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Blockbuster Ends Radio Shack Trial, Will Offer Hardware

9 Jan, 2002 By: Holly J. Wagner

Blockbuster Video will start offering home entertainment hardware at its stores nationwide later this year, ending a disappointing trial program that put mini-Radio Shack stores inside 130 Blockbuster stores.

"Through our work in consumer electronics and specifically our trial program with RadioShack, we were able to gain valuable insights in a very cost-effective manner that will enable us to establish a profitable program selling select consumer electronics that complement our core business," said Blockbuster chairman and c.e.o. John Antioco.

The RadioShack pilot program included a wider breadth of product than Blockbuster customers wanted, Antioco said.

"Compared to the RadioShack boutiques, we are developing a plan to offer an assortment of products that are much more closely aligned with our core business and include more name brands than the normal RadioShack assortment. Additionally, Blockbuster can leverage third party supply chain arrangements to maximize margins and minimize investment in inventory," he said. "With stores within 10 minutes of 70 percent of the U.S. population and our marketing strength, we have a unique opportunity to implement a profitable business model, allowing Blockbuster to grow market share in the sale of certain segments of consumer electronics."

The decision was made based on Blockbuster's overall work in consumer electronics, including the RadioShack trial, as well as the company's successful sale of other electronics offerings, including DIRECTV, over the past 16 months.

Based on those results, Blockbuster will customize its lineup of consumer electronics with a business model that provides for minimal capital investment and a more efficient use of store space and labor than the RadioShack in-store trial required. Blockbuster anticipates being in a position to introduce a selection of consumer electronics later this year.

Blockbuster has had a history of selling consumer electronics prior to the RadioShack test. The Radio Shack store-within-a-stores have footprints ranging from 150 to 600 square feet each and offer a wide range of electronics products, but Blockbuster has focused on video-supporting hardware, Raskopf said.

"The customers have really gravitated toward the home entertainment-centric products -- DVD, VHS, cables and plugs, anything home entertainment related," says Karen Raskopf, Blockbuster's s.v,p of Corporate Communications. "This past summer, in about 2,000 stores, we put in DVD/VHS combo units. We sold through those very quickly. The sales on those were beyond our expectations. What we as a company are seeing is that we have the brand, the store distribution network and 3 million customers on average a day that are hungry for home entertainment. They are showing that they want to get those products and services from us."

The chain is not looking at widespread rental of players or game consoles, she says. The chain isn't looking at selling big screen TVs either, she says, but, "Never say never."

The company began selling DIRECTV in 2000, and in less than one year had become the nation's No. 2 DirecTV retailer. In addition, the company has sold an assortment of consumer electronics products, including home theater products, DVD and VHS combo players and mobile phones, and a leading fourth-quarter promotion selling DVD players in its stores exceeded expectations. The company also sells DVD players and other consumer electronics in all of its international markets, including gaming hardware in its European and Australian markets, and has had success selling cellular phones in many countries outside the United States, Raskopf said.

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