LOOKING UP

Children's video titles represent a G-rated sales bonanza for supermarkets.While retailers may struggle with other aspects of the video business, product for children, whether theatrical, television or original programming, continues to see sales increases.All the major studios are capitalizing on it and savvy retailers are devoting prime in-store real estate to the display of high-profile hits and

Children's video titles represent a G-rated sales bonanza for supermarkets.

While retailers may struggle with other aspects of the video business, product for children, whether theatrical, television or original programming, continues to see sales increases.

All the major studios are capitalizing on it and savvy retailers are devoting prime in-store real estate to the display of high-profile hits and high-profit catalog aimed at the younger set. While adolescents get excited about Harry Potter movies, even babies have video product designed specifically to enhance their development.

Parents, who are in the stores frequently shopping for groceries and other nonfood needs, will add these products to their baskets when they see them, sources told SN.

"Our children's business continues to grow," said Denny Hopkins, vice president, advertising and public relations, Giant Food Stores, Carlisle, Pa., of Ahold USA, Braintree, Mass.

"Our core customer base aligns very well with children's videos, and is one of our best categories. As we expand our video business, this category will be a focus," Hopkins said.

"Parents know that home video is a good value, and the number and variety of releases available have increased over the past several years," noted Bill Bryant, vice president of sales, Ingram Entertainment, La Vergne, Tenn. "Supermarkets have always succeeded with children's video, and 2006 will continue this trend."

Large box office films "obviously sell more units than other types of children's releases, but the entire category is performing well," Bryant said. "Supermarkets that allocate space in the baby aisle

do very well with Baby Einstein, and other educational franchises."

Steady, but unspectacular, is the way one supermarket video veteran described children's video in 2006. "I have no expectation of any significant change in the category performance from recent years," said Greg Rediske, president, Video Management Co., Tacoma, Wash., which provides rental and sell-through programs to hundreds of supermarkets. "It will continue to be hit-driven, with the significant numbers coming from the theatrical hits."

His reasoning is simple. "Theatrical hits dwarf the rest of the categories. Our greatest successes come from the budget titles of older theatricals and television product," he said.

The baby category has shown some "extra life the last couple of years," Rediske said. "Some of the Nickelodeon product has always shown some good results, particularly Dora the Explorer. Other brands that have done reasonably well include Barbie and the superheroes."

At Giant/Carlisle, Hopkins said the retailer has had "the least success" with educational baby videos. "The price point is a little high, coming from the studio, and not all of our customers see the value in these videos."

The biggest problems for the children's category remain theft and low margins, Rediske said. "Any of the hit products, which drive the business, are sold at virtually no margin, and sometimes negative margins at the mass merchants. Grocery, to maintain a low-price image, must therefore retail at or near these low-margins."

The result, Rediske said, is "no margin, with good theft potential, resulting in negative margins. Not very appealing. That is why we mostly stay with budget product: good margins, lower theft. The grocers seem much happier with this than with carrying product guaranteed to lose money."

Leslie Cortez, video manager, McShan's IGA, Brady, Texas, said her store - the only one in her company that stocks videos - "really doesn't have too many children's movies" aside from favorites like "SpongeBob SquarePants" and "Tarzan II." Rental is minimal, she explained, and customers appear to favor "the bigger movies, not just the cartoons."

Despite these realities, Cortez said she would be open to updating her product mix if movie studios would come to her with more and better promotional and merchandising programs. She would also like to see more classic kids' features made available.

Children's video "should maintain a steady growth as DVD players are [increasingly] not only located in children's bedrooms, but also in the family vehicles - and as children easily adjust to viewing programming [especially short-form] on portable players." Mark Fisher, vice president, membership and strategic initiatives, Video Software Dealers Association, Encino, Calif.

Portable DVD players, Fisher noted, have gotten smaller and cheaper, and provide a relatively inexpensive way for kids to watch their content on the go. DVD players have become "the baby-sitter not only in the home, but also in the family car, now a standard or highly promoted feature of a new car purchase. While a movie might be appropriate for a long trip, short-form children's programming is perfect for [local] car trips."

Universal Media Disc programming, which is available for Sony's PSP portable game device, "may well be an alternative format for young people to watch video content," Fisher said. "Children's video, mostly being short-form, is probably quite conducive to a small screen, and today's children brought up on Game Boy-type screens may be more prone to be comfortable with small-screen viewing."

According to one children's video supplier, it is "time to shake up the checkout aisle and bring DVDs to the front of the store." With their higher margins and ease of display, DVDs will get "second looks from parents and their children. With more DVD players installed in vehicles and lower-priced portable players, it makes sense that parents will be more inclined to make a last-minute purchase that can be instantly used when they leave the store."

Driving Sales

At Paramount Home Entertainment, Hollywood, Calif., Elizabeth Bohannon, vice president, kids and family marketing, said the studio expects the children's DVD category to continue to grow. "While the kids' business has become increasingly competitive, retailers recognize that these titles can really drive increased sales throughout the store," she noted.

"Top franchises exist not only on DVD but across consumer products categories in toys, apparel and packaged goods. Retailers can utilize this in their store to drive revenue for themselves," Bohannon said.

Products with strong franchises and support across multiple consumer product categories will continue to perform very well, she added. "New titles such as 'Go, Diego, Go' that are building on brands that are already successful and that have strong support from both parents and kids will definitely have strong sales in 2006."

Children's Video Display Strategies

Impulse purchase is, and probably always will be, important in building kids' DVD sales especially at grocery, sources told SN. Having the product front and center is key. Corrugated displays near the checkstands, and clip strips in areas of the store where shoppers might also find licensed products for children, work well.

Cross-merchandising opportunities are plentiful, said Denny Hopkins, vice president, advertising and public relations, Ahold USA's Giant Food Stores, Carlisle, Pa. "Many vendors support the DVD sales with mail-in rebates, coupons, and customizable coupons for the purchase of their products and/or the DVD."

Front-end checkout racks "are the optimal location," Hopkins said, "because there are always cashiers in this location to prevent theft. As with any merchandise, the front-end racks are prime real estate." On the downside, Giant "continues to struggle with price image vs. the mass discounters," he said.

"Most supermarkets advertise in their weekly circulars," said Bill Bryant, vice president of sales, Ingram Entertainment, La Vergne, Tenn., "and prominent placement in the main body of each store is the best way to merchandise feature titles." There are "a number of food product tie-ins with most of the new release titles mentioned, and many supermarkets develop their own tie-ins as well," he added.

Supermarkets with in-line video sections take good advantage of the children's TV on DVD market, Bryant said. Retailers that allocate the space to such sections "are typically successful." High-traffic areas are the best location for impulse items, he added. "Increased consumer impressions always result in higher sales at retail."