As sell-through becomes a larger part of the video industry, supermarket retailers are facing the decision of whether to devote more shelf or floor space to the segment.
Last year supermarket sell-through volume soared 26% to $696 million in a $3 billion market, according to SN's State of the Industry survey. This year SN projects continued robust growth with sell-through sales reaching $861 million, a 24% increase.
"We've been hearing a lot of good things about sell-through," said Tom Dyrhaug, video coordinator at Fleming Cos.' La Crosse, Wis., division. "We may expand in the future."
Though some retailers feel it's easier and more profitable to focus attention on rentals, others have allocated considerable linear footage in their video departments or directly within the supermarket for sell-though displays.
Of those surveyed in the State of the Industry report, 27.5% said they are expanding space for sell-through product, while 47.1% said they were expanding inventories of sell-through. About 12 video departments in Fleming's La Crosse, Wis., division devote between 8 feet and 16 feet of wall space to sell-through videos, audiocassettes and compact discs, according to Dyrhaug. The other video departments display sell-through in shippers or freestanding racks.
Though it has no immediate plans to expand sell-through, Fleming's La Crosse, Wis., division is actively discussing it.
"It is something we may pursue," Dyrhaug said.
Copps Corp., Stevens Point, Wis., views sell-through as an integral part of its video business, said Jeff Olson, video specialist. As a result, all 16 of its stores feature some type of sell-through display, either in the general merchandise section of the supermarket or within the video department, depending on where space is available.
"Having a [sell-through] section helps focus attention on video without lowering margins," said Olson. "Anything moves best if you can get it in the main traffic flow. This way all the customers can see it."
Sell-through sections can work to the retailers' advantage because they're not as limited as rental in terms of merchandise and displays, said Matt Dillon, video director at Boogaarts, Fleming Cos./Scrivner Group, Concordia, Kan. Dillion said retailers can be more creative with the types of merchandise sold and displays featured. "Sell-through has potential. It's an unexplored area," Dillon said. Copps Corp. carries about 2,000 to 3,000 sell-through titles in its recently opened 1,700-square-foot Appleton, Wis., video department, Olson said. The new store, which Olson describes as state-of-the-art, will carry an additional 5,000 rental videos.
Other features include a theatrical sign over the store's vestibule, poster frames, message boards, about five televisions and theater-size candy. Traditional Copps Corp. video departments are about 700 square feet and carry about 3,000 rental titles.
The majority of the new store's sell-through titles will be children's and exercise videos. There also will be recently released A movies, but on a smaller level.
"We go through large quantities of big-name titles and Disney movies, but there's not a good margin on them because everyone, especially discounters, has them at a low price," Olson said. Copps Corp.'s new store will also feature sell-through merchandise on islands within the video department as well as in the main grocery area for seasonal video merchandise.
Harp's Food stores, Springdale, Ark., features permanent sell-through displays in five of its 17 video departments. About 200 sell-through titles are carried in specially designed 4-foot by 4-foot floor racks located in two areas of the store. Titles are priced from $9.98 to $39.95, and are usually restocked about every three weeks. "The racks were made especially for sell-through merchandise," said Carl Johnson, video specialist. "They're important to us because when customers see them, they're more apt to buy a movie from us, rather than a mass merchandiser down the street."
Due to space restrictions, Harp's other video departments feature sell-through merchandise only in dump displays. However, the retailer hopes to add the racks to more locations in the future.
J.M. Bauersfeld's, Topeka, Kan., has in-line sell-through displays in each of its three supermarkets. Two stores have sell-through wall displays directly within the video department, while the third has a shipper set up in front of the checkout in the grocery section, according to Kathy Sobke, video buyer. Sell-through merchandise is also sold on islands located in all three video departments.
The in-line wall units are about 8 feet by 10 feet, and carry between 30 and 40 titles. More space is allocated at Christmas time when a large array of seasonal titles is merchandised.
The in-line displays are used to promote recently repriced merchandise as well as older titles, such as "The Firm" and "Jurassic Park." Long-time favorites like "One Flew Over the Cuckoo's Nest" and children's titles, such as the "X-Man" series, also do well.
The sections are located near the front entrance of the store across from the video counter. "When customers first come through the door, they see the [sell-through] section before they see anything else," Sobke said. A year-old J.M. Bauersfeld's store located in Wanamaker, Kan., has sell-through 24-pack shippers at the checkout in its main grocery area. It plans to add similar units to other stores in the near future.
Thomas Sambola, a consultant with Music City Merchandising Services, Brentwood, Tenn., said an increasing number of retailers he services are creating sections for sell-through merchandise because, due to the competitive market, costs have been lowered.
"A lot of studios have reduced pricing," he said. "This helps the sell-through segment tremendously."
Sambola said retailers are capitalizing on the sell-through segment not only by allocating space for the titles, but also by creating theme-oriented displays.
"As far as trends go, the business seems to be driven by themes. A retailer will combine a number of [sell-through] titles in the action or Western theme," he said.
About 18 months ago, Angeli Foods, Iron River, Mich., created a special sell-through section in its interactive area, according to Denise Hasenfus, video manager. The display consists of six, 4-foot-long sections that are seven racks high. It features about 200 sell-through videos.
Titles include a variety of Disney movies as well as big hits such as "Forrest Gump." Collection titles, such as "Pretty Woman" and "Grease," are also displayed. Hasenfus said the in-line area gives the video department an edge over its competitors. "It gives us more of a variety," she said.
Dillon of Boogaarts said he believes sell-through sections are worth the space. Boogaarts' Kansas City division has had in-line displays in 12 of its 22 stores for the past three years, according to Dillon. The sections are about 2 to 4 feet and carry between 50 and 75 sell-through titles, which are rotated monthly. The areas are located in the front end of the video department. The retailer has plans to create similar sections in another four stores over the next year, said Dillon.
"Sell-through can provide an added source of income. Revenue is pretty good," Dillon said. "We can provide older titles that currently aren't available on tape."