As the major Hollywood studios prepare to release their 2004 holiday season blockbuster titles to the video market, supermarkets are strategically rearranging their stores to make room for the hot new flicks that will be out for the end-of-year gift-giving season.
Several highly anticipated movies will take center stage in stores. "We expect 'Shrek 2' and 'Spider-Man 2' to be really big hits this year," said Joe Ramirez, spokesman for Penn Traffic Co., the 216-store chain based in Syracuse, N.Y.
At the box office, "Shrek 2" took in nearly $850 million worldwide, and "Spider-Man 2" raked in more than $770 million, according to The Movie Times' Web site (www.the-movie-times.com).
"'Harry Potter and the Prisoner of Azkaban' will be another huge hit this year," said Greg Hall, general manager for Video Group Distributors, Clearwater, Fla., which distributes DVD and VHS products to supermarkets and video stores. "Harry Potter and the Prisoner of Azkaban" earned almost $786 million in theaters worldwide, reported The Movie Times.
Another 2004 blockbuster that brought in viewers by the droves was "The Passion of the Christ," which earned more than $600 million worldwide from big-screen showings, according to the Movie Times. Such figures give supermarkets a hint of what they can expect to see from DVD and VHS sales, according to industry observers.
"There are a lot of secondary titles that should do pretty well this year, too, like 'Princess Diaries 2,' 'I, Robot,' 'Dodgeball: A True Underdog Story' and 'The Manchurian Candidate,"' predicted Paul Simon, spokesman for Schnuck Markets, the 101-store chain based in St. Louis. "November and December are the biggest sell-through months of the year, and we always have huge Christmas ads in December that are sometimes two-page spreads mailed out to local homes."
While supermarket video specialists look at top-sellers like "Shrek 2," "Spider-Man 2" and "Harry Potter" as no-brainers, deciding which additional titles to promote is another story. The list of titles scheduled for release this holiday season is seemingly endless: "Van Helsing," "Garfield the Movie," "Stepford Wives," "The Manchurian Candidate," "The Bourne Supremacy," "The Notebook," "The Three Musketeers," "Ella Enchanted," "Home on the Range," "Elf," the "Legally Blonde" gift set, the "Barbershop" gift set and the "Star Wars Trilogy," to name just a few.
Space is one of the most important factors that plagues grocers when deciding which movies to pick and how many of each they should order, said Ray Wolfsieffer, video specialist for Bashas' Supermarkets, the 144-store chain based in Chandler, Ariz.
"Space capability in big-box stores is so much greater that they can stock up on top titles, low budget, box sets and whatever they want," said Wolfsieffer. "We rarely even put in a box set because we need the space for other titles, and they tend to just gather dust anyway."
"Space is always an issue," Ramirez added, "but this is a key time for video sales so we make available more children's videos in freestanding display units and place them near the Christmas toy display."
Beating the other store departments to the punch is an internal issue that most video department managers face, said Bob Gettner, video buyer/coordinator for Lincoln, Neb.-based B&R Stores.
"We try to have a clear idea of what's coming in each holiday season so we can request space well in advance. All other departments are requesting extra space, too, making it even more difficult to reserve enough room," said Gettner. "We also try to only put so much inventory out on the sales floor at one time, refilling the space often to make room for all of the hits."
Schnuck's typically buys a larger portion of the most prominent releases and a handful of secondary titles to fill its stores. Rather than estimate how many will sell throughout the entire season, the video managers simply order more whenever necessary, said Simon.
"We can usually get more within one to two days, so we can avoid buying more than we will sell," he said.
Instead of carrying a few of each title, Bashas' focuses on a few key movies and tucks lower-budget releases around them wherever possible, said Wolfsieffer.
Disney's new Mickey Mouse release, "Twice Upon a Christmas," will likely find its way into supermarkets across the country.
With space at a premium, supermarkets also have to determine the best ratio of DVD to VHS to carry in their stores. DVD packaging is typically thinner and, therefore, takes up less room. However, because most titles sold in supermarkets are targeted at younger audiences, many grocery shoppers want the VHS format, which is less likely to be damaged by the tots, said Bob Alexander, president of Alexander & Associates, a consumer product research and consulting firm in New York.
Bashas' still carries around 40% of its blockbuster titles on VHS for this reason. "We sell more drama and action on DVD, whereas we sell more family titles on VHS," said Wolfsieffer. "VHS is much more kid-friendly, and a lot of parents don't want their children handling discs that can easily be damaged. Plus, VHS is less expensive."
Finding space for DVDs and videos is one hurdle. Finding a secure location is equally as important.
"Security is another one of the biggest challenges with sell-though video products during the fourth quarter," said Bill Bryant, vice president of sales for Ingram Entertainment, a video distribution company based in LaVergne, Tenn. "Product needs to be placed in high-visibility areas of the store so that employees can monitor it. However, finding the space to effectively merchandise all of the fourth -quarter titles can be challenging due to the large number of releases."
Shrink has some supermarkets placing videos and DVDs under lock and key just to keep sticky-fingered shoppers from robbing them blind.
"Shrink is definitely a problem, but we try to minimize it by placing the video display up front near the registers," said Ramirez. "Also, in some stores we have display cabinets that are locked from 7 p.m. until 8 a.m."
Salisbury, N.C.-based Food Lion places all DVDs and VHS tapes up front where cashiers and store managers can keep an eye on displays.
While most of the chain's 1,200 stores don't carry a year-round assortment of DVDs and videos, a small selection of holiday-themed movies and CDs are brought in during the Christmas season, said Karen Hern, Food Lion spokeswoman.
"We market the DVDs and videos along with other seasonal items like Christmas CDs, wrapping paper, bows and toys," said Hern. "We'll carry the latest releases as long as they're holiday-themed."
Cross promotions are a big part of any holiday season, especially during Christmas, which lends itself well to a variety of tie-ins.
"Whenever we know that a good title will be coming in that will merchandise well, we do cross promotions with other products throughout the store," said Wolfsieffer. "We use a lot of the merchandising items [the film companies] might send, but we also set up our own materials to embellish the titles."
VIDEO SALES STRATEGIES
When it comes to competing with other retailers in the holiday season, supermarkets are finding unique ways to capture their share of the market. This is true of DVD and VHS sales, which are increasingly being relied on to drive traffic and sales for many chains.
As with any product, competing on price is a virtual nightmare for supermarkets that are rarely in a position to undercut the big-box retailers, such as Wal-Mart Stores, Kmart and Target. However, something as simple as strategic placement of DVD and video displays can be a way to negate the price problem.
"Having DVDs and videos right at the cash register makes the product more of an impulse purchase, which allows grocers to overcome the pricing hurdle," said Greg Hall, general manager for Video Group Distributors in Clearwater, Fla. "If someone is grabbing a movie on the way out, they're more likely to buy it, even if it is a little more expensive than elsewhere."
Another creative solution is the sale of previously viewed DVDs, said Hall. For the consumer who isn't willing to pay full price for an "A" title release, dropping the price point slightly for a used copy might be just enough of an incentive for a shopper to make the purchase.
"Sales of previously viewed DVDs has never been higher," said Hall. "It's a great way for grocers to recognize a higher margin while still offering a lower price to the consumer. This concept works best when selling pre-watched, major 'A' titles."
Bob Gettner, video buyer/coordinator of B&R Stores, Lincoln, Neb., places a lot of value on tie-ins. While other retail outlets are capable of tie-ins, supermarkets that go all out when putting together displays, promoting various items together in weekly circulars, and effectively creating in-store excitement surrounding new releases have the leg up on the competition, he said.
"We have such a wide selection of food items that we can tie into movie sales. Although we can't always compete on price, we can draw attention by creating eye-catching displays," he said.
Supermarkets have come out on top when competing with drug stores and toy stores in recent years, said Bob Alexander, president of Alexander & Associates, a New York-based consumer product research and consulting firm. In the company's annual 2003 trends report, the grocery channel accounted for nearly double the amount of DVDs and videos sold by drug stores, he said.
"Leading names in 2003 in DVD sales were Meijer, Kroger, Fred Meyer and Albertsons," he said. "Things were about the same with VHS, with Fred Meyer, Meijer, Safeway, Wegmans and Kroger leading the pack."
While the leaders boast large-format stores with year-round video departments, grocers large and small are giving big-box and other retailers a run for their money, he added.