Blockbuster redesign

The geographic isolation of the Reno metro market made it the right choice to test Blockbuster's revamped "Rock the Block" store concepts.

While the concept was developed in 12 of the 140 stores Blockbuster operates in the Dallas region, Reno was deemed the best place to execute the second phase, testing promotion and customer reaction.

The new store layouts were executed at 10 stores in Reno, Sparks, Carson City, Fernley and Gardnerville. Blockbuster operates nearly 8,000 locations worldwide.

Before this makeover, Blockbuster had not changed its look in 30 years, says Jeff Gloor, senior director for operations support.

Change came in July 2007 when Jim Keyes, chairman and chief executive officer, was hired after a 21-year career with 7-Eleven Inc.

"In the mid-1980s, 7-11 was in a similar situation," he says. "People thought there was no longer a need for convenience stores. But as long as you change with the customers, they'll stay with you."

Keyes saw a similar situation at Blockbuster, where profits had been sliding consistently.

"Is this a video rental business? Or is it about convenience in entertainment?" he asks. "I see it as a convenience store. People will always want convenient entertainment.

In this vein, Blockbuster need never decline."

Even so, the company needed a complete transformation, says Keyes.

First, he had to convince the company's board of directors not to de-emphasize stores in favor of mail and online business. Instead, he says, "I wanted to make it easy for customers to move from channel to channel. Stores become an important channel, a springboard to other channels."

After the makeover, the 12 initial test stores in Dallas showed a double-digit sales increase with no advertising, he says.

In phase two of testing, this time in the Reno market, he adds, "It

will take three to six months to get a good read; then Blockbuster will take the concept nationwide."

Once known as a place to rent movies, Blockbuster has since branched into consumer electronics such as high-definition televisions, digital cameras, e-books and MP3 players. Framed movie posters and other items tied to new movies are also for sale.

A video game lounge allows consumers to play the latest video games on flat-screen TVs. The redesigned Blockbuster locations sell food, drink and snack items similar to those found at convenience stores, and the stores now open at 6 a.m. to sell consumers a morning coffee when they swing by to drop off the movies they viewed the night before.

The task of designing a store for the future started in the fall of 2007 with rough concept, says Gloor. Movie studio and video game partners were tapped for feedback, along with store design and marketing consultants. And within 90 days, Blockbuster started building out the redesigned store interiors in Dallas.

"We put those ideas into 12 stores, but each had a different configuration of elements and placement," says Gloor. For instance, one store tried a strictly electronics concept. Test stores were rolled out in three phases, each with four stores.

"We choose the best one as determined by customer feedback and financial payoff."

The most profitable component? Beverage sales.

Research showed the company's core demographic is children and families, says Gloor.

One store tried an all-kids concept, but the life cycle proved too short as kids' attention quickly moves from toys based on one movie to the next.

To sell consumer electronics, Blockbuster has introduced another new concept: Selling equipment pre-loaded with content.

The main challenge in the redesign, Gloor says, was not the breakneck speed of change but the complication of setting up individualized market tests in each of the initial 12 stores.

But with the speed came exhilaration, he adds. "It was almost like redefining Blockbuster, to watch everyone pull it together in such a short time frame."

In Reno, customers will notice that the chain's traditional yellow walls are gone, permitting the store to play off the colors of merchandise, says Gloor. "And we lowered the fixtures to open up sightlines in the store. Before, people walked along the walls scanning racks of video rentals but didn't get into the middle of the store."

But testing continues. Existing customers, those already in the company's database, will be asked to record their impressions of the store makeover via an online blog space.