Safeway raises curtain on DVD rentals; Grocery chain testing kiosks in Calgary (The Calgary Herald)

Grocery chain testing kiosks in Calgary

May.12, 2007 The Calgary Herald| A grocery store giant is entering the booming video rental industry with Calgary its pilot project market.

Canada Safeway has installed fully-automated DVD kiosks in 10 of its Calgary stores -- a first in Canada. The machines accept credit cards and feature $1.49 per night rental with no membership requirement. Safeway plans to install them across Canada in the next year.

Betty Kellsey, public affairs manager for Canada Safeway in Calgary, told the Herald the company wants to see how the marketplace accepts the concept.

"Our goal is to have about 200 locations operational within a year," said Kellsey. "So basically every store (in Canada) with a few exceptions will have the machines.

"And the only reason why a store would not have a machine is because of technical issues -- if we can't pull the line or get the proper wires. We hope to have most of our locations up and operating within a year if it goes well."

There are 35 Safeway stores in Calgary and area and 214 across Canada.

Kellsey said the company's research indicated one in three Canadians rent a movie each and every week and 68 per cent of Canadians rent movies at least once every three months.

DVDPlay is exclusively partnered with Canada Safeway in Western Canada. It is the leading operator of DVD rental kiosks with over 1,000 currently in operation across the United States with that number expected to increase to 3,000 kiosks by the end of 2007.

Spokesmen for other grocery store chains said they do not have video rentals in their Calgary stores.

"I have no doubt that time-pressed Calgary consumers will embrace the concept of DVD rental machines at Canada Safeway stores in the greater Calgary region," said Michael Kehoe, a Calgary retail real estate broker with Fairfield Commercial Real Estate Inc. "Local grocers are in a ruthless battle for market share and innovative new offerings such as DVD rentals, sushi bars and in-store bistros will enhance their value proposition to their customers."

Debi Andrus, assistant professor of marketing at the University of Calgary's Haskayne School of Business, said grocery stores operate mainly on their food items but these are "very low margins."

"So in order for them to continue to grow or maintain profitability that's why they have the wide range of services and the wide range of products so that they're able to balance the low margins with the higher margins," said Andrus.

"There's also a trend in retail...in terms of self-service, and vending machines are self-service. So you marry your need for margins with the trend for self-service that's why this particular vending machine with DVDs makes sense for them to try to see if they can make some margin on that."

At the Safeway kiosks, there are no late fees for customers who fail to return movies. It's $1.49 each night the DVD is kept. Customers can return DVDs to any participating store -- not just the location they rented from. They are fully-automated kiosks, credit-card enabled, and no exchange of cash is required.

The machines are stocked with new releases every Tuesday and have up to 100 titles in every kiosk.

They are located at the front of the stores.

Kellsey said the new concept was launched in Calgary because this is Canada Safeway's head office and "we know that Calgary is such a thriving marketplace.

"We thought it would be the best place to test this type of product," she said.

On the machine is a sign that says "i'm your new video store" and a three-step process -- touch screen to select movie; swipe payment card to rent; return movie in slot below.

Payment can be made through American Express, MasterCard or Visa. A receipt can also be sent to your e-mail address.

"One thing that we've learned is when people go grocery shopping, particularly on the weekends, one of their common additional stops that they make is to their local video store," said Kellsey. "So our goal would be to encourage people to come to Safeway to not only buy their groceries but also to pick up their DVD at the same time. It's a very family-oriented, entertainment-oriented package. And there's no question about it. We want to become a destination. So when people are buying their pop and their chips and their goodies and their snacks and they're entertaining, it's one-stop shopping."

Kellsey said the company's research into the video market in Canada also found that people are turning back to their homes for their focal point for entertainment.