For many retailers, video is getting old -- and that's been very good for business.
While the new-release hit movies usually sell for close to cost, at cost, or even below cost, catalog sell-through programs at low price points are providing supermarkets with a new source of profits. When merchandised prominently, impulse purchases of these older movies follow as consumers seek to build up their libraries of movies on DVD.
Shrink remains a concern, but worries over it are lessened by a new breed of racks, the lower prices, and the fact that older movies aren't as attractive to thieves as the new titles.
But with many of these products selling below $10, they are very attractive to supermarket customers.
"The catalog items on DVD are selling very well," said Bill Glaseman, video specialist, Bashas', Chandler, Ariz. "We have a program going with MGM that seems to be working quite well. If we have room, we will see what the other companies have to offer."
Bashas' is selling mostly DVDs for $7.99 and a handful of VHS titles for $6.99, Glaseman said. This is in line with the mass merchandisers and electronics stores, and it enhances Bashas' price image. The titles are sold from a rack provided by the studio.
"We were able to work things out so that, in this case, we could be competitive with the big boxes," he said. And even at $7.99, Glaseman confirmed that the retailer makes much more margin than on the big hits.
C&K Markets, Brookings, Ore., is testing a catalog sales program from Warner in 10 stores, said Larry Hage, general manager. The test has been going for less than two months, so Hage said it is too soon to report results. "The jury's still out," he said. "We're just dabbling right now, getting our feet wet."
C&K also is considering trying the MGM program, he said. "There is a lot of positioning in that catalog market. Both of those studios are vying strongly for the business."
The Warner program has two price tiers, $9.98 and $14.98, and comes to the stores in "waves," Hage said. The first wave was priced at $9.98 and was comprised of older movies. The second wave is priced at $14.98 and has more newer movies and better-known classic titles, he said. "My guess is, we will probably stay in that $14.98 range."
The Warner displays, which can be locked up at night, are placed on the end of island video-rental display racks in C&K's video departments, Hage said.
While the retailer is still early into the catalog sell-through program, "we are moving ahead. The bottom line is, there is good information out there telling us that people are in fact building DVD libraries," he said.
"The studios are floating a lot of big numbers around" on the potential for DVD sales. "And I agree. I think there is some potential; otherwise, we wouldn't be giving it a try," he said.
McMaken's Supermarkets McVideo in Brookville, Ohio, carries some catalog titles for sale, but the independent's main emphasis is still on video rental, said Theresa Daniels, video manager. She said her company can't compete on price with the mass merchandisers and electronic stores, "but I do pretty well for the people who don't get out of town," she said.
"Many grocery retailers have had success merchandising DVD catalog titles on a display rack in a heavy traffic area," said George Fiscus, director of grocery and drug sales for Delta Entertainment, Los Angeles, and president of a sister company, SDR Filmworks, Scottsdale, Ariz. Until recently, Fiscus was the vice president of general merchandise at Bashas'.
"Ideally, these displays should be value priced and located away from the video department for maximum exposure to all customers," he said.
"Customers who are new to the DVD format, or those that are building their DVD library and replacing their VHS favorites with the improved picture and sound quality of DVD, are showing that they won't hesitate to add these titles to their shopping cart," Fiscus said.
"Many supermarkets are having success with low-priced DVD," said Bill Bryant, vice president of sales for Ingram Entertainment, La Vergne, Tenn. Meanwhile, budget-priced VHS is also being merchandised and sold with continued success, he said.
"More VHS titles will be offered at budget prices to liquidate excess studio inventory as the format migrates to DVD. This will create opportunities for incremental sales of VHS budget product priced under $5," Bryant said.