Giant Eagle Automates Video Rentals

DAN ALAIMO

PITTSBURGH — Giant Eagle here, a widely acknowledged leader in supermarket video, will close its rental departments, putting more of an emphasis on sell-through DVDs and automated rental kiosks, a company spokesman confirmed.

The chain received SN's first Supermarket Entertainment Retailer of the Year Award in 2002 for its comprehensive approach to video that included video games, sell-through and some of the most attractively designed rental store-within-stores in the grocery business. Many are about 2,500 square feet with their own outside entrances, as well as one from the store.

This news came at about the same time that Blockbuster, Dallas, said it would close 282 stores this year in addition to the 290 it closed last year. Blockbuster has more than 5,000 U.S. stores. Giant Eagle has about 100 Iggle Video departments.

Giant Eagle will continue to shift to sell-through-oriented sections and put in automated DVD rental kiosks, spokesman Dan Donovan acknowledged.

“Responding to industry trends and consumer demands, Giant Eagle is in the process of detailing plans to transition its video/DVD rental business,” Donovan said in a prepared statement. “During the next nine months, the company will transition its video business to focus on sales of DVDs and replace the rental option with DVD rentals via automated kiosks.”

Details on what the retailer will do with the space and which DVD kiosk supplier it will use could not be confirmed at press time.

The retailer has converted some rental departments, such as one in Westlake, Ohio, into sell-though-only operations. It is also experimenting with a new sell-through format in the main part of the store in the Pittsburgh area. Also, the retailer uses machines from Redbox Automated Retail, Oakbrook Terrace, Ill., in some of its GetGo convenience stores.

Other supermarket chains have been gradually phasing out their video rental programs in the past few years. Some, like Wegmans Food Markets, Rochester, N.Y., are replacing the departments with automated kiosks. Others, like Kroger Co., Cincinnati, which got out of rental in most of its divisions years ago, are now simply installing the machines.

Competition from online sources like Netflix and Blockbuster's own Web-based offering have been cited as a major reason for the closings. Blockbuster saw a 13% decline in its in-store business over the past year, about twice what the company was expecting, according to media reports. Overall numbers for the rental business, including online revenues, have remained relatively steady in recent years.

Last week, Blockbuster replaced long-time chief executive officer John Antioco with John Keyes, who was the CEO of 7-Eleven, also of Dallas, from 2000 to 2005, a time when the convenience chain saw strong and consistent growth.

The announcements by Blockbuster and Giant Eagle come about a month after Kevin Tsujihara, president, Warner Bros. Home Entertainment Group, Burbank, Calif., said the studio prefers video-on-demand distribution over the traditional rental model, according to media reports. While studios get 15% to 20% of the rental business, which is estimated to generate $7 billion to $8 billion total annual revenue, video-on-demand brings the studios 60% to 70%. As a result, the studio plans to release at least some movies to the video-on-demand market at the same time it releases them to the retail DVD market, he said.