SMITTY'S IS RESTAGING ENTERTAINMENT LINES

PHOENIX -- Smitty's Super Valu is revamping its entertainment software offerings. The retailer is upgrading and moving video and related products to new live sections located in the front of the store.The process of putting the new video Entertainment Marketplace sections into 25 stores should be complete in early October, said Gregg Wright, president of Video III, Orem, Utah. Smitty's executives

PHOENIX -- Smitty's Super Valu is revamping its entertainment software offerings. The retailer is upgrading and moving video and related products to new live sections located in the front of the store.

The process of putting the new video Entertainment Marketplace sections into 25 stores should be complete in early October, said Gregg Wright, president of Video III, Orem, Utah. Smitty's executives did not return calls for comment. The Entertainment Marketplace departments are 1,000 to 1,200 square feet and also include music audio and sell-through video, both racked by Handleman Co., Troy, Mich., he said. "It's a revenue-share arrangement. Smitty's employees run the departments, and our local reps service them," said Wright. Video III took over Smitty's video program in May, he noted. It previously had been racked by U.S. Video, Aurora, Colo. Smitty's had been one of the first supermarket chains to offer video rentals, in 1983 and 1984, said a video industry source. Last year, the retailer had a 49-cent-per-tape rental rate that required the rental of two tapes. When SN visited the store at that time, Smitty's video departments had few copies of new releases.

Under the old format, videos were rented at a service counter in the rear of the store. In contrast, the new departments are live, located in the front and feature more new releases.

"There is a big emphasis on new releases that the departments haven't had in the last year. They have live inventory systems, they have been categorized where they haven't been before and pricing has been re-evaluated," Wright said. Wright added, "We're excited about the potential in the Smitty's departments. With no new releases and the 49-cent rentals, they've been averaging only $200 a week. We foresee a real big lift with the

injection of new releases." In a brand new store Video III went into, "they did about $900 in rental revenue in three days without any advertising," he said. Tape inventories will remain at the same levels they have been -- 1,200 to 2,000 units, he said. But new releases will be about 25% of the total, rising to about 30% within a year. This will grow even further as 35 to 50 copies of new releases are added each month to the stores' inventory, he said. The departments do not carry any video games for rental at this time, he said. Video III provides previously viewed tapes, but leaves the sell-through business to the Handleman operation. New releases will get additional emphasis as the racker is able to use products from shared-revenue distributor SuperComm, Dallas. With SuperComm, retailers acquire movies for $10 a tape and then share the revenue 50-50. Transactions are tracked electronically. Shared-revenue rackers, like Video III, differ from shared-revenue distributors, like SuperComm and Rentrak Corp., Portland, Ore., in the type of service they provide to retailers: · The shared-revenue racker typically provides the retailer with all the rental products for a video department and some degree of merchandising service. The retailer provides the labor and the two split the revenues.

· Shared-revenue distributors have described their systems as "pay-per-transaction" or "pay-per-rental." They provide products from a select number of studios. Retailers can pick and choose from the offerings. They get the rest of their products from their usual distribution sources. Rackers and other intermediate suppliers can obtain products from shared-revenue distributors. Last year, SN reported on a hotly competitive market for rental rates among Phoenix supermarkets, but Wright said prices are moderating. Smitty's new rental rate structure is 99 cents a night for catalog, $1.99 for older new releases, and $2.49 for the hottest brand new titles out 60 days or less. "Most of the marketplace down there has raised their regular new releases to $2.49," said Wright. Megafoods Stores, Mesa, Ariz., though, continues to price all rentals at 99 cents every day. Video III also racks the rental departments of the Safeway Stores in the area, Wright noted.

The Smitty's stores are now using a "Three Videos for Three Dollars for Three Days" promotion that has been successful elsewhere in the country, he said. It applies only to catalog products. The program is now being promoted with in-store media, but chainwide advertising will begin when the video program is fully rolled out, he said.