The shutdown of the live sector has been bad news for another growing area of the music business: merch.
In the latest issue of Music Week, we report on the impact of Covid-19 on music merchandise.
While sales at venues disappeared immediately as a result of the lockdown, the pandemic has been driving the e-commerce side of the merch business.
During Q1 in the early stages of the pandemic, UMG merchandising and other revenues were down 4.9% compared to the first quarter of 2019. While lower touring activity affected revenues, it was partially offset by growth in D2C.
Here, John Habbouch, GM and CFO of UMG’s Bravado and Marco Gruhn, head of brand marketing at Warner Music’s EMP, take us inside the merch sector during lockdown…
What has the Covid-19 impact been on the production, distribution and sale of merch?
John Habbouch: “Thanks to our amazing team, our supply chain has remained intact and operational around the world. We experienced some delays in production early on in the pandemic with some vendors closing or reducing staff in certain territories. However, we’ve built a broad global supply network and were able quickly pivot our production. Our fulfilment also remained operational, albeit with some delays in shipping due to increased shipping times across the board.”
Marco Gruhn: “We saw a drop in sales at the start of the pandemic – this was due to people’s confusion and uncertainty about what was going on. After about two weeks, we started to see a recovery as people realised e-commerce is the safest way to shop when trying to avoid contact with others. Within EMP, we kept half of the team on site and the other half worked remotely from home to maintain social distancing. With half of our people missing from the warehouse, our delivery times became slightly longer than usual. However, we’ve managed to adapt well and I’m delighted with how our business has run during an incredibly difficult time.”
In terms of global sales, how has this pandemic affected different markets at different times?
MG: “We’ve seen the same reactions from different markets as the virus spread across Europe. When Covid-19 first hit countries such as Italy and Spain, we saw a drop off in sales and then a recovery after about two weeks. After this, we recognised the pattern and were better prepared as other European markets started to be affected.”
Artists and fans are finding their own way to show their support during this unprecedented time
John Habbouch
How have you managed to work around the restrictions to continue the business?
JH: “Over the past few years, we’ve put significant focus on building a strong online business and expanding our reach outside of traditional arenas and concert venues. With people spending more time online now more than ever, this has proven to be an extremely important consumer connection for us. Our online sales have grown strong across most markets and we’re always exploring new ways to help our artists continue to connect with their fans around the world.”
MG: “We obviously ran into restrictions by having half of our team work from home – many of whom had never done that before. So we stepped up our video conferencing massively and we became more focused in meetings. Our efficiency actually increased as our meetings are now more concentrated. We focus on what needs to be done and how best to do it.
“As worldwide events have been cancelled, we’re trying to figure out ways to create cultural events virtually. We’re working with European Gaming to pioneer the largest ever virtual gaming conference as well as working with a music promoter on an exciting music event. This will, of course, bring in some huge opportunities for us. We also wanted to find a way to help people who are suffering most during this time, so we launched a Shirts for Charity campaign. Three shirts were designed and sold on our website. Within just two weeks we’d raised €85,000.”
Has merch become an important way for fans to show their support at this time?
JH: “Artists and fans are finding their own way to show their support during this unprecedented time, and merchandise has certainly been an important part of that. Whether it’s the numerous artists that participated in our We’ve Got You Covered face mask programme or other charity-driven programmes, we’re proud of the role we play to bring these campaigns to life.”
MG: “We haven’t seen a decline in sales, which is extremely positive, but we also haven’t seen expected peaks which occur when you have a big release or a big event being promoted. We don’t have the benefit of campaigns drawing attention to our products, so we’re missing out on spikes, but all in all EMP’s merch business is stable during this challenging period.”
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