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Blockbuster Shutters VHS-Only Test Stores

28 Dec, 2001 By: Joan Villa

Killing two birds with one stone, Blockbuster Video operated two sellthrough-only "test" stores this fall to sell off thousands of previously viewed VHS tapes that were extras as a result of copy depth programs and the chain's new emphasis on DVD.

The two test stores, which carried the Blockbuster Video moniker, were devoted exclusively to sales of used VHS product. One was in a busy downtown Pasadena, Calif., retail district and the other was in Franklin Mills Mall, an outlet center in Philadelphia that bills itself as "the largest enclosed value mall in the Northeastern U.S." and boasts savings of 20 percent to 70 percent off regular retail prices.

The two locations may also have sold off the more than 2,000 VHS units per Blockbuster store that were pared from shelves earlier in the fall to make room for DVD, notes one industry analyst.

A Blockbuster spokeswoman confirmed the locations of the two stores but says the chain does not provide further details of test concepts. Both stores closed after the test ended in the fourth quarter.

"We have no plans right now on the concept being rolled out anywhere else," the spokeswoman adds.

Blockbuster regularly sells off used product on end caps and tables in virtually all of its 5,000 domestic rental locations and is featuring a "buy two VHS or DVD, get a third free" sale.

However, succeeding at selling off used VHS in separate retail locations is not as simple as it sounds, say industry observers.

Video One Liquidators president Mark Jasperson operates one 12,000-square-foot store devoted entirely to sales of used product outside Denver that he originally acquired as a video rental store.

"We just found a good market where customers are," he says.

Nonetheless, Jasperson, who acquired 56 West Coast Video stores early last year and launched a used DVD trade-in program for consumers over the summer, doesn't expect to open more sales-dedicated locations.

For one, converting a store from rental to sales presents unexpected challenges, including finding a centralized location that caters to foot traffic rather than the neighborhood convenience required of rental stores.

"It's a very different type of business and therefore there's risk involved," Jasperson says. "Most video rental stores in neighborhoods are not grade ‘A' retail space so they don't have foot traffic."

Further, he adds, "it's a very difficult proposition to ignore the rental market unless your chain is large enough where there's an excess of product to fill the store."

Although undoubtedly Blockbuster has the required inventory to feed used tape stores, the concept may still fail due to the logistics and costs of packaging and shipping thousands of tapes, observes Barry Sosnick, entertainment and retail analyst with Fahnestock & Co.

"I don't know how the economics would work," he concedes. "The problem, too, with VHS previously viewed right now is that with DVD selling off at a low price also, it makes it difficult to come up with an attractive price point for VHS."

However, the question of how to effectively sell off VHS—especially in a climate of rising consumer interest in DVD—will not go away with the closure of the two stores. As DVD continues to "steal linear footage" from VHS, video chains will find the issue a pressing one this year, Sosnick predicts.

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