Wherehouse Marks 30 Years By Giving Back To Customers

Over the past three decades, Wherehouse Music has weathered financial troubles, management changes, and the challenges of emerging technologies. To celebrate its longevity and to thank its customers, the Torrance, Calif.-based chain is celebrating its 30th anniversary this month with a series of special sales and giveaways.

The monthlong promotion, titled "30 Days, 30 Deals, 30 Prizes," offers a different 30%-off sale each day, with discounts on all VHS and DVD titles as well as used CDs. Shoppers can also enter to win one of 30 prizes such as a Green Day concert trip; autographed merchandise from Santana, Madonna, and Dixie Chicks; and an Ultimate Harley Davidson Sega Dreamcast pinball machine.

"We wanted to give something back to our customers," says Wherehouse Music VP of advertising Barbara Lewis. "Part of the thought was to give a great offer, but also to keep customers coming in to check out what's going to be tomorrow's deal. We're also trying to make people aware that even though our name is Wherehouse Music, we sell a lot of different products in the store."

Wherehouse Music has greatly expanded its size and scope since its inception in 1970. The company began as a six-store Southern California chain called the Wherehouse, and today it is the third-largest music retailer in the country with 504 stores in 29 states.

Over the course of its 30 years, the chain has offered consumers the newest innovations in home entertainment formats before they were nationally accepted. Early on, the chain offered video rentals, backed the CD and DVD formats, and sold used CDs. Its decision to sell used CDs caused a national controversy when Garth Brooks opposed the policy, but the practice has now become commonplace among retailers.

"We have always been able to identify areas of growth opportunity early in their introductory phases," says Wherehouse Music VP of music business Kevin Milligan. "We were the first to get in the rental business for the VHS as well as recognizing the ability to compete with used CDs."

The chain started expanding beyond California in 1978. By 1996, however, further growth was halted when the company filed for Chapter 11 bankruptcy. With backing from investment company Cerberus & Partners, the Wherehouse emerged from its financial losses to buy Blockbuster Music in 1998 under a $115 million deal (Billboard, Aug. 22, 1998). The company acquired 378 Blockbuster stores and renamed itself Wherehouse Music.

Wherehouse Music CEO Tony Alvarez, who joined the company in January 1997, says, "The first two years of my tenure were dedicated to returning Wherehouse to profitability and to trying different things out for growth. The success of those two years led us to gain financial strength and the muscle to take a pretty bold step, which was to acquire a company almost twice our size. And then came the era of digesting it, which we're virtually done with. We absorbed a chain that had its own strength and culture, and I think we now are a national chain for that reason."

The strategy is in line with the chain's focus on fostering the strength of each store in its local market. Says Milligan, "Our mantra is to be the best store in the neighborhood. We really look at the demographics of that neighborhood and tailor the mix appropriately."

Though brick-and-mortar music sales still represent its largest percentage of business, Wherehouse Music has ventured into the online world with a 1999 $40 million partnership with Checkout.com (Billboard, Nov. 27, 1999). The company is also exploring the interactive arena, having recently opened the .Com By Wherehouse store in Manhattan Beach, Calif., which offers online shopping and CD burning.

"The good news for us brick-and-mortar retailers is that the growth of Internet sales hasn't really been as big as everybody thought it would be right now," Alvarez says. "We will continue to play in that space but will be more focused on things that can take advantage or do things that integrate the strengths of both."

Wherehouse Music has delved into other retail concepts such as the ¡Tu Música! chain, which focuses on Latin music. Nine stand-alone stores have opened since 1997, and many Wherehouse Music stores features their own ¡Tu Música! sections. Other retail ventures include GameSpace stores, which sell video game hardware and software, and Wherehouse Music Xchange, which offers mainly independent music titles.

Alvarez believes that the future, though, will be heavily tied to DVDs. "We are continuing to emphasize and put resources behind that division, which we call 'movies and more,' " he says, adding that the division encompasses not only DVDs but accessory items. "We would like to increase our share in that area without diminishing the importance of music."