THRIFTY EXPANDS, BUILDS ON RENTALS

DAN ALAIMO

BURLINGTON, Wash. -- Thrifty Foods is rapidly expanding its video rental program.

A year ago, the company had video in all 12 of its stores. Now, with acquisitions and upgrades, the total stands at 21 of 23 stores. Additionally, ground has been broken for a new store that will have a state-of-the-art live inventory department, said Sandy French, video coordinator. "Video is important to bring in the foot traffic for grocery, bakery, deli, pharmacy -- the whole store," said French. "Almost all of our video departments are right up front. The customers come in to get a video for the night, but they also need milk, they also need beer, they also need pop." To take fuller advantage of the video traffic, Thrifty is strengthening its service center operation, she said. "We have always essentially been a video store within a grocery store. But within the last year, we have gone into the complete array of services, like Western Union, money orders, Lotto, stamp sales and [United Parcel Service] shipments," said French. Those services have brought even more people into the retailer's stores, she said. "The customers come in to buy a lottery ticket, but then they see the movies, or they will be paying for their movies and then they hear the lottery machine going, so they purchase a Lotto ticket, too. Plus, Western Union draws a lot of traffic," she said. Some stores offer a gourmet line of chocolates at the service counter, as well. The goal is to provide more one-stop shopping for Thrifty Foods' customers. "Everything you need will be at Thrifty Foods. Our goal is to be the best supermarket in the Northwest," said French. A disadvantage of combining the various services with video is long waits for some customers at certain peak times. "That has become a problem. You have to work twice as hard at it and twice as fast," she said. Most stores are set up with two checkout terminals and operate during busy periods with two lines: one for video and one for everything else. But adding the services has been worthwhile, she noted. "It brings in so much more foot traffic and volume, which is something that you really need to have," she said. Thrifty Foods also has begun to combine video with floral, French said. "Video and floral can help boost sales of each other. You can cross merchandise. Plus it makes the department look just so much nicer," she said. The two will be combined in the new store the chain is planning, she added.

The retailer is giving audio books a trial in three stores, where they rent for 99 cents for one day, $1.98 for three days, or $4.98 for a week. "They don't blast out of here, but we have a lot of customers who really enjoy them. They are inexpensive to buy and the profit is good, but they just don't move as fast as a movie or a game," she said.

Sell-through is an important growth area for Thrifty Foods, said French. The retailer is focusing on selling shippers of the big hit titles and was very impressed with how quickly "The Lion King" moved out of the stores. "The customers were just grabbing them left and right. It did exceptionally well. The sales were way up there," said French.

As Thrifty Foods buys stores from other operators in Washington, it has been converting existing racked, shared-revenue rental programs to departments that it owns and operates, said French. "Since we don't have to share the revenue with anyone, we get more of the profits and have more control about what titles go in," she said. The result of taking over the racked department is "a lot more satisfied customers, an improved selection, and more profits," she said. Customers recognized the difference in the video operation immediately, partly because of more advertising, but also because of the upgraded presentation, French said. When the retailer takes over a racked department, it typically finds that "the selection of titles just isn't there. The new release quantity isn't there. The video department managers felt that they had no control over what the other company brought in. They just brought in the titles they wanted to bring in," French said.

When buying is done by the individual store managers, stores are able to tailor their selection to their clientele. For example, one store gets a lot of hunters and fishermen. "So they are into more action movies than drama," she said. Meanwhile, French reviews the orders to make sure they are within budgetary guidelines.

"Games go well in all stores," said French. While video rental inventories in Thrifty Foods' stores range from 1,400 to 4,000 tapes, there are 200 to 800 games in stock and these represent 20% to 25% of the revenues. "We've always been really gung-ho on games. They really go for us," she said. French has seen no decline in the rental activity on 16-bit games, which are said to be at the end of their product cycle. "Some of the stores have a few 8-bit games left and we still get some renters for those. A lot of other stores don't have them anymore, so the customers come to us. But some of my stores have discontinued them, depending on what area they are in," she said. Thrifty Foods has had an offer of three videos for three days for $3. "We've been doing it for about a month and a lot of our older titles are moving again," said French. The promotion serves several purposes. First, it draws customers to the store. Then it attracts customers who don't need to come to the store every day. Finally, "it's to rent catalog titles that have pretty much died on the shelf. These are titles that have already made all the money that you are probably going to make on them, so what we get from this promotion is sheer profit," she said. Often, a customer will come in for the 3-3-3 offer and then get a new release, too. "They will watch the new release first, come back the next day to return it, and keep the other three," she said.