BLOCKBUSTER LOOKS TO WIDEN SUPERMARKET TEST PROGRAM

DAN ALAIMO

LOS ANGELES -- Blockbuster Entertainment Group, Fort Lauderdale, Fla., hopes to expand its test program of video rental departments in supermarkets, said Gerry Geddis, president and chief operating officer. The company will make a determination about the test program's future by year's end, Geddis told SN in an interview following a business session at the Video Software Dealers Association convention here last month. "We hope to have enough tests by the end of the year so we can make some decisions about a 'go' or 'no go' in 1997. We are looking to have results by the end of December," he said. Blockbuster is talking with "more than five" supermarket chains about expanding the program, said Geddis. One of the chains is Smitty's in Phoenix, now owned by Smith's Food & Drug, Salt Lake City. Blockbuster already operates full-sized video stores within two Smitty's buildings. Geddis would not identify the other chains involved in the discussions. "We truly want to test the program. We want to test it in different demographic parts of the country and try different variations to see if we can make it work," said Geddis. "If it works, then without question, we think we've got the program to roll out," he said. Blockbuster will soon have a dozen test video rental departments: three in supermarkets of Big Bear Stores, Columbus, Ohio, and nine in Wal-Mart Supercenters, Bentonville, Ark. The store-within-a-store sections are 2,000 to 2,500 square feet with 4,500 to 5,000 pieces of rental inventory, about half the size of a typical Blockbuster Video store. The Big Bear test is being conducted by Blockbuster franchisee, Buckeye Entertainment Corp., Dublin, Ohio. The Wal-Mart departments are being run by the parent company. Buckeye has opened two Big Bear departments so far with another scheduled for mid-August, said Tom Carton, president and chief executive officer of the franchisee. "It is something that we are having some success with. We are encouraged enough to do a third one," he said.

Blockbuster waited until now to try departments in supermarkets because it was focused on developing its base of specialty stores, said Geddis. "We were putting our full effort into opening superstores, perfecting them and building up our brand and presence," he said. "We think we have the basis now to branch off. For the growth of profitable market share, which is the only kind we are interested in, we need to have venues other than the 6,000-square-foot superstore," said Geddis. But while Blockbuster is just testing the waters with supermarket departments, Hollywood Entertainment, Portland, Ore., has not been pleased with the results from an eight-store test with Fred Meyer Inc., also of Portland. "We have not done nearly the revenue that we or Fred Meyer wanted to do in the stores that we are in," said Mark Wattles, chairman and chief executive officer, also speaking to SN after the VSDA business session. The departments, which opened in the spring of 1995, packed 6,000 rental units into an average 1,800 square feet. "The consumer wants selection, big selection, which is why Hollywood Entertainment and Blockbuster are so successful. But you can't put that kind of selection in a small little area. I don't think it is much more complicated than that," said Wattles. Hollywood is not phasing out the existing departments and will continue to run them as long as Fred Meyer wants them, he said.