The impact of electronic and digital technologies on nonfood merchandising is a story of shifting revenue streams and also the opportunity for new revenue.
Take digital photography as an example. Its emergence decimated film sales and the need for shoppers to go into stores to drop off their film for processing. Consumers embraced more convenient online ordering.
After being in the business for years, Wegmans Food Markets, Rochester, N.Y., last year shuttered 62 in-store photo departments. “The growth of digital photography has meant significant changes in the business. Our digital photo business was not growing fast enough to offset the loss of traditional film sales and processing,” the company said at the time.
For those who remain in the business, developing equipment has been replaced by digital film equipment that requires less space and less labor, and utilizes equipment that requires “a lot less maintenance” and is otherwise less costly, said one retail executive.
Though many consumers process their digital photos at home, “it's not as cost-effective because you can optimize the quality of the prints using the professional equipment at retail,” noted Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill.
Greeting cards is another nonfood department struggling to find its footing with electronic delivery of e-cards, most often sent free via the Internet. “It's a profitable category,” one retail operator told SN, “but sales have been flat for a few years, despite efforts on our part to offer special deals, such as one card free with the purchase of three or getting a stuffed animal when you buy a certain number of cards.”
Digital technology is transforming video as it has music. Supermarket video departments have successfully been replaced by self-service DVD kiosks.
West Des Moines, Iowa-based Hy-Vee is among retailers who have eliminated their video departments. Two years ago, the chain opted in favor of Redbox video systems — an alternative method of DVD rentals for a $1 per night rental fee.
According to spokeswoman Ruth Comer, installation of the Redbox system at its stores has eliminated the need to carry heavy inventories, to replace outdated videos with Blu-ray versions or to add new titles.
The success of Redbox brought Blockbuster into the rental kiosk arena last year with a partnership with NCR Corp. to launch Blockbuster Express currently being rolled out to supermarket chains. Advances in prepaid payment processing technology has led to the emergence of the gift card business as a new profit center for supermarkets. Blackhawk Network, a company of Safeway, Pleasanton, Calif., has signed up most of the leading grocery chains to sell prepaid branded cards from its Gift Card Mall.