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Wal-Mart Bidding VHS Adieu

13 Jun, 2005 By: Thomas A., Kurt I.

The biggest retailer in home video is getting ready to say goodbye to VHS.

Industry sources say Wal-Mart will be out of the videocassette business soon after the 2005 holiday season.

In the mega-chain's next September “reset” — a thrice-yearly process in which video department planograms are redrawn and between 20 percent and 40 percent of titles are replaced — the company will realign its chainwide VHS inventory based on customer demand.

“In some markets, there will be more [VHS]; in some markets, there will be less,” according to one high-ranking studio source, who asked not to be named.

At a subsequent reset in February 2006, VHS will most likely be cut out, according to the studio source. After February, “it is unlikely there will be any VHS left in any Wal-Mart store,” the source said. There are more than 3,600 Wal-Mart stores in the United States.

Wal-Mart did not return calls requesting comment.

However, calls to electronics departments at several Wal-Mart stores across the country seemed to confirm the flight from VHS. An employee in Texas said the goal there was to eliminate VHS by the end of 2005.

Last month, it was reported that Target Corp. is joining the flight from VHS. According to industry sources, the retailer is phasing out VHS and will complete the transition in all its 1,330 locations by the beginning of September. Both Best Buy and Circuit City have already exited the VHS business.

Noting the decline of VHS in Target and other major chains, analyst Dennis McAlpine of McAlpine & Associates sees Wal-Mart's move as the latest and biggest nail in the videocassette coffin.

“At some point, you expect there would be a consolidation of the decline in the VHS business, and that's what you're seeing here,” he said. Wal-Mart's actions will only precipitate greater flight from VHS, and the conversion from VHS to DVD “will be over soon,” McAlpine said.

With the volume of DVD releases putting pressure on retail shelf space, getting rid of VHS to free up space for DVD is good for Wal-Mart and its customers, McAlpine said. “There's no reason to have VHS out there anymore,” he said.

Additional reporting by John Latchem

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