Old movies are becoming a good business for supermarkets.
With low price points, high margins and a vast selection of well-known titles, catalog videos selling for less than $10 are surprising retailers with their brisk movement.
"We just got involved in it about a year ago with Baker & Taylor [a video distributor based in Morton Grove, Ill.]," said Darlene Kiefer, services coordinator for Seaway Food Town, Maumee, Ohio. "We were just dabbling in it, then we started to see the scan movement. Now I cannot keep the product in some of the stores. The week after you put it there, it is gone," she said. The retailer now seeks to upgrade the program for faster replenishment, she added.
"With the $9.98 titles, there is a fantastic variety of titles available now. It seems to get better every day," said Clifford Feiock, video coordinator for Nash Finch Co., Minneapolis.
During the Supermarket Issues Breakfast at last month's Video Software Dealers Association Convention in Las Vegas, Mark Horak, vice president of marketing at Warner Home Video, Burbank, Calif., noted that while overall sell-through revenues were up 3% in 1997, catalog revenues rose 10.1%, with units rising 16.3%, according to ACNielsen, Schaumburg, Ill.
The reason for the disparity is the rapid growth in sell-through priced at less than $10. To demonstrate this point, Horak presented numbers from Alexander & Associates, New York, that showed that after four years hovering in the $14 range, the average sell-through price per unit dropped to $13.42 in 1997.
"The budget-priced segment has grown dramatically. As more and more live-action films are put out at lower prices, we are seeing that consumers are accepting them. We are seeing a general shift in the category on price point and the type of film by genre," Horak said.
"I don't doubt those figures at all," said Feiock. Many of his stores have permanent three- or four-sided racks on wheels, with most of the space devoted to $9.98 products. "We are doing very well with the $9.98 program and many of the stores are stepping up to include $14.95 and $19.95 price points as well," he said.
"We are just on the edge of this market. I don't see many of our competitors doing a lot with it yet so I'd say that there is a golden opportunity for people who can stock it, rotate it and do a good job with it," said Feiock.
"We have just scratched the surface and now we want to make it grow. I'd like to see us bring some more family and children's titles," said Kiefer of Seaway Food Town.
"We've been doing a little more with it," said Matt Dillon, video director at the Concordia, Kan.-based Boogaart Retail division of Fleming Cos. "Ingram has a sell-through program we've been pushing and it's been working. We are selling some product."
Dillon also confirmed the growth trend in catalog sales. "As we've seen in the past year or two, it has grown and grown, and it will keep growing. Where it will plateau, I don't know," he said.
"We give a lot of space to sell-through," said Laura Greenlee, video coordinator at Martin's Super Markets, South Bend, Ind. "We normally carry the $14.99-and-under titles for sell-through. We merchandise them separately from the new-release titles on a spinner rack out in the store."
Catalog sell-through is ultimately going to eclipse the rental market, she said. "So many movies are now coming out for sell-through, customers would rather buy and keep them than spend the money to rent," she said.
"We recently took our first venture into it," said Larry Hage, division supervisor/video buyer at C&K Market, Brookings, Ore. "While some stores are doing really, really well, others are not doing as well. It's been very spotty, but it is certainly better money than we have ever enjoyed in the video business. To have something that creates that kind of gross is a good thing. It doesn't take up a lot of squares on the floor and it creates a lot of retail dollars," he said.
"There are more supermarkets nationwide that are becoming receptive to the $9.98 price point," said Bill Bryant, vice president for sales, grocery and drug, at Ingram Entertainment, La Vergne, Tenn. "It's becoming a full-time business and one that supermarkets can capitalize on. We are seeing more and more interest in dedicated endcaps or in-line sections. We have always believed that there was a market there, but the $9.98 price point has opened it up to where it makes perfect sense for supermarkets," he said.
For retailers who don't want to dedicate in-line space or put in a permanent fixture, video distributors like Ingram are coming out with shipper programs of catalog products. Ingram's is called, "Own the Memories." "It can be used during the fourth quarter for secondary feature titles that the supermarket may not want to bring in a larger prepack of, and it can also be used for the $9.98 product anytime during the year," said Bryant. "In 1999 we are going to capitalize on periods where there's a window between feature sell-through titles and plug in the hot-selling $9.98 assortment that the supermarket can capitalize on with better margins and the impulse sales at that price point, which of course are tremendous," he said.
The profit is very significant on less-than-$10 products, retailers confirmed, and much greater than on the hit new-release sell-through that sells at minimum advertised price. "It's decent," said Boogaart's Dillon. "We are probably making a 30% profit on it."
"Catalog titles represent potential sales for our retailers and are more profitable than new releases," said Claude Millet, general-merchandise buyer for Associated Grocers, Baton Rouge, La. "The profit on new releases is borderline -- there is no real profit in them. Catalog titles, on the other hand, carry about 30% profit," he said.
"The trend to higher catalog sales offers supermarket retailers good opportunities. I've always thought catalog titles worked well, and they have been successful at our members that carry them," said Millet.
"There are not a lot of things that we sell for $9 each and certainly not a lot of things that sell for that kind of margin," said Hage of C&K Market.
"If you can get the suggested retail price point, there is some very good money to be made," said Nash Finch's Feiock. "Where you have to discount it because of what the market demands, the dollars are reduced, but the profit is still very good," he said.
In the fourth quarter, the biggest challenge to merchandising catalog videos is not theft but finding the space for them when an unprecedented number of hit new releases are coming out direct to the sell-through market.
"Our stores get real filled during that time of year," said Hage of C&K, who will use catalog programs at times when there are no hit new releases. "I would not be surprised if during that period I don't have that stuff in the store just because of the quantity of new releases that are going to be in the stores. I have only a limited amount of space to merchandise our department's shippers. I'm going to put my money where the turns are going to be and that is going to be in the box-office hits," he said.
