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Blockbuster’s Sequel to Success

BY Marc Millstein

In what may be the most watched retail turnaround attempt, Blockbuster Entertainment literally is revamping its entire management and operating structure in a high-stakes move to regain market share in the movie-rental and sales arena.

The once-vaunted chain literally hit the technology wall harder than almost any other retailer when factors such as Internet home shopping, instant downloads of movies, pay-per-view and a vast array of other changes—including a rather simple and low-tech new company and concept called Netflix—came exceedingly close to putting the company out of business.

A major part of the turnaround effort has centered on implementing new supply chain processes and solutions that not only cut costs dramatically but will result in customer-service upgrades that compete in the new world of customer centricity and service that Blockbuster must tackle immediately. Many of the major first steps taken in that quest were outlined by Scott Frost, former Blockbuster IT executive and current principal consultant at Frost Consultant Group during the Technology & Operations Store Summit (TOPSS) in Las Vegas in October. TOPSS is produced by Chain Store Age and Retail Technology Quarterly.

In what can reasonably be termed drastic moves to save the company, Blockbuster first undertook a massive end-to-end supply chain revamping initiative that included upgrading its merchandising system and store-allocation system, plus a redesign of its infrastructure. Blockbuster also implemented a new warehouse management system and other distribution upgrades such as automated pick/pack and ship systems. It also undertook a complete business process redesign involving sourcing, order placement and fulfillment, reverse logistics and more.

The results, according to Frost: a 28% reduction in overall U.S. supply chain costs and a five-year plan for ROI that realized 100% in just three years. Without citing specific numbers, Frost said the changes in business processes and implementation of new end-to-end solutions had shaved millions of dollars from store labor costs and shortened speed to market of new products, a crucial step in the hugely hit-driven market in which Blockbuster competes.

While Blockbuster has made strides in significantly upgrading its supply chain performance, the retailer realizes that all its efforts ultimately count only if customers take a different view of the brand—a challenge that represents the next and most crucial hurdle in the company’s turnaround efforts.

To that end, look for Blockbuster to invest in new business-intelligence tools, collaborating with suppliers to share predictive and real-time sales information, to upgrade its online presence dramatically and to leverage RFID technology to open up the plastic movie boxes and make shopping easier and more fun.

Yet even as Frost outlined the achievements Blockbuster has made in the last few years on the back end, a new management team, led by Jim Keyes, former CEO of 7-Eleven (with his former CIO Keith Marrow also coming on board), faces high hurdles to regain its former standing as a must-shop destination environment and one in which fast-rising sales and profit growth are the norm again. If the new team can achieve that goal, it clearly will have pulled off one of the more remarkable and heralded turnarounds today.

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CompUSA may get a new look

BY CSA STAFF

ADDISON, Tx. After opening a new format store last month, CompUSA may be changing the format of its other stores, depending on customer demand and product interest.

According to reports, the elements found in the prototype store, located in Texas, will be incorporated into other CompUSA locations across the United States.

The nearly 7,700 square-ft. relocation site includes an Apple shop featuring Mac computers, iPods and Apple accessories, and a full-length LCD TV wall.

Additional expansions include extended gaming, which includes an entire wall devoted to the Nintendo Wii, PlayStation3 and Xbox 360 gaming platforms, plus a PC gaming setup to test equipment and play new titles.

While businesses can get their share of support with a specialized services section, all consumers can visit the store’s redesigned IT support area.

“This new store aligns CompUSA’s vision to better serve its three core customers, the technology enthusiast, educated professional and small and medium businesses,” said Gabriela Villalobos, the retailer’s sales and operations evp.

CompUSA announced in April that it would narrow its focus to three core customer groups rather than try to serve a mass audience.

The move was part of a comprehensive restructuring, initiated last February, that included an overhaul of senior management and the closure of half its store base as the privately held chain looked to improve sales and profitability.

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Walgreens withdraws from CVS provider plans

BY CSA STAFF

DEERFIELD, Ill. After many months of talks over low and below-market payment rates by CVS Caremark for four prescription plans, Walgreens has withdrawn as a pharmacy provider from the plans.

Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Progressive Casualty Insurance and Wisconsin Education Association Trust.

Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.

Trent Taylor, president of Walgreens Health Services, the managed care division of Walgreens, released the following statement:

“This is not where we wanted negotiations to lead,” he said. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.

“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark. We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”

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