PWAC Victoria: Jeff Bateman, Writing Sample

The Reading Room

Virgin Takes a Mega-Sized Bite of Vancouver Retail Market

by Jeff Bateman © 1997

An example of the music industry trade journalism I specialized in for over a decade. Published in The Record, Canada's weekly music industry magazine, Dec. 12, 1997.

VANCOUVER: The Virgin Megastore, which opened with a Richard Branson-hosted flourish here in December 1996, passed its first-year anniversary with the confidence that it has carved out a niche that removes it from fierce price wars while still delivering necessary revenues.

Store manager Craig Duncan won't get more specific than to say it's been a "strong" first year. Industry sources speculate that Virgin has a 10 to 15 percent share of the lower mainland market--which in music software terms nets out at approximately $100 million annually.

If the guesstimates are at all accurate, the numbers are far short of the bullish $25 million-plus figures optimistically forecast at the outset by Virgin Entertainment Group CEO Ian Duffell (The Record, Dec. 16/96).

"We knew it would be competitive, of course," concedes Duncan. "But we've positioned ourselves carefully. People come here for reasons that aren't strictly related to price."

According to local retail analysts and label reps, the most competitive market in Canada has grown with Virgin's arrival. Long-standing Seymour St. independents Odyssey Imports and Track Records closed following lease disputes last fall. But most accounts are doing well--albeit not at the rate The Record's Marketplace chart would have one believe in recent weeks.

Marketplace has pegged year-to-date growth for B.C. at 40 percent, which is clearly an error in SoundScan's regional weighting system or perhaps a reflection of the fact that market leader A&B Sound is now part of the system.

"I hope nobody thinks we're doing those numbers out here, 'cause it just isn't true," says A&B VP Lane Orr. "My guess is B.C. has had single-digit growth so far in '98. The real bonanza is in Alberta, which is on fire right now." A&B opened a Red Deer outlet pre-Christmas, and has two more stores planned for Alberta this year.

Although A&B has clearly been hit hard by a competitive tsunami on the west coast in recent years, Orr claims that revenues are solid. "Where we're losing is on the product we make no margins on, so how can I be upset about that?" Top-con price wars with Future Shop are standard here.

The retail politics can also be fierce, particularly in the jockeying for in-store appearances. Putting Diana Krall into HMV Robson St., Savage Garden into the Megastore or Bryan Adams into A&B can have not entirely positive repercussions, and some labels would rather stay out of the in-store game entirely.

(The Adams SPCA fundraiser, organized by A&B with PolyGram Group Distribution, is expected to draw 1,200 fans to the chain's suburban warehouse on Feb. 25, a day ahead of the GM Place finale of the singer's Canadian tour.)

If it hasn't impacted as much as expected on bottom-line revenue, Virgin has certainly given the city its first real taste of world-class music retailing. Vast catalogue, creatively programmed listening posts, fascinating video, book and magazine departments, and popular singles and import sections are part of the appeal.

"We're here to sell selection and service, and to entertain people," says Duncan. "Why do people come in here at 11:30 p.m. on a Saturday night? Why are people still trying to get in when we're closing the doors at midnight? Because they want to be entertained."

Given its central site on what the chamber of commerce calls "Rodeo Drive North," Virgin draws the downtown office crowd, weekend suburbanites, hordes of strolling shoppers, and awestruck tourists who can't believe the exchange-rate bargains.

Tellingly, the store's bestselling title of '97 was the double-disc EMI package The Best Classical Album in The World . . . Ever, which moved in excess of 4,000 units. (By contrast, that title didn't crack A&B's Top 100 list last year.)

Certainly the Megastore has its share of industry fans. "It's the nicest record store in Canada," says one label president, requesting anonymity for obvious reasons. "It's improving the competition, it's raising the bar for everyone else, and now I just hope they can g et ahead with expansion.

"The sooner (Virgin) opens multiple sites, the sooner they'll have critical mass. It's pretty tough expecting to compete with one store in the most price-sensitive city in Canada. They'll have a more realistic go of it in Toronto and Montreal, where price isn't quite such an issue."

While Virgin had planned to open in those cities by the end of '97, the current prognosis is a Toronto opening no earlier than the summer and at some indeterminate point after that in Montreal.

For his part, Duncan hopes the Canadian business gets up to speed with international retail practices. "You can't buy a (listening) post in this store, but even then I have enough difficulties getting promos to put on them," he says. "That's unusual in my experience. Record companies in the U.S. tend to be more aggressive in getting their product in the store and getting it merchandised either on posts or end caps."

Since Virgin's arrival, A&B has cemented its traditional role as a maverick retailer by flagrantly breaking the release-day embargo on U2's Pop last March and later dropping out of the Retail Music Association of Canada.

The chain has made efforts to upgrade its Seymour St. flagship store, which nonetheless remains a chaotic environment where the average shopper's mission is to snag a deal and get out fast. Orr isn't worried, though.

"I don't consider Virgin a competitor of ours," he says. "I see it as a tourist attraction more than anything else. It's a nice store, but the prices are ridiculous for this market." Virgin's racked titles are generally $2 to $4 higher than A&B and Future Shop.

Of greater concern is the flagging B.C. economy. "It's pretty frightening right now. I don't see it getting better. As long as the NDP government is in power, it's not a climate that's conducive for business. The taxes are out of this world."

Jeff Bateman
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