Music Co. to invest $20 mil in e-tailer, will make it official

Wherehouse Music said Tuesday it will invest $20 million in music, games and video e-tailer CheckOut.com in a move to replace its current e-commerce Web site.

CheckOut.com, launched by the Yucaipa Cos.’ Richard Wolpert and Michael Ovitz in August, will also pour $20 million into its own site to become Wherehouse’s official online seller of music and other merchandise.

Wherehouse will integrate CheckOut.com’s services throughout its 600 stores using kiosks that will enable consumers to preorder merchandise or purchase products that are out of stock. CheckOut.com will now also begin selling used music CDs throught the deal.

Wherehouse will begin incorporating CheckOut.com in its national advertising and in-store displays before the Christmas shopping season.

CheckOut.com will add WherehouseMusic.com’s “Lounge” to its site, a feature that includes live weekly Webcasts of musicians such as Ice T, Melissa Etheridge and the Moody Blues.

The deal reflects the trend of e-tailers who are expanding from the Web into partnerships with traditional brick-and-mortar retailers, hoping to attract more traffic to its Web addresses.

Wherehouse is expected to fold its Internet team together with CheckOut.com, creating a Web venture of over 100 employees.

“The partnership gives CheckOut.com an off-line presence with a leading entertainment retailer and access to Wherehouse Music’s several million customers per month, which we see as a key differentiation for our branding and customer acquisition strategy,” said Wolpert, CEO of CheckOut.com.

Wherehouse Music chairman and CEO Tony Alvarez said the deal will enable the company to focus more on its stores, rather than on the Web.

“Partnering with CheckOut.com allows us to concentrate on what we do best,” he explained. “For brick and mortar stores, the Internet cannot be a hobby.”

Since its launch, CheckOut.com has been scrambling to ink partnerships with retailers and other e-tailers to generate sales. The Wherehouse deal will now make it easier for the company to lure music artists and record labels to participate in promotions to its storefront.

The nonexclusive partnership allows CheckOut.com to form a similar relationship with another retailer, although execs from both companies said they would seriously question whether to partner with another entertainment retailer.

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