RENTAL RACKER ADDS STORES, BOOSTS SALES

DAN ALAIMO

COON RAPIDS, Iowa -- The biggest force in supermarket video that almost no one has heard of is expanding rapidly.

E.T. Video here was a regional racker of about 1,000 rental departments in supermarkets and convenience stores until January of last year when it bought a similar-sized program from distributor Major Video Concepts, Indianapolis, which was closing down. Immediately it went from 15 states to 40, and while the bulk of its business is in small independents, it also counts Raley's, West Sacramento, Calif., and Eagle Food Centers, Rock Island, Ill, among its accounts.

"We pretty much doubled our size and went from regional to national overnight," said Brad Kanne, vice president, sales and marketing.

After culling many underperforming departments, E.T. now has a total of 1,900 stores that it services with its rental program and an additional 1,000 that it provides previously viewed videos to. The rental departments range from small inline sections of 16 to 20 linear feet, to live inventory departments of 1,000 square feet, he said.

And the racker continues to expand rapidly. E.T. has added 200 new stores since the beginning of the year. Many of them are retailers seeking to free themselves from the detail work of running an effective video program but who still want to keep video for their customers, Kanne said. About half are retailers that at one point had video rental and decided to get back in.

"Independents are looking for a niche. They are looking for services. They are looking for a way to draw people into their stores. And I hear all the time that they are afraid of what will happen if a Wal-Mart Supercenter opens in their area," Kanne said. Video rental is one service the supercenters don't have, he said.

But where E.T. really shines is in spiffing up old departments. "We will reset the whole department, and we have our own specially made point-of-purchase materials. So when we come in, we will re-sign and re-image the department, and come up with a marketing plan," Kanne said. In many cases, the racker has also added DVD product to the rental inventory, he said.

As a result, "in most cases, we see an increase in revenue, and for many of them we have doubled sales."

E.T. is now in the process of revamping some of Raley's departments, where it is also testing the pay-per-transaction program of Rentrak Corp., Portland, Ore. It is unusual for a shared-revenue racker to get involved with a shared-revenue buying program like Rentrak's, but Kanne hopes the increase in copy depth will drive the rental of other titles, as well as sales of previously viewed product.

"There's no doubt that when you put the pencil to those particular titles, you make very little. But we are looking at how it will affect the big picture," Kanne said.

The competition in the Sacramento market was another reason for testing Rentrak with Raley's. "There's a Blockbuster or a Hollywood in every parking lot, so we are trying to be as competitive as possible," he said.

It is best not to focus on Rentrak as a shared-revenue provider, said Andrew Miller, director of Rentrak's supermarket division. "We are a distributor selling tapes inexpensively into that environment. If he has more tapes for the money, he does more volume, and you drive business that way," he said.

Of E.T., Miller commented, "They are a major player. They are well capitalized and well positioned for the future of the business, and I think you are going to hear a lot more about them in supermarkets going forward."