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When a company describes itself as “the world’s leading entertainment and lifestyle store,” it cannot let competition—whether they are traditional companies or new retail players—lure shoppers away. But that’s exactly what Virgin Megastores contended with not long ago. The good news is this competition prompted the chain to refocus its efforts on remaining a destination for its shoppers.

Eager to re-engage its customers at store level, the chain overhauled an aging infrastructure and added solutions that support a continuous flow of communications and personal interaction with its shoppers.

The Los Angeles-based company, which is a subsidiary of U.K. billionaire Richard Branson’s Virgin Group conglomerate, operates 10 stores in North America. These entertainment showcases are dedicated to helping shoppers keep their libraries of music, DVDs, books and video games fully stocked.

The entertainment company was a household name for years among shoppers until channel blurring began causing unexpected challenges.

“A proliferation of non-traditional retail outlets began entering our niche,” Robert Fort, VP IT, CIO, Virgin Entertainment North America, said during the Technology & Operations Store Summit (TOPSS). The June event, held in Las Vegas, was sponsored by Chain Store Age and Retail Technology Quarterly.

“We began competing against companies like Hollister and Starbucks that began augmenting their assortments with music and other lifestyle merchandise,” he said. “And the increase in digital distribution of music files also impacted us.”

While it struggled to combat new competitors that seemingly began cropping up around every corner, Virgin was also struggling to meet the needs of its own shoppers.

“The first problem was we didn’t have a direct consumer-marketing strategy in place. This made it difficult to measure in-store activity,” Fort said.

Efforts were further exacerbated by the company’s aging store infrastructure—an Achilles’ heel for any company trying to engage its shoppers at store level.

“To compete against these and other new players in our market, it became clear we needed to enhance our store experience, and transition to one that was more energetic, entertaining and interactive,” Fort said.

First, the chain began diversifying its product offering beyond music and into new categories including games, fashion and electronics. However, expanding its merchandise categories was only the tip of the iceberg.

To re-emerge as a premiere source of entertainment and lifestyle merchandise, Virgin wanted to create a new store experience that catered to its customers.

“The only way to do this was to get to know our shoppers’ preferences better,” Fort said. “The best way to do that was to add a loyalty program.”

Fort’s 15-person staff began the transition in 2003, but the team had quite an undertaking ahead of it. Since it was about to enter into a complete overhaul, the team needed to re-examine its front-end strategy.

Realizing that point of sale (POS) is the touchpoint between the customer and a loyalty program, Virgin had to make sure its front end was ready to interact with shoppers. As a result, the chain decided to transition toward a more flexible POS solution.

“Our existing solution was consistent and strong, but if we were going to embark on more shopper interaction, we needed a solution that could support flexible pricing and marketing campaigns,” Fort explained during TOPSS’ opening keynote session, “Destination Retail: Virgin Megastores.”

The chain chose software from Triversity (the solution has since been acquired by SAP, Newtown Square, Pa., and rebranded as SAP Triversity POS). The solution enables the chain to efficiently manage inventory and pricing rules, apply new discounts, add promotions and adapt to sales-tax changes without the use of custom programming.

“The application helped us speed up transaction times, and it was more configurable than our previous solution,” Fort said. “It provided more pricing flexibility, and offered controls that help us control margins.”

The chain also transitioned off of aging IBM hardware to the vendor’s SurePOS 780 registers. These units supported new touch-screen terminals, as well as new printers.

“These additions help us get shoppers through the front end up to 20% faster, depending on the transaction,” he said. “With 100% employee turnover in our industry, it also helps us speed up our training. Our training, which could take an average of three or four days, now only takes between two and three days.”

All Virgin stores installed the new system. Each location operates between eight and 25 checkout lanes, depending on the store footprint.

The complete POS revamp, which went live in fall 2006, helps the chain regain between $2 million and $3 million annually, he reported.

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