Supermarkets may be leaving good money on the table when it comes to video games.
Although interactive games are showing strong growth in almost all segments of the national market, the game business in supermarkets is declining, according to SN's eighth annual State of the Industry Report on Supermarket Video. The study found games at 5.6% of overall video revenues in rental departments last year. This percentage dropped from 6.5% a year earlier and from 10.3% four years ago.
But as the interactive software industry gathers this week, May 13 to 15, for E3, the Electronic Entertainment Expo, in Los Angeles, national retail sales of video games are at an all-time high.
Market research firm, NPD Group, Port Washington, N.Y., reported estimated retail game sales for 1998 of $6.3 billion, well ahead of 1997's $5.1 billion. Software for "next-generation" video game consoles like Nintendo 64 and Sony PlayStation was up 75% in unit sales and 51% in dollar sales. Distributors report a corresponding increase in video game rental activity, as well.
"For 1999, the video game industry should see sales growth somewhere between 10% and 15%, potentially hitting the $7 billion mark," said Ed Roth, president of NPD's Leisure Activities Tracking Service. "Continued availability of new software, very reasonably priced software, hardware prices perhaps reaching the $99 level, the Sega Dreamcast launch in the fall and the current massive console install base are all reasons for predicting industry success in 1999."
So why aren't supermarket video departments keeping up? "Retailers are underbuying on games," said Bill Bryant, vice president for sales, grocery and drug at Ingram Entertainment, La Vergne, Tenn. "The category is booming, and we recommend that they dedicate 10% to 20% of their video budget to game purchases."
A good move for supermarkets would be to cut back on video catalog and put more games in, he noted. "There's an opportunity for supermarkets to acknowledge the fact that Nintendo 64 and Sony PlayStation have exploded this past year and a half, and the category is gaining even more momentum." The new Sega Dreamcast system will add to the game marketplace, Bryant said.
"One problem for supermarkets is that games are hard to buy," said Kirk Kirkpatrick, vice president of marketing at WaxWorks/VideoWorks, Owensboro, Ky. "It's a unique market and they need the right knowledge."
Breadth of inventory is another challenge for small supermarket rental departments. "Game buying really takes an expert," said a video specialist for a midsized Midwestern chain. "We set a budget and let our supplier choose the product."
Another factor is that games, like movies, can be market specific.
In the right locations, though, games can be solid renters for supermarkets. "Games go very well here," said Ryndie Liess, video manager at Country Mart, Hollister, Mo. "There's not much to do in this area, so even two-year-old titles rent very well."
Metro operations, unlike rural areas, have to face increased competition as well. "Our game business is growing but not as much as we'd like," said Jamie Molitor, director of video operations at Dierbergs Markets, Chesterfield, Mo. "We're facing tough competition from Blockbuster here, which is cutting into both tape and game rentals."