For supermarkets, sell-through video sales via the Internet are intriguing, especially since the channel defies the confines of space.
All the mechanisms are in place to make it a reality. Most major chains have a web site and shoppers are placing grocery orders through their computers today.
However, some video executives are skeptical about the viability of on-line sales because video sell-through titles appear to benefit from the shopping experience and they are an impulse-driven buy.
The concept "is preliminary at this point, but activity is definitely heating up," noted Tom Adams, president of Adams Media Research, Carmel Valley, Calif. "Whether it will work or not -- who knows? But Amazon has the book model to suggest that it will work. They're generating quite a bit of book sales off the Internet, so that's some indication that you ought to be able to sell video and audio and other media formats as well."
Amazon.com Books, Seattle, is a worldwide on-line book distributor whose success in selling books over the Internet has made most businesses look twice at the Internet's potential for bringing about a high volume of sales across the vastness of cyberspace. Amazon hit the Web in July 1995 and is currently in the process of going public. The firm may expand into video by year's end, according to Adams.
Sell-through of home video products over the Internet by supermarkets is "the wave of the future," insisted Wayne Mogel, vice president of Star Video Entertainment, Westboro, Mass. "It's a natural for supermarkets, and it's going to get bigger and bigger."
Mogel, whose firm is a video distributor servicing supermarket chains, sees the movement as part of a larger trend. "A lot is happening on the Web," he said. "Sales of products on the Internet -- in all areas -- is what the future holds. Every company I know already has a web address. We at Star Video will probably get into it as a supplier of Internet video sales."
Video Home Theater, headquartered in Des Moines, Iowa, is just beginning to consider going on-line. "We've been entertaining the idea of setting up a web site," reported Cliff Mitchell, the firm's buyer and director of operations. "It's a very interesting idea that does have merit."
The company, which has been in business for about 12 years, leases home videos to supermarkets in 90% of the states east of the Rockies. "Grocery stores don't have the space available for the huge selections," observed Mitchell. "This would be a more efficient way of ordering, sort of like a catalog."
Catalogs can be huge. With the infinite space available to owners of web sites, this new avenue for video sell-through can open up virtually endless cyber-aisles of shopping area in space-conscious supermarkets. With it, of course, is the potential for expanded sales opportunities.
"There are a lot of special-interest tapes that can never find retail space," pointed out Des Walsh, vice president and general manager of SuperComm, a shared transaction fee video provider based in Dallas. "The wonderful thing about the Internet is that it enables the demand and supply to meet in a way that doesn't take up physical shelf space. This is a positive thing that I think will be very successful."
Video Home Theater's Mitchell added that data available on the Internet will support expanded video sales by fully informing grocery shoppers using the Web of unfamiliar titles. "You'll always have the name recognition of your top movie titles," he explained, "but for the [lesser-known] titles, consumers will want to read a little more about them before making the purchase -- title, description, basic information. Will that data be made available on computer? There are definite possibilities here."
SuperComm's Walsh believes that on-line video sales will grow in tandem with the movement toward overall web-based supermarket business. "The people who are the most likely to go down this road are those who are already ordering groceries over the Internet, those who are further along with the technology," he suggested. "For retailers who are [setting up] web sites, it would be a natural extension to tag on the ability to purchase cassettes. Wholesalers, such as Ingram, are set up to ship the same day, to any retailer, any sell-through cassette that is ordered. So a supermarket that does have an on-line service would simply take the order that comes in and instantly transmit it to Ingram, which would ship the cassette to the consumer.
"Wholesalers would certainly be supportive of any retailer who went down that road. It would be a natural because it represents the opportunity to generate incremental revenue, maintain customer loyalty and offer an additional service at a minimal expense. It's a win-win situation all around," Walsh said.
On-line video sell-through makes perfect sense to Tony Priore, vice president of marketing and sales at Evanston, Ill.-based Peapod, one of the nation's largest on-line grocery shopping and delivery services. "Videos can certainly be done," he said. "It's a very feasible concept, as long as the tapes are UPC-coded."
One company is already testing the idea. Reel, based in San Francisco, will launch its experimental on-line video sales kiosk program in about three months. At that time, it will set up a computer terminal in a retail outlet, allowing shoppers to access its video web site: Reel.com.
In development for 16 years, Reel's web site went "live" about four months ago. Billed as "the planet's biggest movie store," the site provides extensive information on movies, including critics' summaries and recommendations. Last week, Reel.com expanded from being an information site to an on-line "video store," as well. Cyber-shoppers have a choice of purchasing any of Reel's 80,000 listed video titles, or renting any of 35,000 titles.
Supermarkets would be likely subscribers to Reel, according to company president and founder Stuart Skorman. "The store would get a percentage of orders that come through their outlet," he explained. "Videos could be shipped either to the store or, more likely, directly to the customer." This would leave shoppers with the prospect of either picking up their video order on their next trip to the market and hauling the tape off in their bag of groceries, or simply finding the cassette in their mailbox several days later.
Sell-through videos get a 20% across-the-board discount via Reel, and rentals are priced at $2.80 per week plus shipping.
Skorman believes that on-line video services provide many advantages over in-store offerings: "You don't have a customer taking up a parking space, or talking to your employee. But on the Web, if one person per day uses my site, or if 100,000 people per day use my site, the cost to me is almost the same. It's ultimately a very small amount of money."
Ron McMillin isn't so sure. The vice president of St. Louis-based video distributor Sight & Sound thinks that the much-ballyhooed Internet may have a difficult time competing with that old-fashioned American love of going out and shopping. "I'm really not sure that on-line video sell-through is all that it's cracked up to be," he cautioned. "All you have to do is walk into a mall on a Saturday afternoon and you realize that Americans love that shopping experience. They browse the aisle, look at the covers of the tapes.
"Supermarkets, in particular, have [an advantage over] video stores because of the [higher] traffic. People enter the markets' video sections and many times they purchase on impulse. Because of the posters, the POP, the jackets, whatever -- they become inclined to rent a certain video. I don't think you're ever going to get away from that, nor would you want to," he added.
McMillin's apprehension is shared by Heidi Samuelson, video consultant for Wadena, Minnesota-based Mason Bros. Co., a wholesale grocer that serves as a buying, store-layout and product-inventory consultant to numerous Central Minnesota supermarkets. "I see that most people enjoy hands-on purchasing," she said. "Of course, we read articles saying that people are eventually going to be shopping for groceries over the Internet. But right now in rural Minnesota, the Internet is only used by a select few. It's just starting to become popular with businesses, but not yet with the residentials. The local telephone companies are just beginning to push Internet access here, so people are becoming aware of it. But I really think it will be several years down the road before anything like that might be implemented. For now, these are still mom-and-pop grocery stores."
Star Video's Mogel agreed that "American consumers typically like to touch merchandise; they like to feel and they like the shopping experience. However, I do believe there is a percentage of people who do not like to go out, and who will like to purchase on-line. Some of these people are already purchasing their groceries over the Internet and having them delivered. It will be the same with video."
Will grocery shoppers seeking videos buy into the lure of going on-line in order to avoid waiting in line? The jury may still be out on that question. But it can hardly be argued that the Internet is already beginning to change the face of day-to-day business around the world. And that includes the local supermarket.
"People want to get out there and surf everything on the Web," insisted Cliff Mitchell. "This is only the beginning."
