Video BusinessP: SUPERMARKET & DRUG CHANNEL GUIDE: Machine operators to increase presence at grocers, drugstoresMay 4, 2009 Video Business|Supermarket & Drug Channel Guide: As cash-strapped supermarket shoppers resist impulse purchases of DVDs, the grocery store's role in the home entertainment industry is gradually being tied more to the 18-square-foot rental kiosk by the electronic sliding doors than the small disc racks next to the checkout stand.
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Kiosk operators including DVDPlay are looking to expand their presence in grocery and drug stores.
| Annual U.S. DVD rental revenue from kiosks is expected to more than double between 2008 and 2011 to about $1 billion, while traditional in-store rental sales could fall about 20%, according to Adams Media Research. Kiosk operators such as Redbox and DVDPlay are eying supermarkets as a primary area of growth. Although grocery and drug's share of total DVD rental and sell-through revenue isn't tracked, the channel is likely to get a further boost by NCR's recent acquisition of TNR Holdings, whose blue-hued MovieCube and The New Release machines were in more than 2,200 North American retail locations last year, including Canada's Loblaws supermarkets. NCR and rental leader Blockbuster agreed last year to develop as many as 10,000 Blockbuster Express machines in retailers such as Kroger and Albertson's by the end of 2010. Redbox, the largest kiosk operator in the U.S., last year boosted its number of machines in grocers by 53% to more than 5,300 and has added another 350 this year. A division of coin-exchange machine maker Coinstar, Redbox also counts Wal-Mart, Walgreens and former parent McDonald's among its retail partners, along with supermarkets such as Supervalu's Albertson's. Redbox plans to have about 20,000 machines across all retail channels by the end of the year. Redbox estimates that its typical supermarket-based kiosk attracts almost 70 visits a day. “That kiosk is benefiting from, in many cases, 20,000 to 25,000 customers walking past it every week,” says Mark Fisher, executive VP of the Entertainment Merchants Assn. “It's most definitely a symbiotic relationship.” The effect that $1-a-night kiosk rentals have had on supermarkets' non-kiosk DVD numbers remains unclear, but some insist DVD sell-through in supermarkets is still strong. Both analysts and kiosk companies say DVD sales have benefitted from the nearby kiosks by making more people associate supermarkets with DVDs. “It's a peaceful coexistence,” says Melissa Moore, senior VP of sales and marketing at DVDPlay, whose 1,200 red kiosks are in supermarkets such as Safeway and Vons on an exclusive basis. “Given the price of the DVD, we think our proposition is a complement, because we have an opportunity to do a 'try it, like it, buy it.'” Additionally, many supermarket chains have boosted DVD sales by either focusing on family and children's titles or cross-promoting certain releases with items such as chips and soda, according to Bob Geistman, senior VP of sales and marketing at distributor Ingram Entertainment, which supplies about 90% of the DVDs for sale at grocery stores. DVD sales have “always played a big role for grocers, but in the past couple of years, they've really embraced the category,” Geistman says. “They've gotten a lot smarter in realizing that not every title's for them.” Yet some grocery store operators have cut back on DVD sales, as well as any in-store rentals, in favor of bringing in a kiosk as a way to offer home entertainment options without the risk of product theft, or “shrink,” says Fisher.
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