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Online, kiosk DVD rentals steal show in tough times

BY Barbara White-Sax

In an economy that can’t seem to get back on its feet, value-priced home entertainment is a big hit with consumers. While DVD rental spending was down nearly 5% in the first half of 2010, according to Rentrak’s Home Video Essentials, online and kiosk rentals have remained healthy.

DVD kiosk rentals continue to grab a bigger share of the video market pie. “Kiosk rentals are just soaring,” said Jack Plunkett, president of Plunkett Research. “It’s clearly a very powerful trend that’s all about price, convenience, speed and location.”

Kiosks are attractive to drug chains and supermarkets because they allow retailers to give shoppers every possible convenience in a highly competitive marketplace. It also doesn’t hurt that they pocket some additional revenue from the kiosk companies.

Redbox Automated Retail has become a considerable force in the market. In September, the company hit the one-billionth DVD rental mark, and the company estimated that its kiosks command a 25% share of all DVD rentals.

The company’s main competitor, Blockbuster, continues to shutter stores and concentrate on the kiosk market, but the industry experts said the company is struggling to play catch-up with a more entrenched Redbox.

Last year, online rental service Netflix and Redbox accounted for nearly all increases in the DVD rental business.

In August, CVS began installing Redbox video rental kiosks in its stores. The rollout will start with kiosks installed in 700 CVS and Longs locations by the end of 2010. The chain should have kiosks installed chainwide by the end of 2011.

The agreement between Redbox and CVS marks the first time CVS has offered a DVD rental service. The partnership also significantly expanded Redbox’s presence in the drug channel, where it has been making inroads.

Also attractive to retailers are the promotional opportunities the presence of a kiosk can offer. In September, Redbox teamed up with Pepsi and Walgreens on a promotion offering consumers a free one-night Redbox rental with the purchase of two Pepsi 2-liter beverages or two free one-night Redbox rentals with the purchase of four Pepsi 2-liter beverages.

2009 rental turns

DISTRIBUTION CHANNEL* %OF MARKET SHARE
Kiosk 20.5%
In-store 42.6
Subscriptions 36.9
*United States only Source: The NPD Group

Even with downloads becoming more popular, industry experts said there’s more upside to come. “There’s room for considerable future growth from kiosks,” said Plunkett, who estimated that kiosks average 50 rentals a day. “Retailers like the kiosks because they represent found money, and they can spark repeat visits.”

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CVS’ future rests on front-end, private-label evolution

BY Antoinette Alexander

NEW YORK CVS Caremark has no doubt been a trailblazer in the healthcare arena, positioning itself along the front lines to leverage its various points of care to improve outcomes and lower healthcare costs. But with all that CVS Caremark has done and will continue to do in the healthcare space — and it is no doubt a lot — it still has more than 7,000 retail locations, and the front of the store continues to be a critical part of its business and a major growth driver for the company.

(THE NEWS: At his last analyst day, Ryan sets out course for future CVS Caremark. For the full story, click here)

The front end is an $18 billion business for CVS and to be sure the company continues to look for ways to drive even more productivity out of its stores. It comes as no surprise that one area it will target for additional growth is private label. Private-label penetration currently stands at 17%, and over the next two to three years, company executives expect that number to grow to more than 20%.

"Private-label brands continue to grow and evolve. In this economy, consumers have shown that they are much more willing to try private-label products," Mike Bloom, EVP merchandising and supply chain, told analysts during Friday’s 2010 analyst meeting in New York. He noted that by the end of 2010, CVS/pharmacy will have nearly 5,100 private-label items storewide, which is an increase of 900 items versus last year. Each year, the company adds about 900 new private-label items and leverages ExtraCare to encourage trials among cardholders.

What is news, particularly to suppliers, is that a key component of CVS’ private-label program is an entirely new line that the company plans to introduce in February 2011, called Just The Basics — named to clearly communicate its functional, value-priced, smart, simplicity positioning. What is significant is that the new line is not a national-brand-equivalent type execution, but rather, more of a basic entry-point, low-price alternative.

"Now, while many retailers are stuck in the brand-follower mode of the 1980s, we have evolved to a leadership role," Bloom said.

The company also is increasingly turning to "treasure hunt" items and is using its circulars to drive front-end sales. For example, it recently promoted a WiFi-capable Netbook for $99.99 on the front page of its circular. While a Netbook isn’t your traditional drug store product offering, it has proven to be a hit among shoppers. CVS sold $3 million worth of Netbooks in three weeks, and it will be a $15 million item at CVS, the company said.

Then there’s beauty. As the article states, CVS is piloting a mini format of its Healthy Skincare Centers (in 120 stores) and will launch in January an ExtraCare Beauty Club.

Clearly the front end continues to be a significant growth driver for CVS and that will continue to be the case for a long time to come.

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Natural rodent repellant Fresh Cab available at retail

BY Allison Cerra

BISMARCK, N.D. An all-natural rodent repellant continues to gain a stronger retail presence with more than 3 million pouches sold, which come in convenient four-pack boxes.

Earth-Kind’s Fresh Cab, created by gardener and environmentalist Warberg Block, uses ground corn cobs soaked in essential botanical oils and packaged in small biodegradable pouches.

Fresh Cab is sold at 15,000 home, garden, hardware and farm and ranch stores throughout the nation.

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