DVD is the future of the video business and retailers participating in SN's annual roundtable are getting ready for it.
All offer DVD rentals in select stores and are either considering or experimenting with DVD sell-through, where shrink is as much or more a concern than it is with VHS tape sales.
Supermarkets have been ahead of many video specialists in putting in DVD rental programs. "When DVD became available, we were one of the first in Arizona to put it in," said Bill Glaseman, video specialist for Bashas' Markets, Chandler, Ariz.
"We have both rental and sell-through DVD in three of our 12 stores," said Laura Fisher, video coordinator/merchandising associate at Martin's Super Markets, South Bend, Ind. "A fourth store will have sell-through when we convert a rental department into a dedicated sell-through department."
DVD movement is building, albeit gradually, the retailers reported. "It is growing slowly and we'll see steady improvement, especially with the programs the studios are bringing out," said Darlene Kiefer, services coordinator for Seaway Food Town, Maumee, Ohio.
Just as with VHS tapes, the key to rentals is new releases, the retailers said. "We've learned that whenever we put DVD into a new store we will not start with older titles because they will not rent," said Bob Gettner, video buyer/coordinator for B&R Stores, Lincoln, Neb. "People with DVD players want new movies where they can clearly see the difference between a VHS tape and DVD."
Here is what the retailers participating in the roundtable said about DVD:
SN: What's been your experience with DVD?
GLASEMAN: When DVD became available, we were one of the first in Arizona to put it in. We started in more affluent areas and in places where it might attract some interest, such as a store near a huge Intel plant. I thought those customers would be likely to become early adopters of DVD. In the beginning, it wasn't that successful simply because there weren't enough players out there. Now with more players on the market, I'm putting DVDs in more of our stores and we are enjoying pretty fair rentals. DVD is in about 15 or 16 stores now. As far as placing DVD in rural outlying areas where we have some very good rental stores, so far there hasn't been any demand. It's not gone into the rural areas yet.
FISHER: We have both rental and sell-through DVD in three of our 12 stores. A fourth store will have sell-through when we convert a rental department into a dedicated sell-through department. With DVD, we've noticed rental is stronger than sell-through. There's been a lot more rentals with DVD. We've tested our market to see how many DVD players are out there. Right now, DVD is not big in our area, but we think that will change.
GETTNER: We started with a package of 25 or 30 titles. However, we've learned that whenever we put DVD into a new store we will not start with older titles because they will not rent. People with DVD players want new movies where they can clearly see the difference between a VHS tape and DVD. That's the experience we've had so far. It's an ongoing learning process. Three of our stores have DVD.
KIEFER: DVD rentals are in selected stores where we feel there is a market. It is growing slowly and we'll see steady improvement, especially with the programs the studios are bringing out. This summer Warner will offer $50 off a DVD player if you rent some of their movies in July or August. That's great!
SN: What do you think is in the future for DVD as a supermarket product?
GLASEMAN: There is a strong future for DVD, and it will eventually become a choice rental product. But it's going to take a number of years for the changeover to take place. As with VHS, DVD rentals will be focused on new releases and not so much on the older catalog titles. And, I don't think there are enough players out there to warrant sell-through promotion yet. Maybe in some cities where there are more players, it would work, but not here.
FISHER: It depends on the market, of course. But DVD is going to take off, and it will really take off once they come out with machines that record. Until then, we are sitting back and watching to see what's in store for us.
GETTNER: DVD is here to stay. It's going to be very big as we move forward. Those who want to remain in the business will have to get into DVD because people are going to buy those players as the price continues to drop, and because of their advanced picture and sound quality. It will really take off when they make the recordable DVDs.
When I first saw DVD, I thought it compared to VHS the same way CDs compared to audio cassettes when they first came out. VHS tapes will be around for many years, but I believe DVD has already found its place in the market and will continue to grow. Hopefully, it will make us some money. There have been enough sold now that people are comfortable with DVD. We have a growing base of customers who are still learning that they can have DVD. Hollywood Video has understood that too; that's why they have embraced it. Why Blockbuster hasn't embraced it yet, I don't know. They're dragging their feet on DVD.
KIEFER: We will see more and more DVD in supermarkets after we find the right way to secure it. If the movement on the under-$10 VHS is any indication, low-priced DVD would have a great future if it can be made secure and still be available as an impulse item.
SN: As DVD grows, do you foresee more of a problem with shrink?
GETTNER: Yes, it probably will be an issue because of the small size of the CD. For grocery, it is hard to merchandise and keep control of the product. It's a lot smaller than a video tape. KIEFER: We want to sell DVD, but decided we can't until we get source tagging with CheckPoint. We've heard the horror stories of people picking up a whole display and walking out the door with it. There is just no way we will bring in DVD at sell-through until it is source-tagged.
FISHER: Two of our video stores now have DVD, but we don't put live DVD product out. When we offer DVD titles for sale, we merchandise them in an empty box and sell them from behind the counter. You make so little profit on them that if one is stolen, there goes the profit for maybe 20 DVDs. We are just starting out and want to make it available to our customers, and let them know that we have it. At the same time, we have to make sure that we aren't losing money. They are smaller than VHS tapes and easier to stick in a pocket or jacket.
GLASEMAN: I anticipated more shrink with DVD at the very beginning. Even in live-inventory departments, we don't keep DVDs out where customers can actually handle the product. The empty box is out just like it used to be before we had security departments. Unless something else comes along, we'll merchandise the product in drawers.