HMV dying has nothing to do with Amazon's tax avoidance

How do you fight a behemoth which needn't profit?

The death of HMV is undoubtedly due to competition from Amazon in particular and the internet in general. There's a lot of rosy-eyed reminiscing about the chain from people who apparently haven't been in it for a decade or so – it was, in many ways, a terrible shop – but the fact that it represents (represented?) 38 per cent of the entire physical music market suggests that it isn't just dying because it was run badly. There may be something fundamentally untenable about high-street music retail.

(Though that untenability only necessarily applies to chains; it may be the case that independent record shops, like Rough Trade, have something to offer which the internet can't out-compete them on)

But I'm uncomfortable about the meme going round that Amazon only has the advantage it does over HMV because of its tax-avoiding ways.

It's certainly the case that Amazon's, er, tax planning gives it an advantage. For instance, it charges 20 per cent VAT in ebooks, but only returns 3 per cent of it to the Luxembourgish exchequer, taking advantage of the discrepancy in the rates between where it is based and where it carries out its business. And, until the loophole was closed in April last year, Amazon managed to avoid charging any VAT at all on goods below £18 by shipping them from the Channel Islands.

But even without those avoidance strategies, HMV would have found it impossible to compete with Amazon, because it's a company which simply plays a different game from all others.

Amazon's entire strategy to date is to release loss-leader after loss-leader, building its share of the market – and the number of markets it operates in – to astronomical levels, all while promising jam tomorrow.

Take the Kindle owner's lending library. That's a project which offers free access to ebooks for Amazon Prime subscribers – Amazon's flat-rate free next-day-delivery program – who have Kindles. It is clearly a loss leader, aimed to drive Kindle sales and Amazon Prime subscriptions. But both of those are, themselves, loss leaders. Amazon makes no money on its flagship Kindle model, the Paperwhite, and while it doesn't reveal the figures, most analysts agree that it also loses money on Amazon Prime.

The company has revenues of the same magnitude as Apple, but profits at the same magnitude as Games Workshop. It has managed to convince an entire class of investors to give it money and not ask for anything back save continued growth. In short, it's a multi-billion pound company being treated like it's a start-up.

That is something which HMV cannot compete with. Even if online retail didn't have intrinsic advantages over brick-and-mortar – with lower fixed costs, larger potential markets and a near-infinite potential for keeping things in stock – and even if Amazon paid full British tax on everything it does, HMV still couldn't offer prices that matched Amazon's, because HMV has to make a profit on what it sells.

That's not actually a bad thing in the short-term. What Amazon's strategy amounts to in the short-term is a massive transfer of wealth from its investors to its customers — at least compared to the non-Amazon alternative. In the long-term, it must result in one of two things: the bubble bursting, and the company being forced by shareholders to stop sacrificing profit for market share; or a consolidation of its monopoly, allowing it to raise prices because every other potential competitor has been driven out of business. Neither of those outcomes sound as good.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Empty highs: why throwaway plastic goes hand in hand with bankrupt consumerism

We are in the throes of a terrible addiction to stuff.

A University of California study revealed this week that mankind has produced more than nine billion tonnes of plastic since the 1950s, with almost all of it ending up in landfill or the ocean. With the terrible effects of our decades-long addiction to throwaway packaging becoming increasingly apparent, it’s clear that a fresh approach is needed.

In April 2010, David Cameron set out his vision for Britain in the Conservative Party’s manifesto. Keen to show that the Tories had turned away from the "I’m Alright Jack" individualism of the 1980s, Cameron sought to fashion a softer, more inclusive brand.

The good society, Cameron argued, embraced much higher levels of personal, professional, civic and corporate responsibility. There was such a thing as society, and we’d all do well to talk to our neighbours a bit more. The Big Society, however, was roundly derided as a smokescreen for an aggressive tightening of the Government purse strings. And on the advice of his 2015 election fixer Lynton Crosby, Cameron later dropped it in favour of well-worn lines about economic security and jobs.   

While most would argue that the Big Society failed to amount to much, Cameron was at least right about one thing. We are happiest when we are part of something bigger than ourselves. No matter how much the credit card companies try to convince us otherwise, mindless individualism won’t make us nearly as contented as we’re led to believe by big conglomerates.

By any measure, we are in the throes of a terrible addiction to stuff. As a nation, we have run up unsecured debts of more than £350bn, which works out at £13,000 per household. Fuelled by a toxic mix of readily available credit and interest rates at historic lows, we cripple ourselves financially to feel the empty high derived from acquiring yet more stuff.

Purchasing has become a leisure pursuit, ensuring the rate at which we acquire new stuff exceeds the rate at which we can find somewhere to put it. Burdened with ever increasing amounts of stuff, consumers are forced to outsource their storage. The UK didn’t have a self-storage industry 30 years ago, but now it is the largest in Europe.

With the personal debt mountain soaring, we’d all do well to realise that we will never have enough of something we don’t need.

The growth of rampant consumerism has coincided with an explosion in demand for single-use plastic. Like the superfluous possessions we acquire, throwaway plastic packaging helps satisfy our desire to get exactly what we want without having any thought for the long-term consequences. Plastic packaging is easy and convenient, but ultimately, will do us immense harm.

In 1950, close to 1.5 million tonnes of plastic was produced globally. Today, the figure stands at more than 320 million tonnes. The vast majority of our plastic waste either ends up in landfill or the ocean, and our failure to kick the plastic habit has put is in the ludicrous position where there is set to be more plastic than fish in global seas by 2050.

There is also growing evidence that our penchant for endless throwaway plastic might be storing up serious health problems for our children later down the line. According to a University of Ghent study published earlier this year, British seafood eaters risk ingesting up to 11,000 pieces of plastic each year. The report followed UN warnings last year that cancer-causing chemicals from plastic are becoming increasingly present in the food chain.

Something must give. Unsustainable as our reliance on fast credit to finance ever more stuff, our addiction to plastic packaging is storing up serious problems for future generations. The instant gratification society, high on the dopamine rush that fades so quickly after acquiring yet another material asset, is doomed unless decisive action is forthcoming.

So what is to be done? The 2016 US documentary Minimalism points to a smarter way forward. Minimalism follows the lives of ordinary people who have shunned the rat race in favour of a simpler life with less stuff and less stress. The most poignant bit of the film features ex-broker AJ Leon recounting how he chose to forgo the glamour and riches of Wall Street for a simpler life. After a meteoric rise to the top of his profession, Leon decided to jack it all in for a more fulfilling existence.

While challenging the view that to be a citizen is to be a consumer is easier said than done, there are small changes that we can enact today that will make a huge difference. We simply have no choice but to dramatically reduce the amount of plastic that we can consume. If we don’t, we may soon have to contend with the ocean being home to more plastic than fish.

Like plastic, our bloated consumer culture is a disaster waiting to happen. There must be a better way.

Sian Sutherland is co-founder of campaign group A Plastic Planet which is campaigning for a plastic free-aisle in supermarkets.

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