SUCCESS OF DVD SUGGESTS A STRATEGIC RETAILING SHIFT

Digital video discs (DVDs) have arrived with all the subtlety of an elephant trumpeting in the middle of the room. Many supermarket operators have jumped aboard this trend, and many more should no doubt do so.Despite a slow start, probably occasioned by high hardware price points at first, DVDs have fully arrived on the retailing scene. Indeed, the quick run-up of DVDs in the past five years makes

Digital video discs (DVDs) have arrived with all the subtlety of an elephant trumpeting in the middle of the room. Many supermarket operators have jumped aboard this trend, and many more should no doubt do so.

Despite a slow start, probably occasioned by high hardware price points at first, DVDs have fully arrived on the retailing scene. Indeed, the quick run-up of DVDs in the past five years makes them the most successful entertainment software ever introduced at retail. Some estimates have it that more than 1 billion DVD units will have been shipped before the year is out, and that's in just five years. It took about twice that long for the VHS tape format to reach that milestone. Moreover, DVD sell-through dollars have already eclipsed those now garnered by VHS.

To be sure, VHS isn't going to fade away overnight, although that will eventually happen. At the moment, DVD has about a 30% penetration of households against VHS' 96%. According to a news feature in the NonfoodStrategies section this week, many supermarket operators are now profiting from the rapid ascendency of DVDs, but some aren't. The story appears on Page 33, but here's a quick look at a couple of the challenges some food retailers perceive when it comes to DVD.

DVDs are dollar-dense, that is they carry a fairly high price point but are of small physical size. That makes them vulnerable to theft. There are many solutions to this problem, such as increasing the packaging size or displaying empty sample boxes. In any event, as one supermarket operator pointed out, this may be a good problem to have: "If they're not going to steal it, then it's not worth selling."

Meanwhile, another food retailer is grappling with inconsistent demand. At some store locations, DVD rules. At others, VHS remains the preferred format. You'll see a lot more about DVD challenges in the news feature.

Incidentally, you may have noticed that I cited above the section and page number for the news feature about DVD merchandising that we've been considering this week. Thereupon hangs another tale.

For the first time in several years, we're changing the section lineup in SN. The section that deals with nonfood topics is now called "NonfoodStrategies," effective this week. Previously, SN's nonfood news coverage was found in the Home & Health section. What's more, while Home & Health was a back-of-the-book section, it has now been moved forward to become the first product section in the book.

These changes were made in recognition that nonfood merchandising is of increasing importance to supermarkets, and should be of even more importance, given that it represents one of the chief ways conventional supermarkets can stake out a competitive position against mass merchandisers. As many supermarket operators have said, "If mass has moved into our categories, why shouldn't we learn more about their categories and do the same?"

Why not? Just look at the DVD opportunity.