FRY'S BEGINNING TO TEST CD-ROM RENTAL ITEMS

DAN ALAIMO

PHOENIX -- Fry's Food Stores of Arizona has begun testing CD-ROM rental products as part of a move toward a broader offering of home entertainment products in its video departments.

The compact disc-read only memory interactive multimedia products will be tested in a new live inventory video department that also includes audio books for rent, computer software for sale and new video games for sale.

The CD-ROM program, from Supercomm, Dallas, is Fry's first experience with a pay-per-rental, shared-revenue program.

The store has been open for six months, but CD-ROM was put in last month, according to industry sources. The store, located in the Ahwatukee area of Phoenix, is Fry's seventh live inventory department and its most aggressive venture yet into a total entertainment software concept, the sources said.

The new Fry's video department stocks 3,000 pieces of inventory in more than 800 square feet of space. Executives at Fry's did not return phone calls for comment about the department.

The Phoenix area is one of the most competitive markets for supermarket video programs in the country, noted industry observers. In a market area that has many strong video programs, this new Fry's department has the most advanced product mix and merchandising, they said.

Nearly all the chains in the area have video rental programs, including Megafoods Stores, Smith's Food & Drug, Smitty's Super Valu, Albertson's, Bashas' Markets and Safeway. Abco Markets is the only major chain that doesn't rent videos. No other Phoenix-area supermarket is known to carry CD-ROM.

"Just about all of the supermarket chains in Phoenix see the advantages of a video rental department. In the last two years they have gotten extremely serious

about it, with Fry's leading the way," said a video distribution executive, who asked not to be identified. "Fry's recognizes that their competition is Blockbuster Video and not the small video shop. That attitude is allowing them to enjoy the sales they are presently seeing," the executive said. "They have begun to recognize and reach for the benchmark of 2% of total store sales." Fry's is one of a very small number of supermarket retailers in the country that sell new, 16-bit video game cartridges for Nintendo and Sega machines. These video games are stocked behind the service counter of the live inventory department, apparently for security reasons. When SN visited the new department, box art from the game packaging was displayed attractively in clear plastic sleeves on a wall near the counter. In stores with smaller video departments, a downsized version of the display is located on the service counter. Prices for popular games for the Sega Genesis machine at the store were: $54.99 for "NBA Jam," and $49.99 for "Aladdin." The new department also includes computer software for sale, with games and educational programs priced from $5.95 to $19.95. Fry's stores with video rentals are carrying audio book rental programs from Rezound International, Minneapolis. The audio books are offered for 99 cents a day, $1.99 for three days and $3.99 for seven days. More than 20 CD-ROM titles are merchandised next to the video games rental inventory in the department. The SN was at the store the CD-ROM titles were renting for $3.99 for a three-day, two-night period. The CD-ROM selection is made up of titles from Compton's NewMedia, Carlsbad, Calif., a leading CD-ROM company. It includes educational, entertainment and informational titles, such as "Beren-

stain Bears Learning at Home," "Lifestyles of the Rich and Famous Cookbook" and "Compton's Interactive Encyclopedia." These products came from Supercomm, confirmed Des Walsh, vice president. He would not disclose any other details. Supercomm distributes the Compton's line on a pay-per-rental, shared-revenue basis. "We believe that Fry's and other progressive retailers are looking toward the future and identifying where their customers desires are going to be," said Walsh. "As computers become a bigger part of everyday life, CD-ROM will become a mass-market product. Even today, there are stores in every chain with an upscale customer base, which can benefit from having new technologies available." Overall, the Kroger-owned Dillon Cos. group of stores, which includes Fry's, Dillon, Hutchinson, Kan., and King Soopers, Denver, is ahead of others in moving toward a total entertainment product offering, noted Walsh. "What we see there is a retailer committed to meeting their customers' needs across a broad range of entertainment options. In the long run, that is the key to making the stores a true destination shopping point for their customers," he said. Video is like any other department in the supermarket, said Walsh. "The more choice you offer customers, the more customers you are going to attract," he said. CD-ROM products combine audio, video and text elements on 5-inch compact discs. Most are playable on devices connected to IBM-compatible personal computers, although others can be played on machines that hook up to televisions. Pay-per-rental, shared-revenue programs like Supercomm allow retailers to pay a small amount to acquire videos or other software and then split the revenues 50-50 with the supplier. Transactions are tracked electronically. Video rental rates at Fry's are $1.99 for new releases, 99 cents for other titles. Video games from the department's extensive selection rent for $1.99. The retailer promotes a 99-cent special on all titles on Mondays, Tuesdays and Wednesdays. Prices on sell-through videos at the store were: "Mrs. Doubtfire," $12.99 and "Sir Charles," $9.99, both on promotion; "Batman: Mask of the Phantasm," $14.99; "We're Back," $17.99; "Secret Garden," $17.99; "Fox and the Hound," $17.99; the "Fox and the Hound" gift pack, $21.99, and "The Fugitive," $17.99.