Suppliers are expecting more big things from supermarket video this year.
Last year was a banner year, with supermarkets attaining 20% of the video rental market, according to some estimates. This year, that growth should continue with supermarkets gaining in profitability and marketing sophistication, said suppliers polled by SN.
"The days of grocers treating video as a stepchild are over," said John Maioriello, president of JD Store Equipment, Los Angeles. "Supermarkets eventually could very well be the most dominant player as an aggregate in the video rental industry," Maioriello said.
"The smarter and sharper supermarkets are -- and will become -- a bigger factor in the video industry," noted Barry Lyons, director of sales for the Eastern region at P.M. Home Video, Sun Valley, Calif.
"Last year, video in supermarkets just exploded," said Rob Milks, sales manager of Shannon Data Systems, Norcross, Ga. Here is what the suppliers had to say about the future of video in supermarkets:
John Maioriello president
JD Store Equipment Los Angeles
The most important thing that we are seeing right now is that large grocery chains -- national, regional and rural -- are assigning full-time people to manage and run full-sized video rental departments. They have had a lot of success with video sell-through at budget price points and now are adding complete video rental departments with as many as 3,000 to 5,000 videos.
In our company's business (display racks and fixtures) in 1993, we saw a growth in the supermarket field of almost 200% over 1992. Many supermarkets are adding complete video game departments with anywhere from 600 to 900 games. They will have Super Nintendo, Nintendo and Sega Genesis. They are renting and selling the games, and that is going to continue to grow and grow.
There also are a number of grocery stores with full-blown video rental departments that are adding comic books. Comic books were projected to be a $700 million market in 1993 and a $1 billion market in 1994. They tie-in nicely with video and home entertainment software.
Rob Milks sales manager
Shannon Data Systems Norcross, Ga.
Where supermarkets used to see video rental as a way to get people into the store to buy more groceries, they are now promoting video as an entirely new source of revenue. It's a way to get the customer back in the store two or three times a week instead of once a week because they have to bring the movies back. These supermarket chains are spending hundreds of thousands of dollars on computerization. They are spending millions of dollars on the new releases that are coming out. I can only see it expanding over the next two or three years and becoming much bigger than any independent video stores out there.
Mike Pascuzzi director, sales
Central Park Media New York
I absolutely think that supermarkets are expanding into video rental. The chains who are in it are doing well with it.
It's not like it was years ago when people were just starting to get their feet wet. You've got a much more sophisticated market and the people who are running these supermarket video departments are getting a lot more experience under their belts. As they see it grow in their stores, they are going to expand it into more and more locations.
Ryan Kugler buyer
Distribution Video & Audio Clearwater, Fla.
I read about chains like Ralphs and Vons expanding into video rental and I think a lot of the others are now going to get into it.
It is a good business for them because it brings people into the stores. When the family goes to buy groceries, it is a convenience to be able to get a video for themselves and for the kids.
The marketing practices of supermarkets are more sophisticated than specialty video stores. They are a lot cheaper with rates at 99 cents and $2 a night, whereas the video store's rates are $3 and $3.25. The supermarket is not depending on video, so they can set their rates to attract customers.
Wayne Bailey president
Accurate Inventory Management Aurora, Colo.
Supermarkets can make a ton of money in video, but first they have to quit running it with a grocery mentality and start running it like a video store. They have the people, they have the traffic, and when they understand that, it is absolutely going to explode.
Barry Lyons director, sales, eastern region
P.M. Home Video Sun Valley, Calif.
Now that the supermarkets realize that video can be a profit center, and not just a loss leader to get people in the store, it will just expand. Supermarkets have an advantage over video stores because of the long hours they are open. Many supermarkets are open 24 hours, and others open at 7 a.m. and don't close until late at night.
