NEW ENTRIES HEAT HOUSTON'S VIDEO RENTAL MARKET

DAN ALAIMO

HOUSTON -- Newcomers Albertsons and Hollywood Video are upping the competitive ante for video rentals in this market area. Houston is widely regarded as the birthplace of supermarket video, This is as a result of distributor ETD Entertainment Merchandising here putting first Randalls and then the Kroger division, also here, in the video business in the early '80s. The supermarket rental programs here survived and thrived despite the Houston market being one of the first in the nation to see a widespread rollout by Blockbuster Video, Fort Lauderdale, Fla. Now another major specialty store retailer, Hollywood Video, Portland, Ore., has big plans for Houston, and Albertsons, with its well-honed video rental formula, is moving in as well. "With Blockbuster, Hollywood and the other video superstores, amateur hour is over for supermarket rental programs," said a video distribution executive, who asked to not be identified. "I look at our main competitors as being Hollywood Video and Blockbuster," said Dorothy J. Jones, category manager, Randalls Food Markets, Houston. "That's who I feel we are up against." Depth of copy and convenience are the key to competing with the specialty stores, she noted. Randalls program is widely respected in the industry as setting a standard for supermarket video, according to multiple industry sources. For the Kroger Marketing Area based in Houston, an attractive department with a large presentation of videos is the most important competitive element, said spokesperson Gary Huddleston. "You have to give the customer a wide selection to be in the video business. To give the customer that type of selection, you certainly need the space, and to commit the inventory," he said. In Houston, Kroger continues to put large, live video rental departments into all its new stores and major remodels, he said. Nationally, Kroger Co., including all divisions, ranks number five among video rental retailers, according a study by Video Software Magazine. But some Houston retailers, such as Fiesta Mart and Gerland's Food Fair, have cut back on video rentals. "We really don't have enough room to do it right -- we can't offer enough titles. So we just decided to get out of it," said Kim Botkin, nonfood buyer, Gerland's Food Fair, Houston. The company had as many as 14 video departments in the early '90s, but now has two. It had used video vending machines in some stores until the supplier went out of business, said Botkin. Houston remains one of top supermarket video markets in the country. Some estimates put supermarket's market share in rentals at over 20% there. Randalls Food Markets, with 49 video departments in 52 Houston stores, and the Houston Kroger Marketing Area, with 56 departments in 100 stores, are the clear leaders among supermarkets. Randalls will add one more store with video this year, while Kroger will add five, according to the companies. Albertsons, based in Boise, Idaho, is in the midst of an aggressive national expansion, and will add 8 to 12 stores this year in Houston to the 12 it opened last year, according to local press reports. All new Albertsons stores have live departments of 288 to 360 square feet and 1,800 to 2,600 tapes, SN has found through store visits. Among the big specialty chains, Hollywood Video currently has 16 stores in Houston, and plans to add 30 more by the end of the year, according to a company source. Blockbuster has 82 stores in the Houston market. Information about Blockbuster's plans for expanding there was not available, but industry observers noted that the specialty chain may have reached saturation in that market. Although it's now based in Fort Lauderdale, Fla., Blockbuster was founded in Dallas, and Houston was one of the first markets it expanded into.

Because of the strength of Randall's and Kroger's programs, supermarkets have held their own in Houston, said Walsh. Kroger's new Houston rental departments range from 800 to 1,200 square feet with 3,000 to 3,500 pieces of rental inventory. New releases are 25% to 30% of the rental inventory. Randalls buys much deeper on new releases than Kroger, with quantities varying by store location and whether they are available through shared transaction fee companies. Randalls is the only retailer in the country known to be using both the shared-transaction fee programs of Rentrak Corp., Portland, Ore., and Supercomm, Dallas. With special promotions offered by Rentrak, the retailer has put in as many as 200 copies of "The Beverly Hillbillies" in some stores. The maximum number brought in for "Die Hard with a Vengeance," a major Rentrak promotion, was 120, said Jones. The shared transaction fee programs "make it possible for me to compete" with the big video specialty store chains, said Jones.

There was little difference in the rental rates for new releases in the Houston market. The specialty stores were highest, with both Blockbuster and Hollywood at $3. Gerland's was at $3, as well, while Kroger was at $2.99. Randalls priced its new releases at $2.50, while Albertsons and Fiesta were at $2.49.