H-E-B DECIDING TO STICK WITH VIDEO RENTALS

DAN ALAIMO

SAN ANTONIO -- Contrary to widespread industry rumors, H.E. Butt Grocery Co. here plans to stay in the video rental business, although some individual departments are being taken out, said Mike De La Garza, vice president of public affairs.

"We are not getting out of the in-store video rental business," he said.

"Various departments have been looked at from the perspective of profitability and we will probably convert some of the operations into other space uses within the store. But the majority of the units are going to remain operating and remain a part of H-E-B," he said.

"There is still a demand, and we find that people are still renting videos in much the way that they have for some time," said De La Garza.

H-E-B now has about 35 video rental departments with inventories of 5,000 to 6,000 tapes, he said. Between five and 10 might be closed, De La Garza estimated. In 1994, when H-E-B sold 33 free-standing video specialty stores to Hollywood Entertainment, Portland, Maine, the company had 57 in-store departments.

A number of video supplier sources told SN recently that H-E-B had decided to get out of the rental business entirely. The retailer has apparently changed its direction, said a distribution executive. "They are now selectively committed to the category on a location-by-location basis," he said.

"There will be a little bit of downsizing, but not a substantial amount," said De La Garza. Sell-through's future at H-E-B will be limited, as the retailer only stocks sell-through videos where it has a secured rental department, he said. "We have not had sell-through in the retail areas of our stores for some time now," he said.

De La Garza characterized this as a "marketing decision," but acknowledged that security "was one of the primary issues that affected that decision."

The evaluation of the rental departments will be based in part on competition and "other external factors." Then we will look at other potential uses of that property within the store that would provide a greater return," he said.

How the space will be used will be decided on a location-by-location basis, with an eye toward expanding existing departments such as bakery, deli or produce, he said.