business news in context, analysis with attitude

We had a story the other day about how Supervalu was positioning its Albertsons and Lucky stores differently – one to compete with other chains, and the latter to compete with independents.

Which led one MNB user to pose a question we should have asked:

I wonder how the Independent grocers supplied by Supervalu feel about Supervalu using the Lucky banner to compete against the independent stores?

Excellent point.

In our radio commentary yesterday, we quoted Charles Darwin as saying, "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change." We suggested that this should be called Darwin’s Theory Of Retail Evolution, and applied it to the business of video rentals – suggesting that online downloads and online rentals will soon make traditional rental and purchase options obsolete.

One MNB user wrote:

I need to modify the Darwin quote for today's competitive environment:

"It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to driving change."

Or maybe just “the one who drives change.”

In our commentary yesterday, we were really tough on the folks at Blockbuster, calling them a bunch of “weasels.”

MNB user Dave DeLorenzo wrote:

I do not share your loathing of them, after all they are a business, and cash flow is king. When they eliminated late fees for the B&M stores, probably to set the direction for chain rental locations, they were responding to the then business model of NetFlix with no late fees. Since movies need to be rented to generate cash, when you or I sit on a movie at home and don't return it WHEN WE AGREED TO by the way, the renter has to find a way to generate additional cash to offset the loss of rental income.

Have you ever returned a rental car late to an airport? Talk about fees! And all the
taxes to pay for stadiums etc. in the city you are renting are a percentage, so they are higher as well on top of the late rental return fee, so I digress.

Back to the point - I always have had the movie cost credited back less the $1.25 re-stocking fee at Blockbuster, and I must have gotten a large print version of the terms and conditions, as I didn't feel it was as sneaky as you. For my money, the $1.25 is fair
if I have kept a 2-day rental 5-7 days, and I know I am getting the $14.99 or $19.99 back on my credit card. I also love the convenience of the drop off of flicks at the store, and the free rentals for being loyal. You should take a complete look at how they have changed and entertain making a new decision about them based on new
information. I do not doubt for one instant your previous bad experience, but forgiveness based on new information is freedom, my good man.

Now, on the supermarket model for managing video rentals, I must disagree a bit with you. Alas, the old models are changing, but you must have missed the Pew Internet study a few weeks back - 51% of Americans are not as tech savvy as you, therefore the downloading model is not penetrating about 40MM or so households yet. So an "evolution" of the model, where a retailer can differentiate themselves by providing the added convenience and value of video rental service at the lowest possible cost to operate seems to be in order. I just saw one in a Dallas Tom Thumb store that seems to hit the sweet spot - a Video vending machine with current titles for about $2.00. Think about it - no real store involvement, revenue for renting the space to
the service provider, and customer satisfaction. It is kind of like your article yesterday about the vending C-Store Kiosk under the roof. The retailers have margin and consumer satisfaction to reap while the old model dies, it is just they who figure it out and ride down it with a good exit strategy, so they are not leaving money on the table.

But MNB user Phil Censky wrote:

Frankly, calling Blockbuster ‘weasels’ was too kind. I had ‘rats’ in mind. The ‘no late fees’ charade reminds me of the huckster aluminum siding salesmen in “Tin Men”. I have zero trust in this retailer and will not give them my business. I’ve been renting through Netflix since 2002 and am quite satisfied. Their availability for new releases is quite good and they jumped on the HD-DVD and Blu-Ray formats quickly. One also must be impressed with their long-tail approach with an enormous catalog of movies. Their recommendation system (based on movies you rate) rivals even the best “indie rental shop” picks. Here’s one customer that won’t follow the siren song of lower costs by Blockbuster. A couple bucks aren’t worth dealing with their limited selection and availability.

On second thought, weasel is right on. They do have a rather short tail.

We still hate ‘em. And we hold a grudge.

We subscribe to the Tony Kornheiser theory in this space – reward your friends, slam your enemies, have a good time doing it.

One MNB user responded:

You got me thinking. With the advent of Tivo at our home, our video rental business has been all but eliminated. Instead, we use the TiVo search features to find movies, features, documentaries of interest to us and watch them at our convenience. No mailing cartons. No trips to the video store. No late fees. The stuff coming out of Hollywood is mostly junk and many of the old movies on television are a much better use of our limited time. And, I believe that you will soon be able to download movies on Tivo via Amazon. Each of us has a saturation point for entertainment, but I suspect that my kids' generation will greatly exceed ours.

MNB user Jackie Lembke wrote:

Taking movie distribution a step further, there are occasionally movies that go straight to DVD, Disney does it all the time, I foresee a time when movies (not just sequels whose only purpose is to baby-sit your toddler) go straight to iTunes or its equivalent; good movies that people actually want to see. Movies with marketing and trailers. It now costs $20 or more to take a friend to the movies, how many can you download and show to a group of friends for the same money. I love the experience of the movie theater, but my husband doesn't so I wait for the movie to come on pay per view or cable, what if I didn't have to wait but could download the movie when it premieres and watch in the comfort of my home with air popped popcorn, my choice of drinks, and a clean bathroom.

MNB user Mike Kipfer wrote:

Now there's another competitor in the mix, Redbox. They have credit card operated kiosks on the sidewalks outside of all the Jewel stores. They rent for a dollar per day and you can go onto the web and find promo codes that allow a free 1 night rental. Looking at their website they encourage the use and distribution of these codes and seem to have kiosks all over the country that you can return the DVD's to.

We think of concepts like Redbox as stopgap technology, filling a need during a time of transition. But 10 years from now, we’d guess, that’ll be obsolete technology.

We reported yesterday on a problem that Trader Joe’s is having in Oakland, California, where it can’t get a liquor license for a new store because organized labor seems to be pressuring planning officials not to grant one until the retailer enters into contract negotiations with the unions. Which we thought was ridiculous.

One MNB user responded:

As long as they pay a good wage, good benefits and treat there employees fairly, what does a union have to do with it!

Wouldn’t it be pretty to think so?

Another MNB user wrote:

If you look closely at the names of the two Planning Commission members, one is named Boxer, as in Barbara's son and the other, Lightly, works for the California nurses' labor union.

You are right on about this issue.

MNB user Doug Campbell wrote:

Maybe Tony Soprano has moved out to Oakland.

We’ll never
KC's View: