ATLANTIC CITY, N.J. -- Video rental customers are big spenders on both their renting and returning trips to the store, said speakers at the East Coast Video Show here.
Executives from Ingram Entertainment, La Vergne, Tenn., and PolyGram Video, New York, presented research that definitely showed video drives significant incremental sales of other supermarket products.
For example, a study by Ingram showed that on an average trip to rent videos, customers spent $5.60 on the rentals and $9.80 on snacks. When they brought the videos back, they spent an average of $20.83 in the supermarket, primarily on other grocery products, such as dairy and packaged goods.
"That is an average benefit of $36.23 per video rental event," said Bill Bryant, vice president of sales, grocery and drug at Ingram.
"This is a tremendous impact and should entice most supermarket managers to fully explore how they can further increase customer awareness to boost the impact of their video departments. Those supermarkets without video departments should strongly consider adding them as a part of the one-stop shopping concept," said Bryant.
Since doing the research, Ingram has heard from retailers saying that "They were really surprised to see the correlation between the video rental transaction and the additional ring in the supermarket." Some have increased their commitment to video as a result of the research, Bryant said.
A related study by PolyGram revealed similar results. Overall, customers who rented videos spent an average of $28.87 on other products in the store. Customers who came to the supermarket primarily to rent videos spent an average of $15.61 on other products, while those who made the trip primarily to grocery shop spent $40.92.
"The study clearly showed there was a direct relationship between video rental and other purchases made in the store, even if a person came to the store with the single intent of renting a movie for the night," said Allan Golden, PolyGram's vice president of sales.
From the retail side, Brenda Vanover, video coordinator/merchandiser at K-VA-T Food Stores, Grundy, Va., confirmed the research findings. Customers buy snacks at the time they are renting movies and "rental activity impacts the sales of dairy, produce and bread.
"Since the traffic is already there, we make sure the product is exposed to the traffic by merchandising and looking for ways to cross promote. We use the frequent-shopper program, direct mailers and a web page devoted to video, and make the departments fun and exciting," she said.
Ingram and PolyGram approached the research in different ways. Ingram's survey asked more questions than PolyGram's, probing many aspects of consumer behavior in six targeted market areas. The total sample was more than 1,000.
PolyGram's study polled a national audience with a more limited questionnaire. But its total sample was more than 5,000. Both were done earlier this year.
PolyGram initiated its research after a video buyer from a major Northeastern supermarket chain told it video rental was losing space to other services, such as banks, said Golden. "We wanted to show the industry video was more viable than some of the powers that be in grocery thought it was."
The movie business fits in with supermarkets' move to more upscale products and services, such as home-meal replacement, said Golden. "What could be more upscale than a piece of Hollywood, a piece of entertainment. It's something everyone gets excited about and wants to touch and hold, rent and purchase.
"There are so many opportunities within this class of trade, not only for the video industry, but for the audio industry and others. I see nothing but positive business in the future. It alarms me that today some supermarkets would still rather put in nonfood services that, while they require little or no manpower, the return on investment is not better, and in some cases it is far worse, than video can provide," said Golden.
The Ingram study showed that when it comes to additional services in a supermarket, customers preferred video rental to banks by a slight margin, and to dry cleaning by a very substantial margin. "Four out of 10 people chose video rental as their preferred service in a supermarket. That shows the importance of video rental departments to supermarket customers," said Bryant.
Supermarkets can compete with video specialty stores by emphasizing competitive pricing and promoting the convenience of one-stop shopping, he said. "Margins of incremental food product sales must also be factored into the return on investment when analyzing the profitability of a supermarket video department. Certainly, for the chance to increase customer traffic and satisfaction in today's competitive environment, a video department deserves clear focus from supermarket leaders."
