STORES FIND SELL-THROUGH DRIVING GROWTH

A build-up in sell-through displays and inventory is driving growth in the supermarket video category.Buoyed by their success with rentals and big sell-through hits, supermarket chains are investing heavily in expanding their video programs. They are focusing on increasing profitability and establishing ongoing sell-through programs, said suppliers polled at a recent video meeting."Many supermarkets

A build-up in sell-through displays and inventory is driving growth in the supermarket video category.

Buoyed by their success with rentals and big sell-through hits, supermarket chains are investing heavily in expanding their video programs. They are focusing on increasing profitability and establishing ongoing sell-through programs, said suppliers polled at a recent video meeting.

"Many supermarkets have seen video go from just a crowd draw to a very viable profitable center," said Kirk Kirkpatrick, vice president of sales for WaxWorks Video Works, Owensboro, Ken. "At first, it was a little like hiring a circus act for your parking lot to get people's attention. Now they realize that, not only will it draw people, it can be profitable."

Many supermarkets are expanding their departments from a range of 400- to 600-square-feet to between 1,500 square feet to 2,500 square feet, noted John Maioriello, president of JD Store Equipment, Los Angeles. "If you look at the aggregate amount of square footage that grocery is devoting to video, it's almost 10 times greater today than it was two years ago," he said.

As retailers start to see the potential of sell-through video, they are moving beyond hit- and promotion-oriented in-and-out shippers, said Gary Jones, senior vice president of sales for Republic Pictures Corp., Los Angeles. "We are seeing a lot more permanent fixturing of product in the sell-through side of the business," he said.

Even special interest titles are getting more play in supermarkets, the suppliers said.

There is an "increased willingness [on the part of] retailers to do unique promotions with a variety of products," said Tom Sambola, vice president of marketing for Quality Video, Minneapolis. "We see a lot more special interest product selling through supermarkets," added Allan Golden, national director of sales at PolyGram Video, New York.

"Those that want to stay in the business, who are going to start merchandising for the rest of this decade into the next century, are going to have to invest more in their existing video programs," said Steve Comm, vice president of sales for Starmaker Entertainment, Troy, Mich. "The retailers that have their act together, so to speak, are starting to do that."

Here is what the suppliers had to say:

Kirk Kirkpatrick

VP, sales

WaxWorks Video Works

Owensboro, Ken.

In the past, many retailers' attitudes were that they didn't care if they made money off of video because they made so much money off the potato chips the customers bought when they came in. Now, if they have a good video department, and a nice selection and knowledgeable personnel, they can make money off that too. They don't see it as an expense but as an investment.

Sell-through has grown because there is more sell-through product now. This has been good for the supermarkets because they can use it, if not as a loss leader, certainly as a very high-perceived value item at a low price that will make their customers feel like they are getting the best deal.

Such sell-through sections are very profitable for some stores, but for others it is not profitable. It involves a lot of square footage. If you are going to have a video department, you need to address it as any other specialty area of your store, where you have a manager and the inventory that will guarantee success.

Tom Sambola

VP, marketing

Quality Video

Minneapolis

We have seen more and more retailers getting into the video business. They are now much more interested in sell-through. There is a lot of interest in the special interest, lower-priced merchandise that they can make good gross margins on.

The players who have been in it from the beginning are now improving their presentations and increasing their title selections. A couple of years ago, supermarkets were into the theatrical releases and that was it. Today, they are having coloring contests, sweepstakes and a variety of promotions that involve the media and the consumer.

It's a great opportunity for the retailer. Most of the product is guaranteed -- they have no return restrictions. The margins are good. There is no expense on freight. All they really have to do is just put it out and sell it. If they put it in front of the consumer, and make an effort to sell it, they can sell a lot.

Gary Jones

senior VP, sales

Republic Pictures Corp.

Los Angeles Supermarkets have found that video is a tremendous draw. It keeps the customer coming back and it has become a profit center, especially on the sell-through side of the business. For example, we had a very successful John Wayne promotion that was probably more successful in grocery stores than in any other segment of the marketplace. We sold about 2 million cassettes total. Since it was an impulse buy, priced at $9.98 retail and merchandised on racks next to the cash registers, customers picked them up, took them home and enjoyed them. In the future, sell-through will only grow. You will see more grocery stores putting in permanent fixturing and expanding their sections because it will become a profit center for them.

Paddy Padmanabhan

executive VP

Tempus System Solutions Group

Auburn, Ind.

The supermarkets now understand video a lot better. Many of them are not just doing video rentals now, they are expanding into other related entertainment products. They are building around video rental. They are getting into all kinds of other entertainment services, including CDs. Sell-through has increased. Specialty entertainment merchandise also is moving. This makes for a better use of floor space. When people come to rent, they are in tune with entertainment products.

Supermarket chains are investing in their existing departments. They are reorganizing the departments. They are increasing the breadth and depth of new releases. They are investing in the right point-of-sale system so they can manage the departments a lot better.

John Maioriello

president

JD Store Equipment

Los Angeles

The key trends in supermarket video are larger stores and more product. The grocery operator who has video departments today is adding video games for rent and for sell-through. There is much more emphasis on video tapes in the fitness area and children's area.

Where many grocery stores years ago would just fill in with used tapes to create a large catalog department, today most of them treat the video rental department like a video specialty store, and they are buying very deep on new releases. The grocery store today has become a formidable competitor to the video specialty stores.

Allan Golden

national director, sales

PolyGram Video

New York

In the last few years, there's been a tremendous evolution of growth in supermarket video as a whole. A lot more sell-through product is moving through the supermarket industry, and there is a lot more emphasis on special interest video, which is a refreshing change.

The rental business has been very strong in the supermarket industry for many, many years, but we see a lot more special interest product selling through supermarkets. There is a lot of children's product, and many of them are in-and-out promotions. For example, we have done in-and-out promotions with supermarket chains around the country on the Reebok line, which have been excellent for us.

Steve Comm

VP, sales

Starmaker Entertainment

Troy, Mich.

You are seeing more of a willingness among grocery retailers to get into sell-through. They are devoting more floor space to sell-through, not only in their regular racks, where they are scaling down rental in favor of sales, but also in the prepack type of promotions. That is where our growth has come from.

Price point will drive a lot of business in the grocery environment for impulse sales, so little by little, that is starting to catch on.

The more progressive chains, like Kroger, Randalls and Wegmans, were the first to make changes. Now you are starting to see some of the smaller regional chains getting into it and some other big chains are entering the business. For example, Winn-Dixie, which has been standing on the sidelines for the past several years, is now getting back into the video business.

Robert Wienstroer

Southeast regional sales manager

PPI Entertainment Group

Newark, N.J.

I see more and more supermarket chains getting into the sell-through side of the business and special interest. We have more and more chains doing fitness promotions in January and February. Year-round, we are seeing more and more chains like Shop 'N Save, Dillons and Wegmans putting sell-through product into special displays, and they are having great success with it. The success stories keep building and we see them doing more and more of it.

J. David DiCristina

project consultant

Shannon Display Merchandising Systems

Atlanta

The main change we see is that management is no longer afraid of the square footage that they have to give up for video. They are finding out that they are making money with it. They are going more with sell-through and more dump tables to merchandise used movies. But the biggest trend is putting in more square footage for existing video departments. It is making them a lot more money. They are remodeling and refixturing. Even if there is a video store in their shopping center, they will still go in and put in nice fixtures.

Extras like interactive game demonstration units would be a big plus. These allow children to try out a game while their parents are shopping. It enables the retailer to rent more games and, as everyone knows, every time you rent it, the customer has to make a second trip to return it, and the chances of renting another game or movie goes up considerably. The one advantage that the grocery industry has over video retailers is that the traffic flow is immense. If a customer has to return a movie, the chances of them buying a carton of milk or whatever they may need is greatly enhanced.

It's amazing how grocers have started to come on with video in the last four years. Four years ago, they didn't want to give up the square footage. But now they are finding that they can make the dollars per square foot that they require and more.