April 30, 2002, 12:00 AM

Listen Up

Virgin Megastores are using web-enabled kiosks to open a universe of 200,000 CDs to the ears of shoppers.

Virgin Megastores is reincarnating the listening booths of the past in the form of web-enabled kiosks. And they’re working so well that Virgin plans to roll out 100 more kiosks to stores in major markets this year.

Working with IBM Corp.`s kiosk hardware and Microsoft Corp. software, Virgin developed a web kiosk application that allows consumers to listen to any of 200,000 CDs in the store inventory before buying it. While music retailers have had listening stations for some time, they are limited to the CDs that the retailer wants to promote. Web-enabled kiosks expand that universe to all CDs.

To listen to a CD, the procedure is much like consumers used to do in big record stores where they would take an LP out of a bin, hand it to a clerk who would unwrap it then place it on a turntable and direct the customer to a listening booth.

The MegaPlay

Virgin’s kiosks, though, have a decidedly 21st Century twist-they are self-serve and depend on the Internet. Customers scan the bar code from a CD and the kiosk links via the web to a 200,000-CD database maintained by entertainment industry information database Muze Inc. Customers can listen to up to 30 seconds of music from each track. Video and game previews come from Video Pipeline Inc.

“The real goal is to provide information,” says Jan De Jong, vice president of information technology at Los Angeles-based Virgin Entertainment Group. “The fact that we sell a product where the customer can’t hear the music before taking it home has always been a challenge. But with listening kiosks, we are providing an incentive to buy.”

Virgin piloted 20 MegaPlay kiosks, as it calls them, in its Times Square Megastore in New York City and 15 in its Newbury Street store in Boston. Each kiosk handles 3,000 to 5,000 scans per month, De Jong says. They are in use 50% to 70% of the time they are available, depending on the day of the week, with Saturday the high-volume day.

Besides 200,000 CDs, which represent 2.5 million tracks, the web kiosk service offers customers the opportunity to preview 10,000 movies and entertainment software titles. Customers can listen to up to 30 seconds of a song and view 1 to 3 minutes of movie trailers. The 30 seconds of listening is an industry standard for most CD/audio clips, says De Jong, who adds that some classical selections can preview up to 60 seconds. De Jong says 30 seconds gives customers more of a taste of a song than they had before and gives Virgin a try-before-you-buy option that it did not have before.

Virgin operates 22 stores in the U.S. The average store has 200 to 400 single play and multi-play listening posts and offers up to 1,000 CDs that can be previewed. Virgin stocks those stations with best-sellers and other CDs it wants to merchandise to shoppers.

Web-enabled kiosks have been working their way into retail stores for some time. But until now they were either product locators or extensions of the web site. Using web-enabled kiosks to allow store shoppers to try out merchandise before they buy it could become a new trend in selling, analysts say. “Consumers are getting more comfortable with automatic services and web kiosks are supplementing the store clerks,” says John Hoeller Jr., senior manager with KPMG Consulting Inc.’s consumer markets, retail practice.

Further, he says, kiosks hold shoppers in the store longer. “Entertainment retailer kiosks can help keep customers in the store longer where they are likely to spend more money,” Hoeller says.

Kiosks also allow retailers to extend their store footprint. And the try-before-you-buy function may entice consumers to buy something they may not have planned to buy, Hoeller says. Indeed, says De Jong, sales of older music CDs have increased as a result of the kiosks. “We see a fairly high percentage of deeper catalog products, which is very important for our stores,” he says. “We have a lot of inventory and this is the first time customers can listen to older music before they buy it. It’s a good sales incentive.”

De Jong says Virgin is still developing the measurement and cross-referencing process to get a bead on ROI. For example, the store cannot track exactly which CDs or DVDs were scanned and then purchased. But De Jong says that if a sale occurs within 60 minutes of an item’s being scanned, Virgin assumes the kiosks helped make that sale. Without revealing details, De Jong says the kiosks are driving new customers and increasing the number of items per transaction. “The impact on sales conversion is three times what we had anticipated,” he says.

Piggybacking

IBM says the list prices for the Net Vista web kiosks range from about $4,200 to $10,000 with volume discounts available. In addition, Virgin pays Muze and Video Pipeline a fee, which De Jong would not disclose, for access to their databases. Muze says it charges either a per-use fee or a flat fee, depending on the customer. At about $3 margin per CD, a $6,000 kiosk would have to generate incremental sales of 2,000 CDs to pay for itself.

Other applications in the store pay for the communication links to the web. The data from the kiosks run along the broadband connections the stores already have for POS and corporate use. “There is no incremental cost because we’re using the spare bandwidth in the stores and the connection is highly reliable,” De Jong says. MegaPlay kiosks have uptime of 99.98%, he says.

Virgin Megastores has been marketing the in-store web devices with signage. Signs have worked well so far, but De Jong says that as the rollout progresses, Virgin will undertake an ad campaign and PR events, although details have not been worked out yet.

The biggest drawback to customer use, he says, is the small size of the machines. “People don’t understand that such a small machine can have all the information that it does,” he says.

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