Unlike most other classes of trade, supermarkets can rent their videos and sell them, too.
With giant sell-through titles like "Jurassic Park" and "Snow White and the Seven Dwarfs," retailers will both sell and rent these titles to enhance their image as complete video destination stores.
They will have impressive displays promoting the sell-through tapes and tremendous depth in copies of the same titles for rental. One side of the business will build on the other, generating a sales spiral that few retailers in the video trade can take advantage of.
"With titles like "Jurassic Park" and "Snow White" hitting in October, we are going to have massive displays in most of the stores, said Clifford Feiock, video coordinator at Nash Finch Co., Minneapolis. "That will bring a lot more people into the store and also into the video [rental] department," he said.
"The percentage of customers that rent from us is actually pretty small, but when you put sell-through in there, too, it really helps," said Feiock.
It's almost a synergistic effect, said Bill Glaseman, video specialist at Bashas' Markets, Chandler, Ariz. "The customers see all the noise, hoopla and promotions from the studios, and that makes them aware that the titles are available for rental," he said.
Most video stores, with the notable exception of Blockbuster, focus almost exclusively on rental. While a handful of discount stores have rental departments, the vast majority of mass merchants are only interested in sell-through. Many supermarket chains, on the other hand, work both sides of the video street very effectively.
For example, when these chains aren't selling "Jurassic Park" and "Snow White," they will be renting them, and the rentals will result in more sales. The rental units will later be sold as previously viewed at low price points, launching the video collections of even more rental customers. Savvy retailers also take advantage of the rental release of top theatrical titles by offering related catalog tapes for sale.
Stocking both rental and sell-through "definitely" boosts overall department margins, said Andy McPheeters, nonfood buyer and merchandiser at Stanley Stores, Bay City, Texas. "A lot of people that shop video in grocery stores do it because of the convenience. It's a one-stop deal. What we offer are new releases and recent releases [for rental], and we always have a large selection of newer releases [for sell-through] when somebody's looking for them."
Many retailers complain about the low margins they must live with on the big sell-through titles, but those with rental sections and expanded sell-through offerings can do something about it. Whether by using free rentals as an incentive in promoting sell-through tapes or by playing the rental and sell-off game to maximum profitability, supermarkets can turn a money-losing situation into a marketing advantage, retailers maintain.
"You can use the rentals to support the sell-through by offering a free rental or offering a tie-in. It can help to promote sell-through incredibly," said Tim Harrison, video supervisor at Food Giant Supermarkets, Sikeston, Mo.
"Rental helps sell-through more than the other way around," he continued. "People want [the video] on street date, whether it is a rental or a sell-through, but the people who rent it on street may actually end up purchasing it later; somebody who buys a title on street date is certainly not going to come back and rent it."
When a video "streets," it is important to have sufficient copies of the title on hand, whether it is being merchandised for sell-through or rental, retailers said.
"I don't care how many copies of a new title you have, you can never have enough when it first hits the shelf. With 'Jurassic Park,' everybody wants that. We try to accommodate them," said Thomas Lowther, director of retail scanning at Brookshire Bros., Lufkin, Texas.
When making buying decisions for "Jurassic Park" or any other sell-through hit, Lowther said, "we try to use good business sense. How many can we sell later on down the road as used, previously viewed movies and get our money back from it? We try to buy as many as we can without getting hurt."
After the title's peak rental period, the first few weeks following its release, excess copies can be sold as previously viewed -- an option that is becoming increasingly popular. In this way, retailers can cash in on rentals of a hot new release by having great depth of copy. The title, which was purchased at a low sell-through price, pays for itself. Then it can be sold below suggested retail for a slight profit.
Bill Liesenfeld, nonfood supervisor at Sak 'N' Sav, Houston, said he plans to sell previously viewed copies of "Jurassic Park." "I'll rent the movie for three or four weeks and then I'll sell it used for $9.99. We've had really good luck with movies that we've brought out that way, at a reduced price."
When deciding which titles to bring in as sell-through and which to carry as rental, most retailers have noticed that children's videos do better for sell-through. Titles like "Snow White" and other children's tapes also will rent, but their strength will be mostly in the sales area.
Although live action, adult-oriented titles like "Jurassic Park" and "Speed" will do well as sell-through, they will attract many traditional rental customers. Similar titles from earlier this year were "The Fugitive" and "Mrs. Doubtfire."
When faced with a new release that is likely to be a big hit, retailers have the opportunity to bring out some higher profit catalog items along with the low-priced hit. For example, along with "Jurassic Park," other dinosaur titles can be positioned for rental or sell-through next to it. Two options are "We're Back," a sell-through title from earlier this year, and the entire Barney catalog from Lyons Group, Richardson, Texas.
Dennis Maguire, vice president of domestic sales at Buena Vista Home Video, Burbank, Calif., stressed the importance of strong merchandising in video departments, especially with the fourth quarter's blockbuster releases. Retailers can mine the video catalog and bring out videos of the same genre or with the same actors. "Retailers can add to their revenue and certainly enhance their margin outlook by selling some [related] product along with the hit title," he said.
"When 'The Lion King' came out, we came out with 'Jungle King' [released this year by Sony Music]. We made a big production of 'Jungle King.' We put that shipper out, but it'll be a long time before another 'Lion King' comes around," said Brookshire's Lowther.
Another option could be bringing out the old Hanna-Barbera "Flintstones" television show videos available from Turner Home Entertainment, Atlanta. With the release of the new version of "Miracle on 34th Street" later this year, retailers are also expected to merchandise the original for both sell-through and rental.
What enables supermarkets to successfully carry both sell-through and rental? Store traffic is an unsurpassed advantage supermarkets have over video specialty stores and mass merchandisers. In short, store traffic energizes the synergy.
"We have a greater opportunity for
exposure because we have a lot more traffic," said Stanley Stores' McPheeters. "It all comes down to traffic," said David Bishop, executive vice president of MGM/UA Home Entertainment, Santa Monica, Calif. "Rental drives traffic in to make the transaction and then back in to return the product. So there's additional exposure when you feature sell-through products at the supermarket level." Ron Sanders, vice president of sales and rental at Warner Home Video, Burbank, Calif., also echoed this statement. "Especially for sell-through, it is such a high impulse-oriented purchase that anytime you can tie in a top-of-mind theme or topic with the consumer, it gives the consumer an additional reason to buy."
Gary Schloss, vice president of general merchandise at Carr Gottstein Foods, Anchorage, Alaska, claims the sell-through market is largely untapped. He said he has seen customers who are building video libraries containing hundreds of titles. "As the price of video comes down, people would much rather have copies in their library. That was proven when 'The Fugitive' came out at a sell-through price," he said.
Industry observers note retailers are taking advantage of low-priced sell-through titles to have numerous copies on hand for those seeking to build personal video libraries.
When asked if this phenomenon has cannibalized rentals, Larry Hage, division supervisor at Ray's Food Place, Brookings, Ore., said he did not think so. "People are doing the same thing with videos they did with their favorite music albums 15 years ago. If it is a good one, why not have a copy?" he said.