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Is Blockbuster Battling Empty-Shelf Syndrome?

7 Mar, 2005 By: Jessica Wolf

Blockbuster Inc.'s “no late fees” program may be creating more white space on its store shelves.

Competing dealers are monitoring Blockbuster stock carefully and, along with other observers, they have noticed the shelves are decidedly light.

“We've been hearing that's what's been happening across the country,” said Todd Zaganiacz, president of the National Entertainment Buying Group (NEBG). “People have been going in [to Blockbusters] and finding that there's just nothing there.”

Thanks to Blockbuster's strong tradition of copy depth, many renters have grown accustomed to walking into Blockbuster locations with the assurance that the newest releases were guaranteed in stock, one of the No. 1 chain's most visible and unbeatable promotions. But with renters keeping out titles longer following the chain's “no late fees” policy, that may be a thing of the past.

Blockbuster's guaranteed rental policy ended before the “End of Late Fees” program began, said Randy Hargrove, spokesperson for the chain.

On average, he said, renters are only keeping titles out about a day longer than the due date, which is what the chain discovered when it tested the “no late fees” program in select markets prior to the national rollout. Under the new scheme, Big Blue renters can go up to nine days without incurring additional charges.

But, reportedly, customers are having trouble getting the titles they want at the moment they want them at some Blockbuster locations. Disgruntled renters quoted in a March 3 Dallas Morning News story said they had to make multiple trips to their respective Blockbuster stores to rent titles such as The Motorcycle Diaries, Shark Tale and I Heart Huckabees.

Hargrove is quoted in the Morning News article as saying there have been some availability issues at the chain, especially for smaller box-office titles, but that Blockbuster is looking at ways to improve that. He also attributed some of the copy dearth to the chain's new subscription model.

Whatever the cause, Blockbuster's loss could be a competing store's gain, said Ken Dorrance of The Video Station in Alameda, Calif.

“One Friday night, I found we had eight out of the top 10 renting titles in,” he said. “I went to our closest Blockbuster that same evening, and they only had two out of the top 10 in — and this was a corporate store.”

Al Welch, owner of Video Village in Rockwall, Texas, agreed. “We've had new and returning customers because of [Blockbuster] stock-outs,” he said. “It was a really big issue with Ray.”

Ted Engen, president of the Video Buyers Group, said many retailers in the Midwest who compete day-in, day-out with Blockbuster stores are reporting the same thing.

“Blockbuster has been trying a lot of different things, and I respect them for that, because change is good,” he said. “But … now they've got these inventory issues.”

Late fees not only provide an added revenue stream for the video rentailer, he added, but also serve as an incentive for renters to return product promptly.

“Now, not only with no more late fees but with the subscription model, Blockbuster is leaving the consumer with a lack of incentive to bring the movies back,” Engen said.

NEBG's Zaganiacz said he suspects Blockbuster also may be ordering low on some titles in an effort to strong-arm suppliers into sweeter deals. “You see Warner and Sony titles, and they're overloaded,” he said. “But for other studios, there's little or nothing.”

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