BASHAS' WEATHERS THE RENTAL STORM

DAN ALAIMO

CHANDLER, Ariz. -- In the face of the same staunch competition all supermarkets face in video rental, the program at Bashas' here continues to flourish.

Sales were off in the second half of last year by about 3%, said Bill Glaseman, video specialist. But this is a far cry from the double-digit decreases that have other chains reconsidering their commitment to video rental.

With a conservative approach to buying and by forgoing drastic increases in depth of copy, the chain has so far weathered the storm of competition from specialty chains like Blockbuster Video, Hollywood Video and Video Update, said Glaseman.

"I am able to stay within my budget, and I am getting my proper return," he said. "I might not have as many copies as customers want for a week or two, but it is working out all right."

Glaseman has been running Bashas' video departments for a dozen years, first as a racker and for the last six years as a direct employee. He credits customer loyalty and top management support for the program's success.

"We have the same releases as the other stores do, and we have very acceptable rental rates. Meanwhile we benefit from the internal volume of our stores. A lot of customers go in and out, and if we have a video department there, they tend to rent videos while they are shopping," he said.

So far the strategy has been successful. For example, an in-store consumer survey conducted by SN in a new Bashas' store in Chandler two months ago found that customers gave Bashas' video program high marks. While they recognized that Bashas' selection and new-release availability were less than at the specialty chains, the consumers rated the grocer's video program nearly as good.

Bashas' ranked ahead of all other competition when it came to convenience, overall shopping experience and rental rates (the store was running a grand-opening special at the time of the survey). Half the customers said they planned to rent a video on that shopping trip; most did not have a specific video in mind. Seventy percent of the shoppers said they planned to browse and then select a title, while 78% said they expected to find what they wanted in the store's video department.

"I was very pleased to find that even though we don't have as many new releases, our customers seem to be happy with what we are doing," Glaseman said.

With 44 rental departments in its 94 stores, Bashas' is putting live video departments into all its new stores and expanding video sections in remodels. The company put in four new departments last year and remodeled another. This year it will add two new departments, and three stores are being remodeled. "In each case, the remodel is giving me larger video exposure," said Glaseman. The two new stores will be completed late in the year, he said, and one of the remodels was recently finished.

The Chandler store, which opened in November at 1920 West Chandler Blvd., is typical. Located at the store's front, the video department is 480 square feet. It opened with some 1,200 tapes. Of those, 448 (38%) were new releases. The department has a red-and-white color scheme with neon signage along the upper walls. The white ceiling and windows on two sides to the main store gave a feeling of openness remarkable for such a small department. There are three monitors.

In addition to prerecorded video tapes, the store also rents DVDs and Nintendo 64 and Sony PlayStation video games. For higher margins and convenience purchases, sell-through is offered on a rack immediately outside the department entrance at prices an increment higher than some of the chain's competitors'. For example, "The Mask of Zorro" was $16.99, compared with $14.99 at nearby Fry's and Albertson's stores.

As part of the grand opening, the new store was offering all videos for 88 cents a night. At the end of December, the rental rates reverted to Bashas' more common $1.99 for new releases, games and DVDs, and 99 cents for catalog, all for two days.

By comparison, at the time of SN's store visits in the Phoenix area the base new-release rental rate was $2.99 at Fry's, $2.97 at Smith's, $1.99 at Albertson's, $3.49 at Hollywood Video, $3.25 at Video Update, $3 at independent Video Paradise and $1.99 at Blockbuster Video.

Bashas' uses the 88-cent offer in all its new video departments, Glaseman said. "We go in with the lower price for between four and six weeks. The customers love it, and it gives us a very fast buildup of our customer base," he said. When the retailer goes to the higher rental rates, two regular promotions are introduced: a rent-five-get-one-free card and a savings guide that offers consumers 50 cents off the rental of certain new-release titles determined by studio co-op advertising.

Glaseman knows the card is successful, he says, "because I get a huge envelope of them returned to me every week." From the numbers he sees on the monthly specials, "I am sure they get results. They are also easier to measure than radio, because radio dollars go out over the air and stay there. We don't know what is happening." Glaseman credits distributor ETD Entertainment Distributing, Houston, for helping make these programs a success.

The opening of the new Chandler store coincided with an increased commitment at Bashas' to video games and DVD. "We are adding more games to our better stores now, and they are renting well," he said. Scratched PlayStation discs have been a slight problem, he noted, which leads to some concern that the same may happen in the future to DVDs. But in the meantime, Bashas' is gradually building up the number of stores that offer DVD and inventory.

"We were the first ones in this market to rent DVDs. I put kiosks out as soon as they became available. They didn't do that well at first, but it is really growing now. So we are adding new releases and putting DVD into additional stores," said Glaseman.

Bashas' experimented last year with vastly increased depth of copy in two stores, but the test was a failure, said Glaseman. On about 20 titles he put in three to four times as many copies. For example, on titles for which he would normally buy four or five copies a store, he brought in between 15 and 20 units. "But not one title came up to what I would need to get my money back," Glaseman said.

"The only thing that test proved to me is that we have just so many customers coming into that store who are renting movies, and I didn't need 15 copies to satisfy them," he said.

"What happens to all those extra copies?" he asked. "First of all they are taking up space, and secondly I had to pull a lot of them out and sell them off at a low, previously viewed price. So from my standpoint, in my market, I don't think that copy depth is the answer."