BIG TIME, SMALL TOWNS

ST. CLOUD, Minn. - There's nothing small about Coborn's entertainment offering although it serves many rural communities.On average, the 21 towns and cities with Coborn's-bannered stores have a population just under 10,000, according to the 2000 U.S. Census. This includes the relatively populous St. Cloud with its 64,308.By contrast, the rental inventory in Coborn's video departments ranges from 15,000

ST. CLOUD, Minn. - There's nothing small about Coborn's entertainment offering although it serves many rural communities.

On average, the 21 towns and cities with Coborn's-bannered stores have a population just under 10,000, according to the 2000 U.S. Census. This includes the relatively populous St. Cloud with its 64,308.

By contrast, the rental inventory in Coborn's video departments ranges from 15,000 to 32,000 units in spaces that average 3,200 square feet, but go as high as 6,000 square feet, Brad Ufer, video/photo supervisor, told SN.

The departments also include new-release sell-through, catalog sell-through, video game rental and, in some locations, an integrated selection of books and magazines. Put together with bright, modern and creative decor and signage, Coborn's is set to receive SN's 2006 Supermarket Entertainment Retailer of the Year Award, which will be presented in Las Vegas this week at the Home Entertainment 2006 show of the Video Software Dealers Association, Encino, Calif. VSDA is transitioning to a new name: Entertainment Merchants Association.

The award, based on nominations made through SN's website and judged by the publication's editorial staff, emphasizes merchandising and marketing accomplishments over size and volume. Industry sources agree that Coborn's program is one of the best in this regard.

"Our stores have a certain look," Ufer said. "We want them to be family friendly; we want them to be bright and inviting. We want families to feel comfortable coming into our stores and I believe that is happening."

With a total of 34 video rental stores and departments in or very close to grocery stores,

Coborn's video and entertainment program resembles that of the specialty stores it effectively competes against. Ufer said the company is seeing significant revenue growth for both rental and sell-through, which contrasts to the generally flat-to-down market many other retailers are reporting for these categories.

Besides being part of 22 of the 23 Coborn's traditional supermarkets, seven are in or near the company's price-oriented Cash Wise banner and four are in convenience stores. Four of the Coborn's and Cash Wise locations are stand-alone shops near supermarkets. The one small St. Cloud Coborn's store that does not have a video department will get one later this year when the retailer opens a replacement store, Ufer said.

"Our most effective strategies have been to carry a large selection of video products, monitor customer demands, adapt to changing technologies and set profit levels that allow us to effectively compete," said Don Wetter, chief executive officer, Coborn's. "In addition to movies and games, we will continue to integrate more leisure-time products into the mix of offerings, including magazines and books. Long term, we expect to continue innovative merchandising and marketing in order to appeal to changing demographics.

"Of equal importance is our ability to respond to the desires or needs of an individual community. Research helps us maintain our viability as we monitor a community's access to movie theaters, Internet providers, large chain video stores and other venues for video products."

HIGHLIGHTS

Among other highlights of Coborn's entertainment software division:

Constant promotions that include "Free Kid's Vids," which generates additional revenues, and cross-merchandising with other departments.

Low, under-$2 rental rates and the expansion of budget-priced sell-through DVDs.

A focus on customer service by engaging knowledgeable store-level personnel who are "passionate about video," Ufer said.

A commitment to video by top management that long ago realized the benefit of a big video presence and continues to be bullish on its prospects.

Industry involvement, with Ufer participating as one of the founding members of Grocer's Council of EMA/VSDA.

And, most notably, ongoing growth in sales, as well as the size and numbers of departments/shops. A Cash Wise department in Bismarck, N.D., was just moved into a 3,200-square-foot shop in the same shopping center, and the new St. Cloud location opening later this year will be the chain's 35th.

"Our future is pretty simple," Ufer said. "As we build stores, the plans are still to have video inside them. As long as they are viable, contribute to the store and are something the customers want to see in our stores, we're going to continue to merchandise videos for sale and rental."

With rental firmly established, Coborn's plans to sell more videos. "I believe the expansion of the video sell-through product inside our video department and in the main body of the grocery store will be the main focus of our video operation at Coborn's," Ufer said.

"We want to continue to bring in product that the customers want to buy and at reasonable prices that they will feel comfortable with. That is a big part of our future. Then to manage the change in rental, adjust our merchandising, our pricing and our operation as the industry changes," he said.

WHAT OTHERS SAY

Although far from any media centers, Coborn's entertainment software program has acquired a national reputation.

"Coborn's reviews the competition and simply does it better," said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn. That competition is the big rental chains, as well as the mass merchants and electronics stores that sell DVDs. "They've never been intimidated by competition; they are motivated by it.

"When you walk into a Coborn's video rental department, you begin to understand why Coborn's is a destination for the video rental consumer. The departments are always merchandised with the latest products, all formats are represented and the clincher is the video department personnel. Coborn's hires and trains people who enjoy movies."

Entertainment software comes down to having the right product, effective merchandising and outstanding customer service. "Coborn's does all three extremely well," Bryant said.

"I visited Coborn's earlier this year and spent some time with Brad in his stores and with his management team," said Mark Fisher, vice president, membership and strategic initiatives, EMA/VSDA. "It was quickly obvious that despite chain size, their people and their DVD merchandising sophistication rank with the best supermarkets as well as other retailers."

Ufer readily gives credit both up and downstream for the division's achievements. "We truly have a special group of people working in the video department and they demonstrate 'ownership' every day," he said. But Ufer added, "the key to our success has been the Coborn family and their belief that video is something their customers want to have, and then providing us with the resources we need."

Another key for Coborn's has been the ability to respond to the changing video marketplace, he said. For example, Ufer pointed to expansion of new-release walls, reinvestment in non-theatrical titles, adding sell-through and giving it prominent display space, and "analyzing the video game formats that made the most sense for our customers, while giving them adequate space and merchandising."

Coborn's rents video game software and recently added game accessories for sale. Selection includes older formats like Sony PlayStation 1 and Nintendo 64, as well as new formats like PlayStation 2, PlayStation Portable games and movies, Microsoft Xbox and Xbox 360, Nintendo GameCube, and PlayStation 3 when it comes out. "We continue to add space for games and make it part of what we offer customers," he said. The retailer does not rent hardware or provide demonstration stations, he said.

Ufer attributes the retailer's success in games in part to the demographics of its rural communities. "We have long been in the game business, so our customers have an expectation that they will be able to rent games in our store and try them before they make a purchase decision," he said.

Total Entertainment Experience

ST. CLOUD, Minn. - Tapping a trend that has reshaped the video industry, Coborn's here is adding more sell-through to its departments. Getting ahead of other retailers, it is introducing magazines and books in some sections to create a total entertainment destination.

The concept resulted from a visit to some of Stop & Shop Supermarket Co., Quincy, Mass., which won the SN Supermarket Entertainment Retailer of the Year Award in 2004. Brad Ufer, video/photo supervisor, came back intrigued by that company's Bestsellers! sections that encompass video, video games, books, magazines and music.

"Our markets are rural and the demand for square footage on the grocery floor is extreme as we prepare to do battle with major competitors, so we are trying to differentiate ourselves as much as possible. At the same time, I was looking to give people more reasons to come into our video rental department than just video rental," he said.

An expansion into video sell-through was one step, "but I felt like I still needed more things to entice them in." By putting in a book and magazine area inside the video section, with carpet on the floor instead of the usual tile, and more space to encourage a more leisurely shopping experience, Coborn's was able to replicate a bookstore environment. So far, these have gone into stores in communities that do not have large bookstores, like Barnes & Noble, he said.

Customers approach books and magazines with the same mind-set as video, he said, and putting them in the video department allowed more linear space than on the main grocery sales floor. This will increase book and magazine sales, while drawing more people into video, Ufer said.

As demand for catalog rentals has declined, Coborn's has been giving some of that space to budget-priced titles, he said. This space ranges from 12 to 120 linear feet, depending on the store.

"The idea is to give customers another reason for shopping in our stores as they have started to move away from the rental experience to a purchase experience. We try to offer a selection that pleases both," Ufer said.

Free Videos, More Business

ST. CLOUD, Minn. - A program offering up to three free children's videos from a special selection without rental or purchase requirement increased revenues for Coborn's here, said Brad Ufer, video/photo supervisor.

After determining that a small percentage of revenues came from the children's category, Ufer proposed testing the concept to make video a more integral part of the grocery shopping experience. Management allowed a test, "and it was very popular, so we expanded it to the whole company," he said.

"We've definitely seen that the average transaction size went up when we went to the Free Kid's Vids program. It seemed like anybody who was getting a free kid vid rented two or three new releases at the same time," he said. While some customers may have felt obligated to rent something along with the free title, Ufer thinks it is more about the time constraints of the typical customer. "Time is so important to customers right now that when they are getting their entertainment, they want to get all of it at once," he said.

Coborn's also cross-merchandises rental and sell-through videos whenever the opportunity arises, as well as selling candy, soft drinks and sometimes pizza in the video areas. The most successful cross-promotions have involved video and soft drinks, Ufer noted.

"Because we are grocers, we can do things that other people can't do. For example, I can give away a bag of popcorn with a rental for a very cheap price because of my alliance with the grocery buyer," he said.

A factor having a negative impact on promotions and revenues, is a lack of studio sales representation, Ufer said. Coborn's does not have a rep from one of the major studios, and "how can you set up programs or promotions in advance if you don't have somebody talking to you about it. The studios that still have representation are the studios that are able to work with me on programs for sell-through or rental, and they are being successful."