COMMENT – No Longer Virgins

The reason for the move is essentially that Virgin Group overlord Richard Branson no longer sees entertainment retail as core to the group’s business.

Exactly what Virgin Group’s core business might be is becoming increasingly blurry these days – it is hard to imagine a focal point between such wildly diverse ventures as petrol-guzzling Virgin Atlantic and Virgin Galactic, which intends to take hold of the interstellar tourism trade, and the rather greener pursuit of renewable energies with Virgin Fuels.

The doom-mongers will be quick to leap on the selloff as indicative of a failing retail business Branson doesn’t want in his back yard, a business beginning to eel the strains of digital downloads, internet shopping and supermarket competition.

While this may appear logical, it should be remembered that Virgin Group sold off a great deal of its Megastores (which it later bought back) in 1992 in order to fund Virgin Atlantic – the point being just because an umbrella corporation sells off a division it does not mean it is operationally defunct.

That’s not to ignore the challenges Zavvi faces. On ground level, national sales of CDs and DVDs are down. Behind the scenes, Branson has reportedly reached into his (albeit very deep) pockets to bail out Virgin Megastores in the past – a security the new retailer will no longer be able to call upon.

And you can add to this the turmoil that such a radical upheaval is liable to cause. Of course nothing has been confirmed yet, but the MBO could well culminate in staff cuts and even the closure of some smaller stores later down the line as the fledgling retailer consolidates.

The landscape of entertainment retail is changing and other firms such as HMV have already been making noises about changing business practices.

A newly-independent Zavvi could well be better placed to adapt to this change now it has shed its ties with the past and is able to forge out a business strategy independent of any parent company operating above it.

Like former owner Branson’s galactic ambitions, Zavvi may encounter some problems as it launches – but that won’t dampen the new retailer’s determination to succeed.

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