Virgin Entertainment Group’s decision to close all six US Virgin Megastores by mid-summer signals the end of the company’s VIP customer loyalty program and its US e-commerce business, as well, according to a company spokesperson.
While news of retail stores shutting down is hardly surprising these days, the demise of Virgin Megastore’s loyalty program and e-commerce business are worth noting.
The loyalty program was launched in the US in 2006 following a successful roll out in Europe, Asia and Australia. It uses a patented thermo-graphic rewritable card that instantly updates loyalty points and marketing messages with each use and can be rewritten 500 times. By 2007, the company was reporting that 170,000 people had joined.
Thanks to the card, Virgin Megastore marketers were able, for the first time, to effectively mine transaction data, profile its customers to determine the products that resonate with particular profiles and identify its most profitable customers.
All of this was supposed to give Virgin Megastore a competitive advantage. The card’s advantages, however, probably weren’t enough to combat such significant forces as the continued migration of music to the Internet and the current economic downturn.
Virgin Megastore’s e-commerce business is interesting because, like Borders, Virgin partnered with Amazon.com on a co-branded site, with Amazon providing inventory, fulfillment, site content and customer service. Virgin Megastore didn’t launch a standalone e-commerce site in the US until the fall of 2007 while Borders launched its site last year.
Virgin claimed the new site would give it more control over how its brand was presented to consumers online.
While Virgin Megastores is completely exiting the US business, Borders, too, is suffering these days. It’s hard to know if managing an e-commerce business was more difficult than either of these companies expected and is contributing to their problems, because here again there are some significant market forces at work, including the economy and, well, Amazon.
