Sunrise Records’ HMV takeover

Owner Doug Putnam is banking on a higher demand for vinyl in the suburbs than in the urban core

Sunrise Records is banking on an untapped market of vinyl lovers in the suburbs and smaller cities as it prepares to expand nationwide.

The music retail chain is growing from 10 stores by taking over 70 former HMV locations in malls across Canada in early April. 

HMV declared bankruptcy in January and has begun liquidating its 102 stores. Court documents showed the retailer was losing $100,000 a day.

In Ontario, Sunrise, a company based in Ancaster, plans to open in Mississauga, Guelph, Belleville, Pickering, Owen Sound, Sault Ste. Marie, Hamilton and St. Catharines.

Conspicuously absent from the list is downtown Toronto. (Sunrise already has an outlet in Etobicoke.)

Doug Putman, who took over the 40-year-old business in 2014, is still negotiating with the owner of the 333 Yonge location. 

The sticking point is, of course, the rent. Sunrise will consider other downtown options depending on what happens at the Yonge-Dundas location.

Putman is self-financing the expansion thanks to the success of his family’s toy and games manufacturing business, Everest Toys, and other businesses. He hopes to succeed where HMV failed by emphasizing vinyl in his product mix.

Around 25 per cent of the store’s inventory will be vinyl, 30 per cent CDs, 30 per cent apparel and other products and 15 per cent DVDs.

The numbers suggest vinyl is the way forward for physical music sales.

Data firm Nielsen SoundScan’s 2016 report showed a 29 per cent increase in vinyl sales over 2015. Back catalogue sales also surpassed current album sales for the first time, suggesting older music sells better. Canada’s number-one-selling vinyl of 2016 bears that out: Bob Marley and the Wailers’ Legend.

We spoke to Putman about his strategy for reaching what he sees as an underserved market of music fans outside big cities.

What is your target market for this rollout?

We’re in malls, so we get all different ages and demographics. We have to make sure we have product in there for each age and category. I don’t think we can be successful selling to one demographic or one age category.

Outside of big cities, how large is the demand for vinyl?

There’s almost a bigger demand. In big cities like Toronto, you’ve got lots of great independents. When you look at these outlying areas, they don’t have as many options for vinyl. There’s a lot of pent-up demand.

The Nielsen report showed back catalogue is the main driver of sales. Does that suggest an older demographic is buying vinyl?

It’s a lot of younger people as well. We’re seeing a lot of millennials buying it. They love the tangible product. Even though it may be older music, younger generations that, as they hear it, love it and want to go out and get it. 

People are more selective. They don’t buy whatever the new pop group is on vinyl. You’d see that being bigger on streaming or digital. When you get the right albums, you definitely see big sales in vinyl.

Does HMV’s failure pose a challenge for you in that suppliers are wary of selling product to a big chain?

There’s no doubt we have to be aware of that. Yes, suppliers are wary, but it’s up to us to go to them and explain why we’re different. And the one benefit we have is that we’ve been working with suppliers for many years now. They have some faith in what we’ve done and how we’re doing it. At first, of course, they were gun-shy. Once we really spoke with them and reviewed our plans, it got a lot better.

What will you do differently to avoid HMV’s fate?

We partner with our suppliers in a much deeper and more meaningful way. We’ve changed the product assortment to some extent. Renegotiating with landlords helps as well. Any one of those things on its own makes a difference, but when you get all three together, you can change your business from being unprofitable to profitable. 

Can you break down your product assortment?

We’re going to expand our apparel selection, and you’re going to see more music and entertainment apparel. It can’t be understated how important vinyl is. We’re going to do an absolutely huge business on that. Vinyl is going to be a massive help for us. We’ll go deeper into the categories that work. Depth of catalogue is important for browsing. People like to look at a lot of different options. 

How much room will you devote to small indie labels?

We’ve always supported the smaller suppliers and labels, and we want to continue to do that. We’ll start by going at a good pace, and we’ll see what the public thinks.

Are your business contacts shocked that you’re investing in music retail when the narrative says it’s in decline?

It’s probably hard to look me in the eye and tell me I’m crazy, especially for people I know. What they’re thinking and what they’re saying are very different. I talked to a lot of key people about it before I did it, and the support was there. Some people probably thought we were crazy, but I see a future in it.

Why are you interested in music retail?

It’s critical for Canada to have a physical media outlet. To not have that is culturally terrible. I feel the same way about book retail. It would be so disappointing if Canada didn’t have those outlets. I don’t think it gets emphasized enough how culturally important music is. It’s a scary future to me if that goes away. | @kevinritchie

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