Virgin closes stores, builds VIP roster

By Susanne Ault -- Video Business,

27th July 2007

 

Virgin Megastores this month shut two locations in Chicago and Salt Lake City, slimming its U.S. presence to 11 stores, while focusing on building its customer base through a recently launched customer loyalty program.

Also, the lease for Virgin’s long-time West Hollywood, Calif., outpost expires on Jan. 31 and management is still deciding whether to extend its terms. Virgin has a newer location nearby in Hollywood.There are hundreds of Virgin-operated storefronts worldwide.

“We believe that creating the pre-eminent music destination in the country is predicated on quality of stores, not the quantity of stores. The key in doing this is to not spread the brand too thin, but rather to create an ultimate destination store, in America’s destination cities,” said Simon Wright, Virgin Entertainment Group, North America CEO, in a statement.

While closing stores, Virgin has nevertheless been steadily building a reliable customer base through its nine-month-old VIP loyalty program. The chain has corralled 110,000 sign-ups to the program, in which customers receive more chances to win elite prizes the more times they shop at Megastore locations. Recently, VIP members have won $5,000 shopping sprees and tickets to see the taping of the American Idol finale episode.

Virgin is not alone in tweaking its retail formula, as many stores that started as music specialists have had to adapt to falling CD sales by launching new merchandising initiatives.A good chunk of Virgin VIP product sales, about 35%, come from DVD purchases, according to Chad Lavachek, Virgin marketing manager.

“Our first year VIP results are now surpassing all of our forecasts,” said Roger Ritchie, Virgin senior marketing manager. “The VIP program has resulted in nearly $20 million in sales since launch and a 20% increase in store repeat visitation. The biggest benefits have been a remarkable increase in both the retention and repeat visitation of our best customers and huge sales revenue in DVD.”

Virgin management also points to its June opening of a store inside Los Angeles’ Hollywood Bowl concert venue as proof of its ongoing retailing strength. The chain replaces the now defunct Tower Records as the exclusive CD and DVD seller at the Bowl.

Also to boost the Virgin brand, VP of marketing Dee McLaughlin bowed a blog (http://virganity.wordpress.com) this year to regularly update customers on store events.

 

Video Business article