STOP & SHOP ROLLS OUT DVD RENTAL KIOSKS

WENDY TOTH / Additional reporting by Dan Alaimo

QUINCY, Mass. - Following two years of testing, Stop & Shop Supermarket Co. here is expanding automated DVD rental kiosks to over 400 of its stores, beginning in March.

This represents about 75% of Stop & Shop and Giant Food's 550 locations. The stores, all operated by Stop & Shop Supermarket Co., will install units from automated DVD rental-service provider, Redbox Automated Retail, Oak Brook Terrace, Ill., a majority-owned subsidiary of McDonald's, Oak Brook, Ill. Ahold USA, Braintree, Mass., owns Stop & Shop/Giant.

Stop & Shop decided to roll out the kiosks after a successful two-year trial in Giant Food stores in its Baltimore market, and a 12-month test in Hartford, Conn., Stop & Shop stores. Twelve stores were involved in the test. The company hopes to have the installation completed by June 2006.

The kiosks provide "a point of differentiation from competitors and create return trips from shoppers," Stop & Shop spokesman Robert Keane told SN.

Redbox machines are now in 1,000 McDonald's locations in nine markets. Redbox also has test units in some Smith's Food and Drug stores in the Salt Lake City market, and King Sooper's stores in Denver. Both chains are owned by Kroger Co., Cincinnati, and the machines "will be in a few others soon," said Redbox spokesman Greg Waring.

While some supermarkets may hesitate at McDonald's ownership of Redbox, Keane said Stop & Shop was mainly concerned with the parent company's financial strength. "We knew McDonald's had the funds to roll the program out quickly, if needed."

In November 2005, McDonald's sold 47.3% of its stake in Redbox to automated coin counting and prepaid services provider Coinstar, Bellevue, Wash., for $20 million. This, according to Leslie Baker, vice president, grocery and sales, Ingram Entertainment, La Vergne, Tenn., may be a real advantage for Redbox in placing its machines in supermarkets, where Coinstar has a significant presence. "With the Redbox/Coinstar partnership, I would expect to see Redbox machines as the primary rental vehicle for grocery, although there are many others to choose from," she said.

Keane said Coinstar's connection was not a factor in the decision. "Redbox allows Stop & Shop to expand its one-stop-shopping concept to our customers," Keane said.

Supermarkets, especially those without established rental programs, like the idea of a leased-space, shared-revenue kiosk. "It's the world's easiest sell to get a supermarket to go for one of these vending machines," a source told SN. "Supermarkets love the idea because they can get people to come in and come back with the commitment of 8 square feet of floor space." Because the supplier services the machines, "they don't have to worry about it; they don't have to hassle with it."

The kiosks, which hold more than 500 DVDs in as many as 60 different movie titles, "free up resources for supermarkets," Waring said. "No staffing is needed, the footprint is smaller and it provides an advantage over supermarkets that have traditional video rental programs with devoted space and staff."

The trade-off, however, is less revenue than the retailer would get from a rental operation that they own. "Any leasing program favors the lessor and not the lessee," said Craig Hill, video specialist, Harp's Food Stores, Springdale, Ark.

Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb., which is testing one rental kiosk, said he was skeptical at first, but now sees vending as a complement to a traditional video rental program. "If it does fairly well we could look at purchasing our own machines and keep 100% of the profit. If it doesn't do what we are looking for, we can just ask them to take it out after the trial with no repercussions," he said.

None of the Stop & Shop or Giant Food stores that will be adding rental units have traditional rental programs, Keane said.

The self-service machines offer new titles every Tuesday, "the same day you can get them through any other retail channel," Waring said. Customers use a touchscreen to select a movie and are automatically charged $1 plus tax per night by swiping a debit or credit card.