In supermarket video in 2003, the plot was very much the same as 2002, except it definitely thickened.
The storyline was simple: the continued, unprecedented and thoroughly welcomed (by retailers, anyway) growth of the DVD video format. This was the same as in 2002, but it went wider and further.
At the start of the fourth quarter, the Digital Entertainment Group, Los Angeles, reported that DVD was nearly in half of all U.S. households. That threshold was expected to be eclipsed in the fourth quarter with the sales of very low-priced players, reasonably priced combination VHS and DVD players, and the gradual lowering of prices of recordable DVD units.
Children's and family titles -- the last stronghold of VHS -- moved squarely into the DVD camp. Studios and retailers welcomed shoppers looking to update their libraries with the latest technology.
Catalog video found a home in supermarkets as retailers sought ways to profitably participate in the video business without going head-to-head on event movies at loss-leader pricing in the mass merchants. New displays made it easy for supermarkets to make a statement about their commitment to the catalog video business, and lockable shelving allows them to protect the discs against theft during off-hours.
With the simpler pricing structure of DVD, supermarkets are pleased with their rental results, and are starting to see similar pricing on VHS tapes from the studios. Rental growth numbers pale in comparison to DVD sell-through, but retailers tell SN they are holding their own while offering an important competitive advantage over Wal-Mart, which does not offer video rental in stores.
"In 2003, supermarket chains embraced catalog VHS and DVD like never before, and we expect this trend to continue in 2004," said Leslie Baker, vice president, sales, grocery and drug, Ingram Entertainment, La Vergne, Tenn.
"DVD sell-through continues to be a tremendous growth area for supermarkets," said Bo Andersen, president, Video Software Dealers Association, Encino, Calif. "One of the most noteworthy trends is that supermarkets are making money with catalog sell-through. Supermarkets have long found it profitable to offer the latest new-release videos for sale, but it was practically unheard of for them to sell VHS catalog titles. The high demand for anything DVD and extremely attractive pricing have made DVD catalog titles attractive to supermarkets."
Among the other video developments this year, vending machines again resurfaced as a way to merchandise DVDs, limited-play DVDs were tested in supermarkets and other channels by Disney, and revenue sharing for DVD and video games gained momentum. Of these, industry observers think the revenue sharing has the most staying power.
Among retailers, Kroger started expanding its video presence and made waves with a giant chainwide promotion on behalf of the DVD release of "Lion King." Stop & Shop expanded its comprehensive entertainment product departments, Giant Eagle expanded its successful video program, putting more emphasis on sell-through, and Albertsons was named Supermarket Video Retailer of the Year by SN.