BUFFALO, N.Y. -- Adding to its aggressive sell-through program, Tops Friendly Markets here started buying direct from two more studios last month.
The retailer is now buying direct from Warner Home Video, Burbank, Calif., and Columbia TriStar Home Video, Culver City, Calif., said a source within the company who asked to remain anonymous. In September Tops had gone direct with Paramount Home Video, Hollywood. The company has been buying direct from Buena Vista Home Entertainment, Burbank, for about a year and a half, the source said.
While direct buying has been rapidly gaining ground in other classes of trade, notably with the mass merchants, this represents the most aggressive direct-buying program among supermarkets because of the number of studios involved, said industry observers.
"The main benefits are the gross profits and the partnering," the source said. "The studios are absolutely wonderful to work with. There is more of a give and take" than there is with a video distributor. "There is a better understanding of how we do things at retail. It is more of a partnership."
Tops has been buying videos from Star Video Entertainment, Jersey City, N.J., from which it continues to get products that are not available on a direct basis.
Working with the studios also helps with the merchandising and resupply of the in-line sell-through sections Tops is gradually rolling out. For example, in a Fairlawn, Ohio, Finast Friendly Markets store the section is 24 linear feet, with a header and monitor playing the latest hit, facing the front checkstands, and with large freestanding outpost displays not far away by the pharmacy counter, SN found while doing store visits recently.
"That helps the studios know they are going to get a greater presence in all our stores. They will help with planograms, making sure that we have the best product that is available. They are going to help manage the category in that regard," said the source.
The sections focus on family and children's programming, but are stocked with best-selling theatrical movies, including those that are R-rated, but not NC-17. An example is "9 1/2 Weeks," which stores can't keep in stock, the source noted.
"As long as the cover art is tasteful and not suggestive Tops will carry it," the source said.
Use of category-management technologies helps keep the stores supplied on a timely basis. With electronically managed systems, where data is captured daily based on sales, studios can advise Tops when specific stores are running out of products. In one case, the retailer was able to get a reorder in on a top title one week sooner than it would have in the past. "They can react a lot faster and that is extremely, extremely important," he said.
Financial concerns weighed heavily in the decision to buy direct, he noted. For instance, margins on big titles going out at minimum advertised pricing have doubled and, in some cases, tripled. "So the retailer will make a little bit more here and it is going into the gross profits," he said.
"When it comes to advertising, it is easier to get funds and they are willing to do a lot more with you because we are in a partnership. There is a lot of give and take."
Tops is now receiving from the studios various rebates and other bonuses that weren't passed along by the video distributor, according to the source.
One of the studios, which he wouldn't identify, offers exclusives to direct customers. "There are certain things that Tops can buy that other retailers won't be able to get their hands on. That gives them a little bit of an advantage over the competition," he said.
The studios take the partner relationship very seriously and are very actively involved in service, technology and merchandising assistance, he said. "There is more of a willingness to try something new." For example, using a different type of planogram or trying a test program first. "Instead of always being the last in the market possibly to get something going, Tops will now be the first," he said.
The chain has a regular space for video sell-through in its weekly circular, in which it features three to four items. "There are always enough releases coming out to fill that column," said the source. These range from Disney event titles, to other theatrical hits, to repriced rental movies, to children's lines, among other products.
