Musicland Launches E-Commerce Stores

Music and entertainment retailer Musicland (NYSE: MLG) is hoping that e-commerce will turn its fortunes around. Musicland, which operates more than 1,300 brick-and-mortar stores including Sam Goody, Suncoast, MediaPlay and OnCue, announced Wednesday that it has launched e-commerce stores for all of its brick-and-mortar brands.

The move comes as Musicland’s stock price is near its low of the year and more than a month after competitors Hastings (Nasdaq: HAST) and Virgin Entertainment launched online superstores. Hastings’ launch was not without its problems. Technology issues forced the company to delay its heavily promoted launch, which led to a brief investor backlash.

Musicland is promoting its e-commerce launches by running daily and weekly contests, with a $10,000 grand prize that includes a home entertainment system and a trip for two to a wrestling event. Shoppers will be allowed to enter the contests every day.

“Supported by online advertising and marketing programs, the contest is strategically designed to increase site traffic by spreading word-of-mouth awareness of the launch,” said Karl Sowa, managing director of Musicland’s e-commerce division.

Heavy Promotion For Launch

Musicland’s contests and Web site will be promoted at sites including Yahoo!, ESPN.com, eonline.com, etonline.com and abcnews.com. Sowa added that Musicland has a promotional partnership with Comedy Central that will give the contests prominent exposure on comedycentral.com

Musicland will also receive promotion on Comedy Central’s cable broadcasts, including “The Daily Show.” The broadcast campaign will expand from Comedy Central onto MTV, VH1 and BET in mid-July. Gil Wachsman, vice chairman of Musicland, noted that deal with Comedy Central makes sense because Musicland’s customers and the cable channel’s viewers have “very similar demographics.”

The e-commerce stores will also be promoted in newspapers including the Wall Street Journal and USA Today. Musicland is also promoting the launches by offering a free gift to the first 25,000 site visitors who make a purchase at one of the company’s Web sites.

Does Musicland’s Strategy Make Sense?

Musicland’s strategy of launching an e-commerce site for each of its individual brands is a bit questionable because competitors like Hastings and Virgin have launched one-stop online superstores. In fact, the goal of many e-commerce companies is to create a one-stop shop.

Musicland, on the other hand, is offering four different destinations that seem to be almost identical Web sites. Musicland’s main Web site links to all four stores, but the individual stores don’t link to one another.

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