INGLES PRESSING FAST FORWARD ON VIDEO RENTAL EXPANSION

DAN ALAIMO

BLACK MOUNTAIN, N.C. -- Ingles Markets here plans to increase its number of video rental departments by more than 42% by the end of the year.

Having recently installed video rental in its landmark 200th store, Ingles is aggressively expanding in video. The retailer may add 30 more departments by the end of the year for a total of 100, said Tony Federico, vice president for nonfood.

"Our same-store video sales are probably up 26% over last year, so our business is moving forward," he said.

Ingles takes several departures from usual supermarket video practice. For one, its rental inventory is all new releases. Secondly, its new departments do not use live inventory, where the actual tapes are merchandised on the sales floor protected by a security system.

The reason for not using live inventory is "theft, pure and simple," he said. The tapes are kept behind the service counter.

As to the emphasis on new releases, "we have limited space and what the customers really want is the new releases," said Federico.

"Initially, our objective was not to make money in video, but to draw store traffic. We were trying to upscale the whole store image and give customers another reason to come into the grocery store," he said.

Even with the focus on new releases, Federico has seen video rental become a strong profit center. "It just amazes me how much money you can make in this business," he said. Ingles departments average about 2% of store sales, he said.

Ingles video departments range from 550 to 700 square feet in the newer stores, said Federico. Typical rental inventory is 3,500 tapes. Rental rates vary depending on competition, but in most cases new releases go for $2.99 for two nights, or three movies for two nights for $6.

The decision to put video into stores depends on competitive factors and rural locations tend to do best. "You can see it in your numbers. If you've got a Blockbuster or a Hollywood within a mile of your store -- and most of them are within a half-mile -- you are going to have a lower percentage of sales. But when you get out to some of the rural towns, we have some doing over $10,000 a week," he said.

"In most of our towns, we are the largest or the best video department in town," said Federico. Because of its attention to upscale aesthetics, the departments are among the better-looking video sections in the supermarket industry, he added.

"Our merchandising team did an excellent job building the department," he said. The newer video departments, like the chain's 200th store in Woodbury, Ga., are similar in appearance. They have large marquee signs in front and poster boxes on the walls to highlight the newest titles.

"It's clear that Ingles views video as a part of the one-stop-shopping concept," said Bill Bryant, vice president of sales for grocery and drug at Ingram Entertainment, La Vergne, Tenn. "Ingles has always been on the cutting edge in terms of new ideas and it operates as if it were a national chain. Ingles has done phenomenally well with their rental departments and we are very pleased to be their supplier," he said.

Commenting on Ingles extraordinary emphasis on new releases, Bryant said, "80% of what rents is new releases, so for Ingles to focus on that makes perfect sense. If you have restricted space for a rental department, it makes perfect sense to focus on new releases. That's what the consumer is looking for in most cases and it is an area that supermarkets can really capitalize on," he said.

Sell-through is merchandised in the main part of the store, it was noted. "There will be some copies inside the video department, but we believe in taking it outside the department. The store managers normally get it in the high-traffic area in front of checkout lane No. 1," said Federico.

Diversification lies ahead for Ingles' video program, he said.

"The future for us is going to be a combo section of video, music, such as the CDs and cassettes that we are starting to test in some of the stores, and computer software," he said.

Some stores have up to 12 linear feet of computer software, while others have smaller spinner racks. "We are doing exceptionally well with it," he said.

Federico confirmed other retailers' findings that software customers in supermarkets do not limit themselves to budget titles. Prices range from $5.99 to $49.99, with some as high as $69.99. "We are selling a tax program right now that is just blowing out of the stores," he said.

The retailer is also just starting with DVD for rent. "We are trying to get some specific numbers on how many units of DVD were actually sold this Christmas, but we have not been able to get our hands on that information yet.