Beverages Boost Blockbuster

Former 7-Eleven leader "surprised" by success of new impulse product offerings
RENO, Nev. -- Ever since being named CEO of Blockbuster Inc. in July 2007, former 7-Eleven leader Jim Keyes has talked about providing new reasons for consumers to come into the media giant's brick-and-mortar stores. Now that beverages and snacks, among other things, are in many of those stores, he's as surprised as anyone by the results.

"Of the various components-consumer electronics, beverages, games, etc.-one of the strongest contributors to improved returns has been the beverage section," Keyes said in a quarterly earnings call with analysts in early November, "which [image-nocss] was a surprise to me, frankly, because I didn't think that would be quite so popular. So we are continuing to fine tune that beverage offering. We're working on smaller, hopefully less-costly, less-capital-intensive beverage bar offerings that would allow us to deploy this in even more stores going forward."

That report came after a scattered reimaging of about 300 Blockbuster stores to include beverages and other products. A larger test begins this week with the reimage of a complete market, in this case Reno, Nev., the chain's first major test market for its new look and expanded offerings.

"We're excited about Reno. It will be the first deployment in a market where we can tell anyone [about it], because the very favorable returns that we've enjoyed so far have been with virtually zero advertising," Keyes said. "These are just random stores selected in several different markets with no consumer communication whatsoever, just purely word of mouth and foot traffic. So we're excited to see how the consumer reacts when we truly tell them about a new Blockbuster."

In these redesigned stores, to reach the movie rentals, customers have to get past a game center with an array of Wii and Xbox accessories, high-definition TVs and mobile media devices, interactive games ready for play in leather chairs, and, of course, the expanded snack racks with a cafe kiosk offering eats and drinks, according to a report from the Gannett News Service.

The key is convenience, selling not just the movie or video game but the means to watch it, Keyes said last week at a store in Reno. And especially with the economic downturn, he said, the more his stores can offer, the better chance it has of getting an edge on the competition.

"We're selling convenience," Keyes said after giving Reno Mayor Bob Cashell and other business leaders a tour of the store. "Why send someone to Wal-Mart when you can bring [those other products] in here, where they're already getting the movies? There's so much talk now about 'community' in business. This is community here, the ultimate community."

The changes have been in the works for some time, with limited testing already in New York and Blockbuster's Dallas home base, Keyes said.

But the company determined the Reno-Sparks-Carson City area, with 12 stores, presented the best accessibility and demographics market for a full-scale test drive.

"This is a very important test," Keyes told the news service, adding that if it succeeds, the new look will be expanded to Blockbuster stores nationwide.

"[We want] to give our customers the wide variety of gift and impulse buys," he said on the conference call. "Very methodically, we're transforming our stores from movie-rental-only locations into complete entertainment destinations."

He added, "We've been getting double-digit increase in sales in those remodeled stores, within that, the ranges are huge. We have some stores that are in the low 20s as well as some stores with high single digits. It really has depended on what elements of the remodels we put in."

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