A funny thing is happening to video rentals in supermarkets: At just about the same time talk about the "information superhighway" and all it might imply about video distribution is reaching public consciousness, the business has achieved an important critical mass that would seem to ensure its future for some time to come.
To many observers, an important milestone along the way toward the continuing success of supermarket video rentals was reached in 1993 when as much as 20% of the total market for rentals was being done through supermarkets. This surprising share growth is mentioned in a report of the future of video on Page 25.
Predictions hold that the market share of video rentals in supermarkets could continue to slowly increase to 25% in the next few years. That seems to be an entirely plausible prediction -- perhaps too low, if anything -- given the natural synergies that exist between food retailing and video rentals. After all, food shopping draws traffic to the video department, and the reverse. Moreover, while major chains have been putting in highly designed departments that have boosted the business nicely, there remain quite a number of supermarkets that simply aren't in the business at all. As operators of the nonvideo supermarkets look around and see the success the category is bringing others, it's likely they will want to play, too. But the dark side of video rentals always has been the nagging feeling that cassette tapes represent a technology that can be easily eclipsed by newer methods, such as video-on-demand services. Those services could bring video and other information to households by means of hard wiring such as cable or telephone lines, or, alternatively, satellite uplinks. Also feasible are microtransmitters using the same technology that makes cellular telephones possible. Most likely, there are other delivery means just over the horizon that are difficult to envision at the moment. So, given all that, are the predictions about the future of in-supermarket video rentals too optimistic after all?
Probably not, and for the same reason that food shopping itself remains store-driven, even though nonstore delivery services are both practical and available.
That reason is that selecting a video is, like food shopping itself, something of a social activity: It not only provides a reason to get up and get out, but it is an activity that caters to shoppers' need to handle the product, take a look at the boxes and maybe chat with others about choices set forth. In a meeting held recently in Los Angeles on the ramifications of the coming information superhighway, participants acknowledged that alternative delivery systems pose something of a challenge to the video rental business as it's presently constituted. But at the same time, many said that because of the social aspects of video selection, the threat may not materialize in full force for several years to come. A brief report on the conference is on Page 24. Beyond that, it will doubtless take quite a few years for whatever system is selected to facilitate the information superhighway to achieve in-home penetration to anything like the degree now enjoyed by videocassette players. So it seems that supermarket video rental remains a show with legs.
And, maybe just as important, it continues to offer various hidden and underutilized benefits as wide as store-image promotion or as narrow as the cross-merchandising of popcorn.
On a more sophisticated level, a video department makes possible the issuance of a video club card that can double as a frequent shopper card. Then membership can be used to develop shopper profiles for micromerchandising, or to hand special rewards to valued customers.
