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Here is what Red Herring said about TWMC: Trans World hopes to top the Internet charts By Georgie Raik-Allen Red Herring Online January 19, 1999 Offline music retailer Trans World Entertainment(TWMC) is making a late play in the Internet space, but hopes to make up for lost ground by cozying up to its music industry contacts. One of the biggest CD sellers in the U.S., Trans World has launched an aggressive campaign to drive its bricks-and-mortar customers to a site that combines e-commerce with online entertainment. It is leveraging its contacts in the music industry to host live chats with artists and broadcast live concerts online. Since it launched in November, the site has held a live chat with James Brown, an interactive interview with Elvis Costello and Burt Bacharach, and a Jewel concert, among other events. Upcoming events include chats with Julian Lennon and Sugar Ray and live concerts by Collective Soul, Kid Rock, and Edwin McCain. Web surfers can also download songs and video clips of their favorite artists. The idea is that users will see a concert, listen to a song, or research an artist, then be inspired to make a purchase, either on the site or at a bricks-and-mortar store. CATCHING UP Trans World acknowledges it has lagged in its online strategy but believes its 26 years of retail experience gives it an advantage over Internet-only plays. "Our strong relationships with artists and labels allow us to offer a wealth of entertainment opportunities to the Web community," says Bill Tynan, general manager of e-commerce at Trans World. "CDNow (CDNW) and Music Boulevard (NTKI) will not be able to build up those kind of relationships for a very long time." Maybe not, but Trans World's rivals have already established a prominent Internet presence and customer base that will be hard to overtake, especially with the less-than-catchy online brand twec.com. To surpass its Internet competitors, Trans World does not plan a flashy advertising or marketing campaign, but will target its 530 million annual offline customers with fliers, stickers, and posters in its stores. "It's important to be a survivor in three or four years, not a huge spender," Mr. Tynan says. "While the Amazons, etc., are making investments that won't see a return for five years, we have had 13 consecutive profitable quarters." KISSING UP Mr. Tynan and Trans World e-commerce senior manager Tom Tuomela recently toured California to garner support in the music industry for its Internet strategy. And while it gets into bed with the big offline players, Mr. Tynan claims that online CD retailers are transgressing the industry's distribution and pricing policies. He predicts that his company's wired rivals will face legal action within the next five years. "It's easy for people to overlook the violations now, but 10 percent of the music industry will be online before the year 2003. Before then, the music labels will take legal action to stop violations," he says. Specifically, Mr. Tynan accuses online retailers of violating the parallel imports agreement, which requires that exporters use local distributors, and undercutting the minimum advertised price (MAP) that record labels and distributors enforce. That's a big charge, and one that Amazon.com (AMZN) and Music Boulevard dismiss. But Trans World's point may be less that the big online CD sellers are breaking the rules, and more that it is keeping them. By cozying up to the labels and distributors, Trans World may not be doing its customers any favors. Not following the trend to undercut prices means its CDs are more expensive, and because the company buys the CDs in the country in which it sells them, different customers are charged different prices. A customer in Germany or Japan, for example, will pay more than a customer from the U.S. As a Music Boulevard spokesperson points out, "It kind of defeats the purpose of having a global store." She also says that online sites are not obliged to honor MAP because they do not receive co-op advertising dollars from distributors. Trans World owns bricks-and-mortar brands Coconuts, F.Y.E, Planet Music, Record Town, Saturday Matinee, Strawberries, and Waxie Maxie's and is buying Camelot Music for about $425 million in stock and assumable debt. The acquisition, currently awaiting SEC approval, will grow its revenues to about $1.3 billion and its bricks-and-mortar store fronts to more than 1,000. Trans World may be have an established presence in America's malls, but while it worries about playing by the rules, its online rivals more about building brand and attracting customers. | ||||||||||||||
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