Wal-Mart Electronics Expansion Tests New Dimensions with Video Game Rental Kiosks

(MoneyWatch)  Wal-Mart will test a game and DVD rental kiosk system in 77 of its New York and southern New England stores, further advancing its expansion into automated electronic entertainment rentals.

The deal also furthers a Wal-Mart electronics push designed to make it a dominant force in the category and to test new operations that it might apply in other store departments.

The machines in the latest test don't only rent games but can purchase them as well when consumers lose interest in the old and look to finance new purchases, which, of course, can be made at Wal-Mart. The rental units under test, from e-Play, charge consumers $1 a night for DVD or game rentals. That's the same price kiosk leaders Redbox and NCR charge for DVD rentals.

Redbox has been expanding rapidly in part through a deal with Wal-Mart that will place its DVD kiosks in over 3,000 stores, although those don't rent video games. Plans are that, where Redbox and e-Play kiosks are operating at the same location, the e-Play machine will shut down the DVD rental function, at least for now. NCR also purchased a minority stake in e-Play last summer.

NCR became the number two DVD kiosk rental operator in April by purchasing the remaining assets of TNR Holdings, a company it had bought into, also last summer. At the time, TNR operated about 2,200 DVD kiosks under the names Movie Box and The New Release, with its focus on grocery stores. At the same time, NCR struck a deal with Blockbuster to brand its kiosks with the retailer's name and, down the road, potentially established compatible services that could permit a consumer to, for example, rent a DVD at a Blockbuster location and return it to kiosk. After purchasing the rest of TNR, NCR set a rapid expansion of its DVD rental business, with the goal of operating 10,000 kiosks at some point next year, said Jeff Dudash, a spokesperson for the manufacturer, with placement targeted not only for grocery but convenience and drug stores as well.

NCR's determination to expand its kiosk business and the commitment of retailers ?€" not only Wal-Mart but, significantly, leading drug chain Walgreens ?€" to install machines has the potential to turn the video and game rental business upside down again, and as profoundly as the introduction of Netflix did a few years ago. From the Wal-Mart perspective, adding machines enhances its position as the go-to retailer for inexpensive home entertainment and budget-oriented consumer electronics.

The evolution in Wal-Mart consumer electronics has the potential to have a broad effect as the company takes what it is learning and applies it elsewhere. Speaking at a Barclays Capital analyst conference in April, Wal-Mart vice chairman Eduardo Castro-Wright noted that the retailer had generated compelling results from the retooling of its electronics operation, which included making changes to product presentation and adding iPods to the product assortment, among other initiatives, adding:

And so much so that we felt that the same type of approach of driving brand and driving clarity and changing the experience for customers in the store would or could or should be applied to other categories.