H-E-B MAY GIVE TOWER RECORDS A SPIN IN UNITS

RANDY WEDDINGTON

SACRAMENTO, Calif. -- International entertainment retailer Tower Records is negotiating with San Antonio-based supermarket chain H. E. Butt Grocery Co. to add "store-within-a-store" operations in selected locations. "It's one way for us to broaden our store count in places where we don't have a heavy density," said Kevin Cassidy, Tower vice president of North American operations.

H-E-B did not return phone calls to SN for comment. At one time the chain had extensive video-rental departments, but they began to be phased out in the mid to late 1990s. The company also owned 33 freestanding video stores that were sold to Hollywood Entertainment Corp. in 1994.

The Tower/H-E-B negotiations follow on the heels of the concept's first test markets, as Tower Records opens stores within two The Good Guys electronics outlets in Las Vegas this month.

Tower, which currently has two Texas stores, in Dallas and Austin, sought the supermarket alliance after doing some revealing data analysis, noted Cassidy. "We had done a local promotion in our Austin store with a kiosk that allowed customers to access electronic gift certificates," he said. Looking at the information, "both we and H-E-B noticed that there was a significant amount of activity on these kiosks for both of our respective companies. So we started a dialogue and that began the negotiations."

Although negotiations are ongoing, Cassidy expects that the first stores will "probably be in San Antonio, where H-E-B's home office is." His initial predictions are for two stores to open next year.

Tower plans to stock these stores with "about 30,000 audio units, which would consist of about 20,000 titles," said Cassidy. Whether the locations will stock video titles as well "will depend on H-E-B, since they do have agreements with other entertainment companies," he said. "Obviously, we would tailor the product mix to whatever the clientele is in the local market."

In another facet of the operation, Tower plans "to install Internet kiosks linked to our Web site that would allow customers, if we don't have a specific SKU in stock, to access the Web site, and have it delivered to any location. What we'd like to be able to do is not only expand our own brand but expand our dot-com business as well," said Cassidy.

Tower, which has more than 200 stores worldwide after operating for more than 30 years, sees the store-within-a-store concept as a program with a future. "As people like Wal-Mart expand into gasoline and groceries," Cassidy said, "perhaps more supermarkets will look for opportunities to brand with quality retail companies to enhance their own value."