LAS VEGAS -- When it comes to selling music, price point is key and shrink is an issue, but the category still has a bright future in supermarkets.
That was the consensus of manufacturers polled at the National Association of Recording Merchandisers show, held here earlier this year.
While supermarkets are starting to make some inroads into the sale of top-line music hits on compact discs, the channel remains very price-sensitive. The magic price point for most music is under $10. However, as more manufacturers move to source tagging and supermarkets put in electronic article surveillance systems, the potential for music sales of all kinds will continue to grow.
"These products create a generous incremental increase in the average shopping basket, which is really what the retailers are after," said Joe Ryan, vice president for global source tagging at Sensormatic, Boca Raton, Fla. The growth of source tagging to cut pilferage bodes well for the future of music in supermarkets. "Certain chains like Food Lion have a better understanding of what it takes to compete in some of these categories and they are moving forward with the technology," he said.
Since there are significant numbers of supermarkets with both the Sensormatic and Checkpoint systems, this can be a problem for manufacturers seeking to cooperate on source tagging. But it's better if they have one security system than none at all, said Jerry Pettus Sr., chairman of UAV Corp., Fort Mill, S.C. "Some of the biggest objections that we hear is the pilferage problem and that's why we suggest that they put in a Checkpoint or Sensormatic system," he said. Longer pilfer-resistant boxes help, as do price points that allow extra margin to account for shrink, said Pettus.
"To be successful with music in supermarkets, you just have to have great quality music," said Bill Robison, vice president and general manager of Unison Music Distribution, Nashville, Tenn. This is especially true with music continuity programs, he said. "But you have to have an attractive display to get the shoppers to even come by and pay attention to it," he said.
As in any non-grocery category, getting space in a supermarket is one of the biggest challenges, said the manufacturers.
"We have a strong brand and it's challenging for us," said Gail Plotkin, director of sales for the Audio & Video division of Lyric Studios, Richardson, Texas, parent company of Barney, the preschool dinosaur character. "So I think people with less strong brands probably have even bigger hurdles to cross than we do."
Here's what the manufacturers had to say:
director of sales,
Audio & Video division
We've had the most success with audio in supermarkets when we cross promote it with our video products. For example, our "Barney Sing and Dance" display also houses audio products and that's really been successful for us in getting the space. But getting audio into supermarkets is a challenge that we deal with every day and we are constantly looking for new ways to merchandise audio.
The biggest challenge is, supermarkets generally either don't have an audio section, or they're not committed to children's audio so they don't really know where to put it. Where it's been successful for video, people have made the commitment to video, they've got dedicated fixtures or they are doing corrugated shippers with video. Most haven't taken that step with children's audio yet. We have a strong brand and it's challenging for us. So I think people with less strong brands probably have even bigger hurdles to cross than we do.
VP, global source tagging
Boca Raton, Fla.
One of the keys to making music successful for the supermarket channel is that they can't make it inaccessible to the consumer. It's got to be readily available for a point-of purchase, impulse sale. But when you do that on a $15 to $20 retail product, you're going to have a lot of theft. That's why you've got to have source tagging for it to be successful. These products create a generous incremental increase in the average shopping basket, which is really what the retailers are after.
But I think the supermarkets struggle with electronic article surveillance because of the perception that most of their theft is internal and not from the customer. They use other means to stop their theft problem, mostly closed-circuit televisions. However, with more and more companies like Kmart, Wal-Mart and others using source tagging, it is becoming more available to them. For example, retailers like CVS are tagging all the drug categories. Certain chains like Food Lion have a better understanding of what it takes to compete in some of these categories and they are moving forward with the technology.
Jerry Pettus Sr.
Fort Mill, S.C.
To make music successful in supermarkets, it takes good point-of-sale material -- nice looking displays -- and it seems to go best when presented to the customer by themes. For example, with the new "Star Wars" movie, we've got a "Star Wars" soundtrack. But it has to be promoted at $10 and under to create an impulse sale. When you start going into the $15.95 to $16.95 goods we feel there is more likely to be a security problem and the margin is not quite as good on that merchandise.
We are putting sensor tags on all of our videos and all of our CDs and we're starting to put it inside the case, and we'll be doing that also with DVD. We just have to determine which chains want what system. Some want Checkpoint and some want Sensormatic -- I wish they would all agree -- and they are not compatible. Some of the biggest objections that we hear are pilferage. We suggest that they put in a Checkpoint or Sensormatic system. But we also have the long pilfer-proof boxes and we always recommend that they put it up near the checkouts.
regional sales manager
Front Row Entertainment
Once you get a supermarket executive excited over the fact that he can make money on music, it becomes a good traffic builder. It's an easy impulse item, especially with budget-priced product. The grocer is always looking for an item to make more money and work at very low margins with groceries, so he can pick up extra points with non-grocery items, and that's what budget music products offer.
The major hurdle is the grocery mentality: You have a store manager that knows milk and juice and steaks and cereal and he really doesn't want to be bothered with other products. He's not an entertainment guy.
regional sales manager
One of the biggest factors that allows music to be successful in supermarkets is price point: If you've got budget cassette prices and budget CD prices that make the pricing attractive to the consumer, so they won't have to spend an excessive amount of money on an item that's not a significant part of their grocery shopping. Certainly music is an impulse item when you buy it in a grocery store. So the keys are price point and recognition of the tracks and genres of music.
VP, general manager
Unison Music Distribution
To be successful with music in supermarkets, you just have to have great quality music. We try to tie into typical supermarket demographics -- the 35- to 45-year-old or older female -- with the promotions that we set up at the supermarket level.
But you have to have an attractive display to get the shoppers to even come by and pay attention to it. Unique displays are especially important for music continuity programs. We have been very successful with our audio product as continuities. It has to be a series and you usually run an eight- to 12-week program and it could be classical, it could be nature sounds, any of those types of things. The key price point, based on our history, is around the $5 mark -- the $4.98 to $5.98 price range seems to work the best because it's an impulse item.
VP, credit Pacific Coast One Stop
Simi Valley, Calif.
To make music and other audio products more successful in supermarkets, you need a nice display, something that's easy on the eyes and very presentable, especially to women. The product mix should be new releases and oldies. Often people shopping in the store will hear songs in the in-store programming that they would buy, if it were offered for sale. The price point needs to be comparable to the discount stores, because customers are not going to spend $18 for a CD when they know they can take a few extra minutes and pay $12 to $13 for it someplace else.