Trans World Rebrands Web Site, Mall Stores

- As part of a $40 million initiative to increase Trans World Entertainment Corp.'s marketing clout, push consumer traffic between its online and brick-and-mortar locations, and ready its stores for Internet opportunities, including digital distribution, the nation's largest specialty music retailer is rebranding its Web site and its 730 mall-based stores under the brand fye (for your entertainment).

Trans World's mall stores now operate under the names Camelot, Record Town, the Wall, For Your Entertainment, Saturday Matinee, and Disc Jockey.

Rebranding is slated to begin by the end of the second quarter in June and will be completed nationally by year's end. The Web site, currently known as twec.com, is scheduled to relaunch as fye.com in August.

The Albany, N.Y.-based company says its more than 200 free-standing stores - Coconuts, Strawberries, and Specs - will continue to operate under their existing names.



"There's no doubt unification of our mall brands under one name will provide us with considerable marketing power," says Trans World chairman/CEO Bob Higgins.

Higgins says the company had not intended to rebrand the mall stores using an existing name in its portfolio, but fye scored the best with consumers among many old and new potential names floated in extensive test marketing and research.

In the short term, the biggest benefit from the name change to Trans World should be on the advertising front. The rebranding move is, in part, a play to increase sales and attract more cooperative advertising dollars by creating a unified brand for its mall stores that can be advertised more effectively nationwide via television and radio.

A nationally marketed brand, powering a business unit that accounted for more than $1 billion in sales last year, also potentially gives the company more clout in the industry at large.

"National advertising gives the company the clout to alter sales of music it chooses to market; this buys Trans World influence with the labels and should help build market share," Credit Suisse First Boston analyst Gary Balter said in a research note following the rebranding announcement. "In this content industry, as in books, the future probably holds a scramble by both levels of the industry - labels and retailers - toward vertical integration; market share equals power in that game."

The move is also expected to breathe some life into the company's nascent E-commerce business. Until now, Trans World's Web arm has operated under the unwieldy "twec" name, while juggling a half-dozen other brands corresponding to its mall stores. A consolidated identity creates a more recognizable brand for Internet shoppers and creates the opportunity to forge what Higgins calls a "true cross-channel organization." Trans World hopes to drive consumers from the store to the site and from the site to the store.

Key to such internal cross promotion will be the launch of a new consumer rewards program and the rollout of in-store technology enhancements under a program called eWorks.

The company will test the new-technology initiative in 24 stores in the New York, Boston, and Hartford, Conn., markets this fall.

Pilot stores will feature 25 listening and viewing stations with high-speed Internet connections that will provide customers with the ability to preview any item in the store's inventory . Also, consumer data from the customer-loyalty program will be used to promote customization features in stores and on the Web site.

All Trans World mall stores will be upgraded for broadband Internet connections this year in anticipation of a wider rollout of the eWorks program slated for 2002.

Trans World management is banking on the fact that increased product sampling and personalized suggestions enabled by its technology investment - along with the customer-loyalty program - will help increase sales both online and offline. Wall Street analysts and investors will watch all these developments closely.

Half of the capital expenditure spending associated with the repositioning effort is expected to go into new signage and graphics in the stores, with the bulk of the rest of the money earmarked to overhaul the Web site. A few million dollars will also go toward the kiosks. Trans World will take a charge of 26 cents a share against this year's earnings.

Much of the effort is considered a one-time expense, with the bulk of the costs showing up on the bottom line in the second half of the year in preparation for Christmas.

A focus on rebranding and E-spending - not acquisitions - is somewhat of a shift in strategy for the consolidation-minded Trans World.

However, there are increasingly few attractive chains left to buy (a fact Higgins acknowledged at the company's annual vendor awards dinner on March 20). Meanwhile, some in the financial community are looking for Trans World to focus on improving its overall sales rather than on growing beyond its current 1,000-store empire.

"He's going to really have to start focusing on how to drive comps in the store, which have really been lackluster," says another retail analyst.

The company anticipates the name change will help boost earnings in 2002. But that could be a challenge if the current business climate persists. Trans World watchers note the company has been facing recent sales difficulties (comparable-store sales declined 3% in the fourth quarter) amid a soft economy, a weak release schedule, and competition from file-sharing services like Napster. An ongoing difficult economic environment may only exacerbate the situation.

Also up in the air: What the current moves mean for Trans World in the context of its rivalry with Musicland, which was recently acquired by Best Buy. Best Buy plans to use Musicland's stores as an entry into the malls and will stock those locations with non-music consumer electronics.

Higgins, for his part, remains mum on additional product line expansion in his mall stores. The focus for now figures to be on video opportunities, especially in DVD, which is turning into a significant growth business for music and video retailers.

Credit Suisse's Balter notes that the new brand name, which focuses on general entertainment, allows for a broader mix of goods than, say, a name like Record Town could.

Categories that Balter says could see the inside of an fye store in the near future include software and consumer electronics, especially personal and mobile entertainment devices.