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Tue 6 Mar 2012 05:29 PM

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Facing the music

While CD sales in the west are dwindling, Virgin Megastore decided to increase the music section in its stores in the Middle East. The gamble has certainly paid off for its president Nisreen Shocair, who reports an increase in revenue and plans for further expansion.

Facing the music
Nisreen Shocair, president of Virgin Megastore Middle East.

Spend any length of time with Nisreen Shocair and one thing
becomes clear very quickly: she knows her music and she has a genuine love for
it. Whether it’s picking out the perfect guitar for our early morning photo
shoot, talking about the latest up-and-coming acts she is supporting, or how
music sales in the Middle East are defying international trends and rising, she
takes an obvious pleasure in her work. As president of Virgin Megastore Middle
East this is a real asset but, at the end of the day, she is a businesswoman
and her love of music is surpassed only by her equally obvious love for the
Virgin brand.

“We are not a vanity retail company, we don’t open stores
because we want to; we open stores because they make money,” she says when asked
why she opened her latest Virgin Megastore branch in Dubai Mall — the world’s
biggest shopping mall. “We have said no to developments… we did not open in
Festival City and we have no plans to open in Festival City. We want Virgin to
remain a destination; I don’t want Virgin to become a convenience store. “Some
brands need to be on every corner, like Starbucks, but not Virgin. I see so
many brands opening up in every mall that comes up, I think that is vanity or
the fear that if you don’t open up you are missing out on some opportunity and
ultimately you dilute the brand and it stops becoming something special.”

The new 2,400 sq m store in Dubai Mall has 45,000 products
and is the brand’s fourteenth store in the Middle East. Shocair believes this
latest investment is likely to be Virgin’s last big store in Dubai as she
believes the city has now reached its optimum level and the market is now
oversaturated with mall projects.

“What is next for Dubai? I think this is it for Virgin.
There is saturation as far as mall development. I hope that we won’t have
another mall development, I think we have enough. So this is it for Virgin,”
she says, emphatically.

With the amount of retail space in Dubai increasing 263
percent between 2006 and 2010 and the total supply expected to reach 2.58
million sq m by the end of the year, there are few who would argue with her
logic. While she is not forecasting any big physical increase in space in Dubai
any time soon, she reports that sales were up this summer and the main reason
for this is simple: the Arab Spring.

“[Retail sales] are back up against last year… We are up 30
percent in the UAE,” she reports. With the UAE remaining immune from the impact
of the Arab Spring unrest that spread to the region from North Africa, combined
with the early Ramadan season, the UAE has seen a rise in Gulf shoppers this
summer, she claims.“It is very simple, with the political situation in Egypt
everyone came here and that made sure we had a fantastic summer. It was wild…
We have never seen a summer like this.” “As Ramadan pushes into the summer we
are going to see that trend continue as basically people are not leaving and
that it good for us retail-wise. There used to be a three-month lull but we
don’t have that anymore.” Boosted by this success, Shocair is already planning
her fifteenth store.

“Abu Dhabi is really important. It is a very small store and
I think we have disappointed our customers there. They have been itching and
screaming for another store and we haven’t been able to give them that, mainly
because the other developed mall, the Marina Mall, it is hard to get that
space. We are waiting to see what the new developments bring.”

In Egypt, the brand will also open a second store in
December and Shocair says she is currently in talks for two more large
developments. Qatar, which is due to host the FIFA World Cup in 2022, is also
on her radar.

“Egypt and Qatar is very important to us as the population
grows and people move there for the World Cup and we see big shifts in that
economy and we want to be ready.”

This year Virgin Megastores celebrates ten years in the
Middle East and Shocair, who came from a record company background and worked
for the likes of Sony Music, Bertelsmann AG and Hearst Entertainment, admits
that she was first wary of taking on the challenge faced by the Middle East

“It is very simple. I came from a digital background and
when they contacted me about Virgin, they weren’t doing very well and I said
‘Absolutely not. I’ve spent two years telling Sony and BMG and everybody that
we need to be moving over [to digital] and we need to be focusing on the future
so it is going to be difficult for me.’ But the Virgin brand is a beautiful
brand, what you see here is because of the brand.”

At the same time, music and record stores in the west are
suffering, with rival HMV closing 60 stores in the UK in 2010. In the US, CD
sales are expected to slump another 29 percent this year, on top of a sixteen
percent decline last year, and analysts predict that digital music revenues
will surpass physical music sales for the first time this year. However, the
Middle East market is the anomaly and Shocair reports that it is one of the few
regions where CD sales are still strong. Even vinyl records are making a
comeback and proving popular.

“[At first] I shrunk the CD section a bit too small and
customers screamed in their own way. So I said let’s give this another try, so
we expanded it and the business went up fifteen percent. There is obviously a
demand, so why should I actively kill it?”

That is not to say she is turning her back on the digital
revolution as she reports Virgin Megastore is currently working on a digital
platform to allow customers to download music.

“We have been trying to launch e-commerce but customers
still want to come to the shop, which is frustrating as you want to start
seeing people mimicking what you are seeing abroad.”

The timeline for the launch of the digital catalogue is
currently up in the air as she says they are facing various obstacles regarding
price points and she believes there needs to be more synergy between the
distributors, the record labels and artists.

“We have issues with pricing. Content owners in the Middle
East think you are operating out of the US so they want to charge you hefty
upfront fees when your population is nowhere near 320 million people.

“They are always slower… It is an ongoing issue. Why are CDs
so expensive? I don’t price it. [The suppliers] price it. It is not from me, I am
the biggest advocate of price changes. I believe there has to be a big change
as far as video and music price points.

“What they have done is they have paid such huge royalties
so they work backwards, which is an antiquated way of working, you need to work
from what the customer is willing to pay and work backwards from there.

“When their contracts come up for renewal they are going to
have to sit with the studios and record labels and say times have changed.”

But it is not just the record distributors she has in her
sights. Shocair also believes the telco operators in the Gulf need to take some
responsibility and must work harder to police their networks in order to
prevent illegal film and music downloads from threatening the future of the
entertainment industry.

She believes curbs on copyright criminals in the Middle East
lag behind the rest of the world, a situation media companies claim costs them
billions of dollars in lost revenues.

“Telcos keep selling bandwidth and we all know what
bandwidth means, it means faster downloads and most of it, I imagine, is illegal
downloads,” she says. “We need to work closely with the telcos to solve that.”

“There was some report that said whatever revenue the music
industry lost in physical sales, the telcos generated in bandwidth sales — and
we see telcos selling faster and faster bandwidth… I don’t think anyone wants
to see the music industry go away, or video, or gaming so [telco operators] are
willing to work with us I am sure.”

A major part of the Dubai Mall Virgin Megastore is the stage
set up just inside the store, which the company used to promote Virgin
Megastore Fest’11, which ran from 15 September to 7 October and saw more than 25
local music acts playing in-store.

“We are proud to present the first Virgin Megastore Fest
this year, which will develop into an annual musical festival set up to promote
and cultivate our local talent,” Shocair says.

Coming from a record label background, Shocair says the
showcase is not simply just about promoting the brand and she actively spends a
large percentage of her time helping to promote local bands and acts get off
the ground.

“It is not just talk… I would argue we have done most of the
projects on a not-for-profit basis. I get personally involved in this as it’s
my baby and I came from the record industry and I’ve seen how much of a
disadvantage they have. These are very small acts and no one is going to take
them and if they do, they want a finished product. We have been able to give them
a platform… We give them the store and we give them marketing and see what they
get out of it. We really do work with them and really do develop talent.

“Some make it and some of them don’t. There are some that
work hard at it and succeed, but those who wait for the record label to do
everything for them don’t make it. We try to stay away from people who just
want to be famous or are having a midlife crisis.”

As we finish off the interview Shocair tells me: “the most
important thing in retail is to never get attached to the format or product, to
become neutral and unemotional.” But I don’t buy that. It’s obvious she
genuinely loves the music business and it is this emotional connection which
has helped Virgin Megastore to continue to grow in the Middle East.

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