidator who tries to liquidate it and tries to get as much money as possible to try and pay back some of these suppliers. So there's really nothing on our end that we're able to do, except to tell these partners that we're ready to open doorways; we're looking to get product in. The best thing we can do is support them and start ordering the product again. And, obviously, these were big numbers and I don't know that any of them have the potential of going out of business or not. Obviously, we certainly hope they won't. But if there's anything that Sunrise can do to support these labels, we're certainly open to do it and willing to do it.

When I interviewed Nick Williams, the president of HMV Canada, he said they had gone to all the big players, studios and labels, and needed everyone on board. Most did, but not all, which killed any hope. Is there anyone that doesn't want to enter into the music retail world again?

Yes. There is the odd supplier, two off the top of my head, that don't want to partner to the extent that we need, and from our standpoint, that's their option. We can't force anyone to work with us. We're going to let the consumer do the talking for us because if they can't find that product in the store, then it's a loss for everybody. It's a loss for me obviously, but for the customer as well.

So when you prove profitability and everything is working smoothly, then you can go back to them?

A hundred percent you can. The reality is you always support those people who brought you to the dam. The people that have stepped up now are the ones that we support the most and we appreciate the risk that they're taking on us and we want to reward those people. Not to say that we're not going to work with the few suppliers that aren't interested; of course we will, but I can't hide, as I'm sure HMV was, the disappointment that you have when so much of the community is willing to support you and there are just one or two that don't want to. It's just disappointing overall.

David Hartley/REX/Shutterstock
HMV store. 

You are going into 70 former HMV locations. Will you be expanding into any other locations that weren't previously occupied by HMV?

Trying to. There are 30 locations out there that we weren't able to get deals on HMV. We tried to sign every lease that HMV had and we were open to signing every lease. My hope is that maybe some of the landlords that didn't sign with us right away, now that the news is out there, maybe they feel more confident, whether it's this year or next year. We do want to sign more locations, so we're always looking for more locations, whether they were HMV or not.  I think where you have an HMV, you know you had a core customer there buying, which is great. Hopefully, at the end of the day, we get more landlord support and the other ones will sign on.

Did you get the big flagship store in downtown Toronto?

Right now it is a no. I can tell you we are trying to. I don't know exactly what [the property owner's] plans are at this point. I do know that we have told them we are interested and if that location didn't work out, we still want to do a downtown Toronto location.

Lastly and most importantly, you would like to hire or keep on the 1,300 staff that lost their jobs in this HMV bankruptcy. How is that going?

Obviously they were working for HMV; I believe now they work for the liquidator. Our hope is that we get applications from HMV employees when their tenure is done with the liquidator and that they have interest in working for us. We haven't reached out specifically one on one to anyone. We've put out the message now. We want them to know that we want to hire them.

Lucas Tingle
Doug Putman

You haven't reached out to the former execs?

Some of them I do know on a more personal level so there has been some discussion, but the reality is we have to be fair to the previous owner of HMV and they have a job to do right now, all the executive team, and when their tenure comes up with them, we'll certainly talk with them. For the ones, that are still there, no.

When HMV announced it was in receivership, it seemed people were quite upset to see it go, even though they likely hadn't stepped foot in there for ages. We'll see if they put their money where their mouth is.

That's what I'm hoping. It's like the old saying, 'you don't know what you got until it's gone,' and hopefully people see that and they're going to come out in droves and support us. We certainly want that more than anything.