RICHMOND, Va. -- A test of a CD-music program targeted at supermarkets, and designed to tailor selections to individual stores, will begin later this month, said Michael Rigby, president, Fresh Picks, a newly formed rackjobber here.
"Our schedule is to have between four and six pilot locations by the end of March," he said. Tests will last 90 days and then the company will begin a rollout that targets as many as 150 to 200 stores going into the Christmas selling season of this year, and 500 to 600 stores by Christmas of 1998, he said.
Rigby would not reveal the names of the retailers that will test the program. But said, "they will be fairly proximate to Richmond because we will be hand-holding them."
The company had to adjust its expectations after a Feb. 10 article in Forbes resulted in a flood of inquiries, said Rigby. "We are currently in discussion with a number of chains, and a number of chains have called to schedule discussions," he said.
Because the company initially will put in 500 stockkeeping units in 40 linear feet, the program will be tested in larger stores. Using modular-designed fixtures, it will be adapted to smaller stores, said Rigby. The sections will incorporate listening stations with a total capacity of 36 titles and a kiosk for special orders, he said.
Rigby formerly directed Circuit City's entry and growth in the music business. The electronics chain now ranks seventh in music sales nationally, he said.
"We will be making a full-service music offer available for the first time in supermarkets," he said.
Aging demographics for consumers purchasing music point to a new opportunity for supermarkets in this category, he said. "The fastest growing segment of music buyers is now over 30. With all the time demands that group has, making special trips to specialty music stores just doesn't seem to happen," he said. "We are taking the music offer to where those CD buyers already are shopping. The average household purchases 5.8 CDs a year. They just don't buy them in the supermarket at the moment," he said.
The potential is demonstrated by supermarkets' 12% market share in music retailing in the United Kingdom, as well as by the 12% share they have of the sell-through video business in this country, said Rigby. Recorded music is now a $12 billion business, he noted.
Fresh Picks will operate on a rack-job basis, sharing revenue with the host retailers. Sales will be tracked on two levels, at the retailer's point-of-sale and by frequent service by Fresh Picks' field personnel.
The retailers' portion of the sales will be determined by POS scanning of product. "It's a straight percent of gross sales, with all the fixtures bought by us, all the inventory owned by us, and the field staff run by us," said Rigby.
There will be only 20 UPC codes based on price points, so the chances of scanning mistakes that arise out of tracking individual titles will be minimized. For example, because of the frequently changing title assortment, POS scanning of video sell-through titles has been inconsistent across the industry. Tracking only by price point simplifies the updating process for support departments and will avoid this problem, said Rigby.
Meanwhile, frequent service by field staff will enable a second, more precise level of inventory tracking that will allow Fresh Picks to tailor selections for individual stores. Rigby expects the departments to be replenished three times a week.
The 500-title assortment will satisfy about 80% of all customer demand, he said, but this quantity will be determined by the demographic profile of individual stores. "Stores two miles from each other can be night and day in terms of their profile," said Rigby. Promotional components and selections in the listening stations will be changed on a four-week cycle, he noted.
Music is nothing new to supermarkets, industry observers noted. Many have tried it and failed. But for Fresh Picks, "the big difference is we will absolutely ensure that the optimum presentation is maintained at all times," he said.
Pricing will be set to be slightly above the most-competitive retailers in the market, thus ensuring adequate margins, said Rigby. "We will be competitive with the market, but we will not be at the lowest price," he said.