SLONE'S UNIT IS GIVING VIDEO VENDING MACHINE A SCREENING

DAN ALAIMO

LEXINGTON, Ky. -- Slone's Signature Markets here is testing a new generation of video vending machines in one store, and may extend the test to other stores, said Bob Slone, chairman.

"We are always looking for ways to draw more traffic and that's the real reason we looked at the video vending machine," said Slone. "We have been very pleased with it so far." The test began in August. "We are in discussions right now to put them in other stores," he said. Slone's has 12 supermarkets.

The machine, which was shown last month at the East Coast Video Show in Atlantic City, N.J., holds up to 1,000 units, more than twice as many as past venders, said Michael McLaughlin, president of Video Vending North America, also of Lexington. The MuVi Video Vender, made by Systems Italia, Zane, Italy, can be used to rent or sell videos, although Video Vending, an exclusive distributor in the United States, is now only renting. The inventory includes DVDs.

The machine at Slone's is one of six test units the company has operating under the CineVault name. "The supermarket location has done extremely well. It's our No. 2 location," said McLaughlin. It is located outside the store next to the entrance. Video Vending operates it on a leased-space basis.

"We lease the space to them and get a flat fee," said Slone. But the traffic was more important to him than the income. "They take care of everything. The videos go right back into the machine. There is virtually no maintenance to keep it up," he said.

Slone's once had video-rental departments, but took them out when the big video specialty stores started building up in the Lexington area, he said. "We felt at the time we were not getting the return from the space video was using. But one of the unique things about the vending machine is it's no larger than a bank teller machine," Slone said.

The test at Slone's is of indefinite length, said McLaughlin. The company plans to have 10 locations by Thanksgiving and as many as 20 by next summer. Besides Slone's, Video Vending is in discussions with another supermarket chain in the Lexington area, which McLaughlin would not identify.

There have been several attempts to put video vending machines in supermarkets, but none have succeeded, said industry observers. Besides carrying more inventory and new release depth of copy, the new machines differ from past efforts through their use of advanced technology, said McLaughlin. For example, the system resembles that of automated teller machines and customers access it with a magnetic stored-value card. Also, customers use a preview screen on the machine to screen and select their titles, he said.

"We've got all the new releases as well as all the different categories. Our machines hold from 500 to 1,000 units so that makes it truly viable in today's market where you need decent copy depth along with some breadth of catalog," said McLaughlin.

Customers sign up to use the machine inside the supermarket and receive the stored-value card, but that's all they need to do in the store. "You obtain the cards at the customer-service desk and you put money on them at the machine," said McLaughlin.

"ATMs have re-engineered the banking business, so we are retooling the video-rental business with a similar interface. The customer feels that the best way for them to accomplish a transaction is to do it themselves. Through the database and the color screen, we are able to replicate the experience of a video store within a very small space," he said.

"With old machines, which were unsuccessful, there was no ability for the machines to interact with the customer or assist the customer in making a choice," said Nicholas Weare, chairman of Video Vending North America. "Not only are we saving them time, because we are open 24 hours a day, we are actually helping the customers choose the movie that they would like to enjoy, and the customers want help. So we are using the technology in a way that wasn't available before," he said.

The vending machine also uses a novel rate structure, offering customers a six-hour rental on new releases, if they want it, for $1.99. Twelve hours is $2.99, 24 hours is $3.79 and each additional 24 hours is $3.49. Catalog titles are $1.99 for two days and $1.25 for each additional day. Children's videos are free for the first 24 hours and $1.99 a day after that.

"You can rent and return 24 hours a day. That's part of what makes the six-, 12- and 24-hour rates work. We see a lot of involvement in our machines by people who work shifts, and they are very happy to see a 24-hour video-rental operation," said McLaughlin.

"For grocery store owners who are thinking about getting out of the video-rental business, or if they have gotten out of the video business, this is a way for them to get back in and provide the customer with a service they have come to expect in a grocery store," he said.