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Consumers Wary of End of Late Fees Offer, Retailers Say

11 Feb, 2005 By: Jessica Wolf

Now that Blockbuster Inc.'s fevered pitch of "The End of Late Fees" advertising seems to be winding down a bit, retailers said, video rental consumers are peering more closely at the fine print and not liking what they see.

Blockbuster noted customers like the new policy. “Blockbuster has received tremendous feedback from both its customers and employees in response to the company’s elimination of late fees,” said a company statement.

But consumers are just beginning to digest the finer points of Big Blue’s no-late-fee program — details that weren’t immediately communicated in sweeping TV ads, other retailers said.

Those finer points are yielding skepticism, said Marc Oringer, general manager of five-store Champagne Video in New York.

“Most do not believe it can work, while others think it is a last-ditch effort on Blockbuster’s part to ignite a fire under declining rentals in their stores,” he said. “Yes, some customers — only a handful — have asked what Champagne Video is going to do, and we tell them we are in wait-and-see mode. Since business has been more steady this year than this time last year, why change? As a rentailer, I am waiting to see what Movie Gallery and Hollywood [Video] are going to do.”

Indeed, the No. 2 and No. 3 chains (for the time being, at least) have not made any official moves in response to Blockbuster’s no-late-fee program.

A Hollywood Video clerk posting anonymously on the Home Theater Forum discussion board said some customers have come in threatening to take their business to Blockbuster if the Hollywood store did not cancel any outstanding late fees. They, however, backed off when the clerk explained the details of the Blockbuster plan.

Blockbuster’s policy of automatically charging the customer’s credit card after a title is 39 days late is the sticking point for many consumers, said Todd Zaganiacz, president of the National Entertainment Buying Group.

Plenty of questions come into play there, Zaganiacz said. What if the card gets charged and the customer doesn’t notice it on his bill until after the 30-day refund period is past?

“We’ve heard from some people who have tried it and have gotten their cards charged, and the amount was a lot higher than expected,” he said. “[Blockbuster’s no-late-fee’ pitch] hasn’t as easily overtaken the public as you might have expected.”

As for competition for the smaller retailers, he said, Blockbuster’s scheme will likely most affect stores that are in very close proximity to Blockbuster locations.

In Video Depot’s area — Palm Desert, Calif. — business hasn’t been affected at all, said Scott Whitmer, VP for the nine-store chain. Consumers in the area are looking at Blockbuster in a negative light because the only Blockbuster locations in the area are franchisees who are not participating in the no-late-fee program, Whitmer said.

“What we’ve heard is the franchise stores instead are selling their customers on subscription programs if they come in asking about no late fees,” he said.

Video Depot’s store managers have reported decreased interest and questions from consumers about Blockbuster’s program over the past month or so, he said, and business has been good at Video Depot locations.

“If the question is whether or not it’s affecting our business or the consumer mentality, I say not at all,” Whitmer said.

Terri Schumacher, owner of Video Village, Etc. in Mt. Vernon, Iowa, said her store has taken a proactive stance and approached customers for their thoughts.

“Right after the first of the year, we thought we’d better not ignore it,” she said. Asking customers about their opinion of the Blockbuster program, she found they “were already leery of the details.”

In response to Blockbuster, her store has gone to two-day rentals on select new releases and offered a free additional day coupon on the store Web site, though not many customers redeemed it. What she tells customers most about the Blockbuster plan is “read the fine print.”

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