Children's video remains at the center of supermarket video sales efforts, especially now with the growth of DVD.
In 2004, supermarket sales of children's video could be the beneficiary of several converging trends:
The growing expense of taking a family to the theater, which tops $60 in many markets.
The surge in household penetration of DVD players throughout homes and cars, and the presence of VCRs in children's rooms.
Consumers' embrace of large-screen televisions and surround-sound systems, which reasonably emulate the theater experience at home.
As the economy has been flat for years, more people have begun entertaining at home, turning children's home video in the DVD format into a hot and timely sell-through category for supermarkets in 2004, especially with the added entertainment value of DVDs' exclusive bonus content.
No large nonfood category compares to the 18% growth rate of home video in 2003, or has similarly strong prospects in 2004, according to figures released recently by the Digital Entertainment Group, Los Angeles. DVD is the largest and fastest-growing component, with retail sales soaring 33% over 2002 to $11.6 billion, and rentals rising 55% to $4.5 billion.
DVD accounted for 72% of all home video transactions in 2003. That percentage is similar for DVD sell-through in supermarkets, according to numbers recently compiled by SN.
Even though supermarkets have a relatively small share of home video, the incremental business could be both significant -- particularly in children's titles -- and strategic to completing families' shopping needs. More than 1 billion DVD software units were shipped to retailers in 2003 -- including 381 million in the fourth quarter alone -- a pace that's 43% higher than a year ago, according to figures compiled for DEG by Kaplan, Swicker and Simha, Encino, Calif.
Despite such impressive velocity, food chains often hesitate to dive deeply into the category because of the fear of theft, which "is as controversial as the dickens," said Bill Mansfield, a nonfood supermarket executive formerly affiliated with Tom Thumb, Harris Teeter and most recently Marsh. He is also the immediate past chairman of the General Merchandise Distributors Council, Colorado Springs, Colo.
"We need to have a pay-on-scan environment. Once we remove the fear of theft, supermarkets will put the videos everywhere. We [supermarkets and studios] may need a shared environment to pull that off," he added, citing Dreyer's ice cream as a brand with such a business model. "Margins are so thin on new releases, less than 5%, that if you lose one to theft, your profits are gone for the rest.
"Or we could embed an electronic protective device, although not all retailers are set up to monitor that. Video sell-through is so huge, even for chains that don't support it as much as studios would like, it's difficult to ignore the sales potency of the category," Mansfield said.
"While the sale of new video releases often amounts to churning dollars, the video product we sell is usually a family event or a children's event. If we're not satisfying that $20 need, our competitors will. Video has become important to developing customer continuity. It's not just an add-on sale. It needs to be there. Otherwise, it would be like a retailer deciding not to carry cigarettes, which are bad for you and get stolen, but bring in too many dollars to ignore."
In 2004, the children's titles expected to have the greatest appeal include: "Cat in the Hat" and "Peter Pan" (both from Universal), "Brother Bear" (Vista Home Entertainment), "Shrek 2" (DreamWorks) and "Garfield" (Fox Home Entertainment). Meanwhile, PG titles like "Cheaper by the Dozen" (Fox) and "Looney Tunes Back in Action: The Movie" (Warner) will also find an audience in supermarkets. "The theatrical slate looks strong this year, which lends itself to success in home video," said Leslie Baker, vice president of sales, grocery and drug, Ingram Entertainment, La Vergne, Tenn.
For now, supermarkets will focus on children's theatrical titles with proven legs. "Floor space in a supermarket is difficult to secure for direct-to-video titles," she added. "However, supermarkets with permanent sell-through sections can more easily place DTV titles." One DTV movie that will fare well in supermarkets this year is "Winnie the Pooh -- Springtime for Roo" (Buena Vista), said industry observers.
One Eastern distributor has great enthusiasm for children's video. "The whole children's category does very well for us, particularly animated titles, but also comedies," said Brian Snyder, general merchandise category manager at Associated Wholesalers, York, Pa., which services 1,200 supermarkets and convenience stores, including 50 with video sell-through.
"Even a movie like 'Freaky Friday' with Jamie Lee Curtis will do well, although kids don't necessarily go for films because of a favorite actor or actress in mind," he said. "For example, Hillary Duff movies might be popular, but for us the animated titles probably sell the best. Children see the fish in 'Finding Nemo,' and they're not always aware of whose voice is behind the character."
Television shows are also "a perfect product category for supermarkets because it is totally mainstream entertainment. There's something for every member of the family in many of the releases," explained Steve Feldstein, senior vice president of marketing and corporate communications, Fox Home Entertainment, Los Angeles.
"Releases of entire TV seasons on DVD are the biggest testament to that. Previously it would take 26 videotapes to put out an entire season. Who has that space? So it became a 'best of' market. Now with the robust nature of DVD, we can have an entire season on DVD, and that's given birth to about a billion dollars worth of TV programming on DVD."
TV titles account for just 6% of the market, but should soon account for a greater share, according to recent media coverage. In 2003, for example, 526 TV series titles were released on DVD compared with 472 theatrical releases; that represents a doubling of new TV series offerings and a 10% increase in movie releases. By comparison, there were just 10 TV DVD releases in 1998.
"The biggest trend in children's DVDs these days is in short-form TV programming, especially where there is an educational component," said Megan Kean, marketing manager, Paramount Home Entertainment, Hollywood, Calif. "Ten years ago, occasional animated features dominated the market; now animated TV programs are in vogue." "Children's TV on DVD fits supermarkets because it's always low priced -- $10 to $12 on average -- and it already has a built-in fan base among mothers with kids. It works well as an impulse buy," Kean said.
As studios find significant new revenue in their catalog of TV programming, consumers are using DVDs to alter their TV-watching experience. People can time-shift for convenience, avoid commercials, engage themselves more completely by viewing continuous episodes, and gain added knowledge of their favorite series through bonus content that's often part of the package.
Some children- and family-oriented TV releases this winter and spring include "The Wiggles: Top of the Tots," "Mister Ed," "Gilligan's Island," "The Bernie Mac Show," "Green Acres," "Lost in Space," "Blues Clues," "Jimmy Neutron" and "Punk'd."
For these titles and others driving home video at retail, "supermarkets benefit from the studios' publicity efforts building demand, making video the 'most gotta-have-it' general merchandise in the store. We'd like that excitement carried through more, however," said Associated's Snyder, noting that studios used to provide more point-of-purchase materials to supermarkets.
Even so, Mansfield believes that "home video is feeding the entertainment aspect of the supermarket. The more fun supermarkets can have with these products, such as dressing up checkers or clerks, or building displays, the more they can embellish that entertainment concept and the more they can win. Video has to have some romance. It can't be treated just like any other product."
As much as that might induce impulse sales, competing on fundamentals is more central to many supermarkets' daily operations. Snyder explained how Associated "began accepting videos as direct-to-store shipments in 2003 to ensure stores could have product out on the first street date available to the public at good, reasonable prices. People want their new releases immediately, and when supermarkets have them the convenience kicks in."
Top 10 Supermarket Video Rental Titles
RANK, Last Week: Title (Weeks Out)
1, N: Radio, Columbia
2, 2: Open Range (1), Buena Vista
3, 1: Once Upon A Time In Mexico (1), Columbia
4, 4: Cabin Fever (1), Universal
5, 3: Out of Time (3), MGM
6, N: House of the Dead, Lions Gate
7, 7: Uptown Girls (3), MGM
8, 6: American Wedding (4), Universal
9, 5: Jason vs. Freddy (2), New Line/Warner
10, 8: Underworld (3), Columbia
N = New
As of Feb. 1, 2004
This chart, tailored for the supermarket video market, is based on information taken from more than 1,000 supermarket rental locations serviced by Ingram Entertainment, La Vergne, Tenn.