Going into the November to December selling season, business has been very good for video, especially DVD, which continues to grow strongly.
Shrink is an ongoing concern for many retailers, as is the loss leader pricing by the mass merchants and electronics stores on the big hits. But the sheer number of high-powered titles and new catalog opportunities, many relating to the holidays, helps many supermarkets overcome these worries.
With the high traffic the holidays bring to food stores, the biggest challenge is finding the space to merchandise these products effectively.
"It's the best selling season for video, but it's also the best selling season for grocery items, so shelf space is at a premium," said Chuck Porter, director, Iggle entertainment and video, Giant Eagle, Pittsburgh.
Giant Eagle has large, state-of-the-art stores as well as older, smaller units. "Even in the large ones, we run into problems with hams, turkeys and all the ancillary items that go with the season," Porter said.
Despite that, "I think we are going to have a great fourth quarter in total, starting with 'Finding Nemo' in November, which is going to be one of the best titles that we've had in years. I think it will be better than 'Monsters, Inc.' was a year ago," Porter said. Giant Eagle is planning cross promotions with "Nemo," Kellogg's and Kraft.
This holiday season, there will likely be two $300 million box office movies, "Finding Nemo," which broke the previous record for an animated feature held by "The Lion King" with $336 million, and "Pirates of the Caribbean: Curse of the Black Pearl," which is closing in on $300 million. Both are still playing in theaters. There will be two more over $200 million -- "Bruce Almighty" and "X2: X-Men United" -- and six over $100 million -- the well-timed Arnold Schwarzenegger movie "Terminator 3: Rise of the Machines," "Seabiscuit," "Freaky Friday," "Bad Boys 2," "S.W.A.T." and "The Santa Clause 2," which will play into many retailers' Christmas merchandising plans.
"The consistent flow of major sell-through releases, along with increased consumer demand for DVD, will make November and December banner months for supermarkets that effectively merchandise major releases and holiday titles," said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn.
"'The Santa Clause 2' will be the strongest holiday-themed feature title this year," Bryant said. Late last year, the movie grossed over $140 million at the box office, "which will translate into strong home video sales in quarter four of 2003."
Martin's Super Markets, South Bend, Ind., is planning a coloring contest to help promote "The Santa Clause 2," said Laura Fisher, video coordinator. Some stores will sell Halloween titles using displays from distributor Ingram that combine product from multiple studios. In mid-November, these will be converted to Christmas product and more stores will put them in, she said.
"It really depends on the size of the store and how many ends they have. Of course, they have a lot of other products they have to make room for during that time period," Fisher said.
These displays will be on the main sales floor. "We encourage the display of sell-through in our stores outside the video department because of the larger flow of traffic," she said.
Shrink is a concern, but that depends on the store, she said. "Some stores have to pay more attention to it than others. Normally, we try to put the video displays up by the checkstands or near the office where we can keep an eye on them." Overall, Fisher expects video sales to be about the same as last year with no significant increase.
On the other hand, Brenda Vanover, director of video operations, K-VA-T Food Stores, Abingdon, Va., predicts "huge sales" with "Finding Nemo" leading the way. "I look for this December to be a record-breaking month."
It's up to individual stores to come up with decorating ideas, she said. "I will furnish the stores with all the information they need to cross merchandise with the titles' tie-in partners."
But theft will impact the location of sell-through at K-VA-T, Vanover said. "All product will be inside the video department. However, we will have displays with empty [video] sleeves along with the products of tie-in partners right outside our video entrance," she said.
"We're gearing up for November and December," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb. "It's just a matter of trying to get things ready to move out the door.
"In this time of year, things kind of sell themselves. In the past, we haven't had to do a lot to push anything. Everybody is just out there buying, period," he said.
This is a team effort for the retailer's staff and, because they work together, Gettner will get the space he needs for video -- or at least close to it. "Sometimes it doesn't work out, and it's a matter of putting the inventory out a little at a time," he said.
"DVD is good and we are moving a lot of product," but theft forces B&R to pay attention to where the videos are merchandised. "You have to watch the product and have it in strategic spots," Gettner said.
The retail prices on DVD players are now as low as VCRs, K-VA-T's Vanover pointed out. "Therefore, I predict that this will make DVD the format of choice for most consumers this season," she said.
DVD penetration will have increased by 15 million households by the end of this year, noted Rodney Satterwhite, vice president, retail business development, Warner Home Video, Burbank, Calif. "So there are opportunities for a lot of titles to be sold again in the DVD format," he said.
"Consumers are rapidly converting their entertainment libraries from VHS to DVD. This transition will create incremental sales of DVD holiday product," said Ingram's Bryant.
Consumers new to the DVD market "may not have a single holiday film on DVD, and they are going to either replace what they have on VHS or pick up something new," said Lexine Wong, executive vice president, Columbia TriStar Home Entertainment, Culver City, Calif.
"It's an impulse buy, too," added Tracey Garven, vice president, domestic marketing, Columbia TriStar. "People are out shopping for the holidays and want to bring something home to share with the family."
"There's a lot of impulse opportunity at supermarkets for holiday-themed programming," noted Steve Feldstein, senior vice president, corporate and marketing communications, Twentieth Century Fox Home Entertainment, Beverly Hills, Calif. "With Hanukkah and Kwanza, there is programming available for all those families, and a supermarket could be a natural if they seize the opportunity."
"Seasonal products have always been tremendously successful in supermarkets," said Kelley Avery, worldwide head of DreamWorks Home Entertainment, Glendale, Calif. "People like to pick up movies that get them in the holiday spirit. It's a category that tends to overperform in that short period of time, but with big results for supermarkets."
The holiday gift-buying season is about more than just holiday-themed video product, said studio executives interviewed by SN recently.
While a market remains for titles explicitly about the end-of-year holidays -- "The Santa Clause 2" is expected to do very well for retailers -- it's the combination of quality programming and heavy store traffic that will drive business.
There was a time when the path of least resistance for the studios was to put out Christmas-themed product "because it was an easy sale," said Glenn Ross, president of the Family Home Entertainment division of Artisan Home Entertainment, Santa Monica, Calif.
"What we've learned over the years is that people don't only want to give gifts at Christmastime that are themed around Christmas, but they want to give gifts that will have intrinsic value all year long," he said.
"If you look at the fourth quarter now, it's fiercely populated with theatrical films and branded products that have tremendous awareness among consumers," Ross said.
"If you look at the toys, there's a huge spike in toy sales around Thanksgiving, and probably none of them are Christmas-themed. It's all about the quality and longevity of the gift," he said.
While political correctness may point retailers toward other end-of-year holidays, Christmas still drives the sales, said Bill Sondheim, president, GoodTimes Entertainment, New York. From a merchandising standpoint, "I would focus on that and do an excellent job with that holiday and not dilute myself by getting involved with other holidays," he said.
Beyond that, Sondheim said supermarkets should use four or five major event titles to drive traffic, "and then be aggressive in bringing in low-priced catalog. In the supermarket, the best opportunity is to capture the top-end sale and the very bottom-end sale, and not try to deal with the middle price points," he said.
"The fourth quarter is the biggest season for children's sell-through, so it's very, very important to us," said Debbie Ries, senior vice president, sales and marketing, HIT Entertainment, Allen, Texas. "Our company puts a large emphasis on that holiday season, and not just on Christmas-specific titles, but on catalog in general."
Because of the heavy food-shopping traffic in supermarkets during the holidays, video is a big opportunity, said Michael Arkin, senior vice president, marketing, Paramount Home Entertainment, Hollywood, Calif. "Especially in the parts of the country where the weather is not great during the holiday periods, you're home, you're cooking, you're baking, and you can watch a movie while you're doing it," he said.
There's even opportunity for supermarkets to sell gift sets that retail at higher prices than they are used to, Arkin said. For example, Paramount is bringing out an "Indiana Jones" set of three movies that will have a minimum advertised price of $49.99. "It's quite a unique title, and it provides them with a great margin opportunity," he said.