Virgin stores, Amazon split

This fall Virgin Megastores and will part ways, ending a five-year relationship in which the e-commerce giant hosted a co-branded Web site and providing inventory, fulfillment, site content and customer service for Virgin.

The multichannel music merchant joins Borders bookstores, which earlier this year said it will introduce its first proprietary e-commerce site in seven years in early 2008. The move will take place after its relationship with Amazon comes to an end.

For Virgin Megastores, managing its own Web site once again means being able to “customize and control what we look like online,” said Dee McLaughlin, VP of marketing at Virgin Entertainment Group NA, Los Angeles.

“We have worked hard on rebranding Virgin Megastores as a lifestyle destination filled with great and unexpected products,” she said.

With the new site – which will launch this fall with the same URL as the old one, – the company can now “showcase these products online so that the brand offline and online will be consistent,” McLaughlin added.

While she didn’t go into more detail about the new site’s features or how it will improve the company’s multichannel retailing capabilities, she did say the site is just one example of how Virgin Megastores is trying to build momentum for the brand.

In the first quarter of 2007, Virgin Megastores reported a 9 percent increase in comparable music sales and a 15 percent increase in overall comparable sales.

Specific departments have experienced a significant sales increase, including DVDs, which rose 11 percent, and interactive games, which jumped 18 percent.

During the first quarter, the company’s Times Square store achieved annual sales of $50 million for the first time, making it the highest volume store of its kind in the world, according to the company.

New marketing playlist
The company attributes its recent success in part to its marketing efforts, which were revamped last year in an attempt to reach new target groups. Virgin Megastores’ ad agency is P2050.

The company added lifestyle themes and realigned its media buys to emphasize local city and lifestyle media. The company has also experienced success with ads in tourist and student guides.

Virgin Megastores is also using e-mail and direct mail to promote local store events. In July, the brand’s Union Square store in New York City hosted an invitation-only event that promoted up-and-coming graphic artists who worked on Virgin Megastores’ new ad campaigns. More than 300 guests, loyalty program members and members of the press attended after receiving invitations by mail and e-mail.

In November, Virgin Megastores implemented a strategy to increase its visibility during the holidays. The strategy included the use of free-standing inserts for the first time during the Christmas holiday season in all key markets.

Customers get rockstar treatment
This year Virgin Megastores is putting more effort into online and blog ads for its value offers and loyalty program, McLaughlin said.

Its VIP loyalty program, launched nine months ago, already has 150,000 members. It offers members special privileges such as trips, backstage concert passes, opportunities to meet celebrities and store discounts. Vehicles such as 944, Ciudad, LA Magazine and Energy radio have helped the company promote its new VIP loyalty program and value-oriented campaigns to a new customer, McLaughlin added.

“It has been a great traffic and sales-conversion driver and the interest in it from other vendors has been phenomenal,” McLaughlin said. Virgin Megastores offers marketers the opportunity to advertise on the rewriteable loyalty cards on a monthly basis.

Later this month, Virgin Megastores will launch a social media newsroom. The microsite will offer video, podcasting and up-to-the-minute news content for both consumers and the media.

“Virgin always strives to be more innovative and we know that reaching out to the consumer and the media online needs to be quick, entertaining and informative,” McLaughlin said about the new site at The site was developed in collaboration with SJ Communications Inc.

Finally, Virgin Megastores is looking into opening pop-up retail outlets around the country. They are a growing trend for retail outlets as their temporary nature reduces costs and often brings product to unconventional venues.

“Pop-up stores are a way for us to bring the brand to cities and test the waters,” McLaughlin said.

In July, Virgin Megastores closed retail locations in Chicago and Salt Lake City. In June, it opened a retail space inside one of California’s most famous concert venues, the Hollywood Bowl.

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