ORLANDO, Fla. -- New releases are the key to video rental success, and retailers participating in SN's video roundtable commit a significant percentage of inventory to them.
One chain, Boogaart Retail division of Fleming Cos., Concordia, Kan., is testing a merchandise mix that all but eliminates most of its catalog sections, said Matt Dillon, video director. "One approach that I'm testing right now is scaling our catalog back completely and going to a new release kind of department," he said.
"It is now about 80% new releases and I have not seen any drop-off in business at all. We had the catalog titles and saw that they were not doing anything besides wasting space, and space is real valuable to us," he said.
But others said catalog is still an important contributor to department profits. "With the high prices of new releases, you really want to develop your catalog business," said Matthew Feinstein, vice president of Marbles Entertainment, Los Angeles.
One time-tested method of keeping catalog selections fresh is to rotate titles from store to store, said Tom Carton, president and chief executive officer of Buckeye Entertainment Corp., Dublin, Ohio. But, he noted, "If 25% of even your family product rotates quarterly, you need to alert the customers that maybe they haven't seen everything down that aisle."
Noting that some specialty stores keep videos as new releases for a year or more, roundtable participants agreed that nine months was about the longest acceptable time. "Customers are real smart and they will notice if an old title is still presented as a new release," said Dennis Maxwell, video director at Reasor's Foods, Tahlequah, Okla.
Here is the roundtable discussion on the state of new releases:
SN: Everybody agrees that new releases are the hot buttons that determine video rental success. How is your approach to new releases changing, or how has it changed recently? I understand that Boogaart is doing some fine-tuning.
DILLON: We are doing several things. One approach that I'm testing right now is scaling our catalog back completely and going to a new release kind of department. It is now about 80% new releases and I have not seen any drop-off in business at all. We had the catalog titles and saw that they were not doing anything besides wasting space, and space is real valuable to us. So we decided to try it. Since it has been successful, we are probably going to try it in more stores. We also have changed the way we approach our buying. I am probably buying 20% less than I did two years ago. I am doing more promotion of what we have and making it work for us longer.
MOLITOR: How long is a new release a new release for all of you?
FEINSTEIN: I'd say anywhere from six to nine months, depending on the title. We will look at the turns that it is still making.
DARNELL: Four to six months.
DILLON: Four to six months also.
CARTON: We are probably at nine.
GETTNER: I would say six months, depending on the return on investment. If it is still doing well, then we will leave it alone.
MOLITOR: We have two tiers of new releases, one-day and two-day titles. That changes after one month, and then we keep them out there for six to nine months.
MAXWELL: We go nine months as a maximum, with a couple of exceptions based on the number of dollars generated by a title and the number of copies. We use a formula that reduces the number we have each month. For example on a title like "101 Dalmatians," we would start out in a big store with 150 copies for rent and expect each of those copies to generate $10 a month. Three months later, if the title generates $500, we only keep 50 copies. But nine months is the maximum, regardless of how well it is doing.
SN: Some specialty stores that I've visited keep titles on the new release racks far longer, sometimes even as long as a year. Is anyone looking to extend the amount of time you keep titles out as new releases?
MAXWELL: We've cut back. At one time, a year was our maximum. But customers are real smart and they will notice if an old title is still presented as a new release. A year is a long time. Even nine months is a long time.
MOLITOR: Especially since there are so many coming out after six months for sell-through, we feel kind of silly selling it while renting it as a new release. So as soon as it goes sell-through, you almost have to put it with the catalog.
SN: What percentage of your total rental inventory is in new releases?
FEINSTEIN: I'd say about 40%.
DARNELL: Ours probably isn't that high, since we are at four months. So, probably about 30%.
DILLON: We are 40% to 50%.
CARTON: Probably 35% to 40%.
GETTNER: I'd say about 40%.
MOLITOR: I would say in between 30% and 40%.
DESORDI: About 30%.
MAXWELL: I would say considerably less, but we might have 8,000 tapes in one of our newer stores and 1,500 to 2,000 new releases is a lot. So in those departments we don't have fewer new releases, we just have more catalog titles. In our smaller departments, it would probably be 40%.
CARTON: A freestanding Blockbuster store would be similar to your larger stores, with 8,000 to 10,000 rental units and 2,000 new releases. It has been a big learning experience for me going into the supermarket departments where our new release percentage is 50% to 100% higher than it is in our freestanding stores.
SN: Are you able to maintain the same profit levels?
CARTON: Yes, I think so. In the grocery store, it is more of a new release-driven business than in our freestanding stores. So you are spending a few more dollars at the front end, and you are also spending more on labor as a percent of total net revenues. But you hope to develop some other opportunities to counteract at least part of that.
SN: Where do you see the new releases going in the future?
MOLITOR: We have a strong program for both new releases and catalog. I still have customers who really enjoy the catalog titles. Children's and family movies are very strong categories for me. In some of our stores, classics is a very strong category. There is definitely a need for new releases, and that is probably where the bulk of my profit comes from, but I still have the need for catalog titles.
CARTON: We've always said that while revenues come from new releases, profit comes from the catalog. I'm not sure that is quite so true any more and perhaps not quite so true in the grocery store business. It is new release-driven, at least at this point in time, as it is in the entire video category right now. We try to develop category rentals. For example, on a quarterly basis we rotate 25% of that catalog product in and out of the stores just to keep that freshness. Even in a Blockbuster store, a customer is likely to say, "I've been down that aisle and I know what is there." You are much more subject to that in a grocery store setting where the aisles are smaller and shorter and fewer. So we try to keep product fresh on a quarterly basis with some stickering opportunities, to say a tape is "New," and that has helped a lot.
DESORDI: Like a new arrival.
MOLITOR: We do that too.
CARTON: If 25% of even your family product rotates quarterly, you need to alert the customers that maybe they haven't seen everything down that aisle.
FEINSTEIN: With the high prices of new releases, you really want to develop your catalog business. Rotating the movies is very important, because in a supermarket you see a lot of people like senior citizens who come into your store every day, and they really have seen almost everything. We are making sure that all our stores have great titles by developing the libraries and rotating the libraries as the months go by.
