The Return of Rental

VIDEO RENTAL BEGAN A widespread return to supermarkets in 2006. Video rental departments have faded from all but a handful of supermarket chains, and video vending has been tried and rejected numerous times in the past, but a new generation of DVD rental kiosks is seeing consumer acceptance while bringing rental back to the grocery environment. Other major developments in supermarket video in 2006:

VIDEO RENTAL BEGAN A widespread return to supermarkets in 2006.

Video rental departments have faded from all but a handful of supermarket chains, and video vending has been tried and rejected numerous times in the past, but a new generation of DVD rental kiosks is seeing consumer acceptance while bringing rental back to the grocery environment.

Other major developments in supermarket video in 2006: the rise of low-cost sell-through programs, continued growth in sell-through in general and a developing market for television programming sold on DVD. Also, Coborn's, St. Cloud, Minn., won SN's Supermarket Entertainment Retailer of the Year Award.

The broader video industry was abuzz with news about the rollouts of two new high-definition formats that aspire to replace DVD — Blu-ray and HD DVD — but few supermarkets have been impacted by these products, and won't be until players of one of the formats reaches mass market penetration levels. The competition between the two incompatible technologies is seen by many as an impediment to the success of either. Meanwhile, “regular” DVD will continue to dominate the market, especially in supermarkets.

Mark Fisher, vice president of membership and strategic initiatives, Entertainment Merchants Association (formerly the Video Software Dealers Association), Encino, Calif., identified two significant video trends in supermarkets in 2006.

“First, there was a virtual explosion of DVD rental kiosks in supermarkets,” he said. “Currently, there are more than 1,500 kiosks in supermarkets around the nation. Second was the development of significant sell-through departments in some supermarkets.” Fisher cited a studio source as saying that video sales in supermarkets have increased 30% in the past two years.

Automated rentals in supermarkets and McDonald's have captured the industry's attention. “DVD rental kiosks continue to gain placement across the country, offering a labor-free, shrink-free solution to DVD rentals in supermarkets,” Fisher said. “As a result, grocers who have abandoned the rental business over the past years have gotten back into it. And, other grocers with full rental departments are evaluating the alternative of rental kiosks in some or all of their stores.”

This was confirmed by Bill Bryant, vice president of sales for Ingram Entertainment, La Vergne, Tenn. “Many supermarket chains without rental departments installed video rental vending machines, and some supermarkets with rental departments installed video rental vending machines in select locations without video rental departments,” he said. “The net effect has been an increase in supermarket locations conducting business in the DVD rental arena.”

The most significant developments last year in supermarket video were in sell-through merchandising, Bryant said. “A number of regional supermarket chains and two national supermarket chains began using aggressive pricing on certain new releases and several supermarket chains implemented a free DVD new release promotion with a designated dollar purchase amount of groceries,” he said. “In addition, many supermarket chains installed catalog DVD fixtures or in-line sections to increase impulse sales and retail margins.”

Overall sell-through in 2006 started soft because of a weak new-release slate, Bryant added. “Sales increased dramatically as supermarkets entered the holiday selling period and these increases coincided with studio new-release schedules,” he said. “Supermarkets that added catalog DVD sections also experienced an increase in retail margin as well as DVD revenue.”