With video sell-through leveling off as it matures, supermarkets are seeking other entertainment software to gain ancillary sales. Among these products are music CDs and cassettes, interactive video games, computer software and audio books.
All of these offer attractive margins and price points that raise the average ring. Not all are suited to every market, but each has its proponents.
Take the music market for instance. "We see the music business growing. It's still in its infancy," said Ralph Klimach, national sales manager for Walt Disney Records, Burbank, Calif.
"Music is poised to follow in the footsteps of video," said Phil McConnell, vice president of merchandising at Fresh Picks, Richmond, Va. This company, which operates on a racked basis, expects to extend its music program to 300 stores this year. "Supermarkets are becoming more involved in general merchandise," he continued. "And music is one of the major categories there, so the acceptance of this channel has begun."
Music isn't always assigned to the general-merchandise department, however. "Of our two most successful music programs, one is mainly for video departments and the other for GM," said John Fincher, national account sales, Baker & Taylor, Morton Grove, Ill. "The first is a counter display of 20 different top-selling soundtracks, which we have in 400 supermarkets. With 30%-plus margins and little theft potential on the counter, plus opportunities for movie tie-ins like 'Titanic' and the 'Grease' reissue, we've had excellent results within video rental departments. The second is a mid-line program of classics, 'best of' collections and special packages that are marketed at under $10. This is an in-and-out program on a shipper basis a couple of times a year.
"We find that permanent displays are more appropriate in video, where there is dedicated staffing, while GM is better suited to the in-and-out promotions," said Fincher.
Many retailers agree. "Our music sales are always in-and-out promotions," said Jeff Manning, vice president for general merchandise at Bashas' Markets, Chandler, Ariz. "They're discount sales, which are typically seasonal, like Christmas promos."
The end of the year, naturally, is the peak season for this product. "Christmas represents 60% of our business," said James Reed, president of Unison Music Distributors, Nashville, Tenn. Unison carries mid-line and value-priced lines of CDs and cassettes, including classical, nature and romantic-interlude categories. "We've had 18 titles go gold in the last five years," said Reed, "such as 'Smoky Mountain Christmas,' 'Ocean Surf' and 'Thundering Rainstorm.' "
Some vendors and retailers target other holidays. "Our business in supermarkets is in Halloween prepacks and oldies," said Dennis Hoefer, vice president of sales at K-Tel International, Minneapolis.
"We did very well with a Valentine's Day CD of music and poetry," said Bill Mansfield, director of general merchandise at Marsh Supermarkets, Indianapolis. "It was produced here in Indianapolis and we had exclusivity."
Still others take a topical approach. "We benefit from Buena Vista's clout in theatrical and home-video releases," said Klimach. "We're able to tie our product into the big new features." In addition, the company has a perennial market for its Storyteller series of classic animated films on audiocassette.
The cassette market as a whole, however, is giving way to CDs. "Nationwide, cassettes are dying," said Reed. He and Hoefer both estimated CD sales at 70% of the market. Fincher claimed the figure is closer to 90%. "It's just like when eight-tracks were being replaced by cassettes," said Fincher. "There's an interval when both formats are viable, and we're still in that period."
That viability varies by region. "Cassettes are stronger in the Southeast than in the Northeast," said McConnell.
Others in the industry feel on the verge of another format shift. "The future of music is DVD," said Kirk Kirkpatrick, vice president of sales at WaxWorks/VideoWorks, Owensboro, Ky. "It's a great marriage with video. The new Mariah Carey video collection, for instance, retails at $24.98 on DVD -- about what some CDs cost."
Meanwhile, as the CD market grows, so does the potential for sales of used product. Some supermarkets have already followed mass merchants into this segment. "We tested buying and selling used CDs for a year in one of our larger stores," said Craig Hill, video specialist at Harps Food Stores, Springdale, Ark. "But there was so much competition in the area that we had trouble getting the current, popular titles customers wanted. A more rural area would be better for this operation."
Fincher suggested a similar niche for audio retailing. "We've helped with fixturing, signage and category management for larger video departments in rural areas. They've put in the Top 300 or so audio titles. That works in smaller markets where the stores are not up against Best Buy."