There's no substitute for experience.
At a time when all supermarket rental programs are struggling to compete with the big video specialty chains, the difference between success and sayonara often comes down to the knowledge and expertise of a retailer's video personnel. That was evidenced in this year's ranking of the All Stars of Supermarket Video as judged by SN and leading industry suppliers.
The all-star ranking is based on revenues and a subjective analysis of the retailers' marketing, merchandising and overall commitment to the video business. The suppliers on the panel, executives who spend time out in supermarkets around the country, were promised anonymity so as not to jeopardize their relationships with retailers. SN polled the suppliers and determined the final list.
In this year's list, Giant Eagle, Pittsburgh, moves from No. 2 to No. 1 based on exceptionally strong merchandising, with Albertsons, Boise, Idaho, slipping back to No. 2. Despite its size, and the strength of one division's program -- King Soopers in Denver -- Kroger, Cincinnati, remains at No. 3 because of suppliers' deep concerns with the top grocer's overall commitment to the video category. Two years ago, Kroger was the clear pick for number one ranking.
Safeway, Pleasanton, Calif., moves up from No. 7 to No. 4, mostly on the basis of its Seattle division's video rental program, and also because of the additions of the Carr Gottstein Foods stores in Alaska and Randalls in Texas. Because of improvements made to its rental program in the last year, Wegmans Food Markets, Rochester, N.Y., stays in the fifth place passing Schnuck Markets, St. Louis, for the first time. Schnucks drops from fourth to sixth, and Hy-Vee Food Stores, West Des Moines, Iowa, drops from sixth to seventh, mostly because Safeway moved up.
Rounding out the list is Ingles Supermarkets, Asheville, N.C., remaining at No. 8 and Price Chopper Supermarkets, Schenectady, N.Y., staying at No. 9. The only new addition to the list this year is Bashas', Chandler, Ariz., which was recognized for consistent execution of its convenience-oriented video departments, proving that merchandising concept is still viable for supermarkets.
For all of these retailers, except for the many under-performing Kroger divisions, a key to the retailers' success is sound category executives with solid experience, merchandising savvy and the ability to adapt to the ever-changing buying climate in the video rental business. While video may be seen by some as an easy matter of buying adequate copies of popular movies, these chains are soon disappointed by their results.
Commenting on the departure of some good video executives this past year, a video distribution source said, "It's kind of sad because you can see the intelligence leaving the business."
Maximizing the still significant profit opportunities in video rental requires that the buyer not only be familiar with the movies, but know how many of each title to put in individual stores, how to parlay the various buying programs into promotions and revenues, how to get the most out of existing catalog inventory, and much more, including basic management skills. It requires a mastery of the numbers and the strength of character to stand up to some of the most powerful and attractive suppliers in the world -- the movie studios -- and to be able to recognize when their trusted trading partner, the video distributor, may not be providing the best advice or support. As some supermarket chains have found out the hard way, this is no ordinary supermarket category management job. Those that treat it as such are far below the top 10 in SN's video All Stars ranking.
Many good programs deserve honorable mention, and some just missed the cut this year. Last year's number 10, Furr's Supermarkets, Albuquerque, still has a strong program and recently changed its long-standing policy of offering all videos for 49 cents, increasing the prices on new releases. Others cited by suppliers as having noteworthy programs are Seaway Food Town, Maumee, Ohio, Coborn's, St. Cloud, Minn., K-VA-T Food Stores, Abingdon, Va., Dierbergs Markets, Chesterfield, Mo., C&K Markets, Brookings, Ore., Shop 'n Save, Kirkwood, Mo., Reasor's, Tahlequah, Okla., Nash Finch, Minneapolis, and Mega Marts, Oak Creek, Wis. As in past years, Tops Markets, Buffalo, N.Y., was credited by the suppliers as having an outstanding sell-through program, although its rental offerings are limited to a few Blockbuster leased space departments.
Seaway Food Town has upgraded its rental program in the last year, while adding music CDs, such as soundtracks and singles, said a distribution source. "They are continuing to innovate into new areas," the source said.
Although hidden away in rural Minnesota, Coborn's has 30 rental departments, some at 3,000 square feet. "These are absolutely cutting edge departments," said another distribution source. "They all have dedicated store entrances. Their video fixtures resemble those of a video specialty store. They have depth of copy. They have dedicated store personnel. They cross promote with other areas of the store. They are in secondary markets and they just do an outstanding job. Plus, they have an extremely strong category manager."
Reaching number one this year for the first time is Giant Eagle. Although reducing the total number of its rental departments, closing older, smaller ones, Giant Eagle's new Iggle Video shops are the class act of supermarket video. "On a scale of 1 to 10, Giant Eagle is 20," said a distribution executive.
These departments are as large as 5,000 square feet, while its newer ones are about 3,000 square feet. The merchandise presentation inside the Iggle Video shops rivals that of the video chains, potently combined with the traffic of the supermarket they are a part of. The departments feature huge copy depth, substantial catalog offerings, current and catalog sell-through, DVD for rental and sale, audio books for rent, and a video game selection that has long been superior to the video specialists. Giant Eagle proves that video can still be a very significant contributor to the supermarket shopping experience, said industry observers.
"Then they know how to buy. Then they know how to manage. Then they've got tight control over retail and beautiful video departments. They are not just on top of the business, they are a step ahead of it all the way," said the executive.
"It's not just a video department, it's a total entertainment center," said another industry source. "They are a destination for video rental shoppers. They just do a very superior job."
Contrary to Giant Eagle's approach in nearly every way is Albertson's. With its 925 convenience oriented departments, the chain is gradually extending the rental program to stores it has acquired in recent years, and building larger sized live inventory departments in some new locations. The program is run by three rack jobbers: Video Two, Sandy Utah, B&M Video, New Braunfels, Texas, and H&M Video, Burien, Wash.
Albertson's is best known, though, for its ubiquitous 2,500 tape sections in the front of the check-outs, adjacent to the service counter. While unimpressive from a merchandising standpoint, these departments are generally well-stocked and do a good job of serving their customers' video needs. Taken together, the retailer does a tremendous volume in video rentals.
But mostly, Albertson's remains near the top of the All Star ranking because of its strong and ongoing commitment to the video category, which also includes exemplary merchandising of sell-through. "The departments are linked to the customer service center so there is always an employee available to assist in the video department. There is strong copy depth and very strong commitment to sell-through in the main selling area of the store," said a distribution source.
In its newer stores, larger sized departments bode well for the future of video rental in the company. "They've enlarged their live departments. They are getting to a template of about 1,800 square feet. It's a nice footprint and they are very well merchandised. They use the space wisely," the source said.
When suppliers are asked about Kroger's video rental program, most think long and hard before responding. Three years ago, Kroger consolidated its video buying with one distributor, making its decision on the basis of cost, said the suppliers. By de-emphasizing distributor service and with a revolving door policy toward category managers in many divisions, video rental revenues have slipped dramatically and the total number of video departments has been reduced by about 20% in the last year, according to the distribution sources. The chain's 700 departments now include about 50 Blockbuster leased space departments scattered among many divisions.
While Kroger's total video volume and the merchandising in some divisions, especially King Soopers, is at the top of the supermarket industry, concerns about the company's future in video place it third on SN's All Star list. "There is a lack of corporate commitment all the way down to the divisional level, and many divisions have elected to reduce the number of locations, or pass the responsibility to Blockbuster to manage the category," said a source.
Moving up to number four this year is Safeway. This decision was based primarily on the accomplishments of the Seattle division, located in Bellevue, Wash., which now manages the departments in the Carrs stores in Alaska, and also on the expectation that Safeway will be able to turn around the now-faded video rental program in Randalls Food Markets, Houston. Sources said Safeway is installing a video point-of-sale system that will be compatible with its other operations, which distribution sources said is a very positive sign, first, because the company is making a significant investment at Randalls, and second, because of Safeway's previous success in video.
While staying in the fifth spot, the Wegmans program has made great strides in the last year, said distribution sources. "Wegmans really came on this year. They took a hard look at the category and decided that they needed to make some changes in the way that they managed their business. They began revenue sharing which gave them depth of copy, freshened up the look of the stores, moved a lot of the departments and improved their image," said a source.
Slipping from No. 4 to No. 6 is no indication of any diminishment in Schnucks' video program, sources noted, but instead is only because of the progress at Safeway and Wegmans. Schnucks remains one of the leading forces in the world of supermarket video retailing.
"Schnucks gets in on the front end of everything, for example, with any kind of new game platform or as they did with DVD," said a distribution source. When DVD first came out and it wasn't even offered in St. Louis, Schnucks went out of the way to make sure that they had it, buying product in other market areas, and making a statement that they were the leader in new technologies. "If there is a new format out, Schnucks has it, merchandises it properly and they are committed to it in the right way."
Hy-Vee is another big chain that continues to do a very good business in video rental, slipping a notch in the rankings because of the improvements of others. "They continue to try to market their departments and they have strong category management. Where they could improve is to enlarge their departments, go to a live presentation and get away from the reduced image cards," said a source.
With a growing store base and a standardized, attractive video rental module, Ingles is seventh on the All Star list. "Ingles is a sleeping giant. Those departments are doing great. They are very nice and have dedicated customer service," said a distribution executive.
Ingles is putting in strong copy depth and yet is getting good turns. "So their customers are very alive and responsive. They may be a lot of markets where Blockbuster isn't quite as strong. But their per-store volumes on some titles is just really good," said the executive.
Another chain that has improved its copy-depth in the past year is Price Chopper, which again ranks eighth on the All Star list. Price Chopper has long led the industry in the deceptively difficult practice of cross merchandising, suppliers noted.
"They use shelf talkers in other areas of the stores to drive traffic into their departments. They are one of the best in terms of promotion. Their problem in the past is that they haven't had the depth of copy to compete, and they have just changed recently to get into that league of competition. So we are expecting good things in the next 12 months for them," said a distribution source.
New to the list this year is Bashas', a controversial choice among panel members because of the retailer's relatively small base of 39 departments and its conservative approach to buying and merchandising. But it is precisely because the chain is able to be successful with an enhanced version of an old buying model that makes it worthy of recognition as an a supermarket video All Star.
The retailer's commitment to video is second to none, although its departments tend to be on the small side -- recently installed live inventory sections are around 500 square feet -- the selection includes DVD and the latest games, and a judicious use of the industry's copy depth programs. The retailer continues to put live inventory sections into all its new and remodeled stores.
Meanwhile, the company is effectively weathering the competitive storm generated by the specialty chains and an in-store survey published in SN last year showed that Bashas' customers were very pleased with the shopping experience there. While they recognized that Bashas' selection and new release availability was less than the specialty chains, the consumers rated the grocer's video program nearly as good.
