Some say the recipe for video success is very simple. Start with sample quantities of new releases, stir in top-notch service and presentation, and add a constant flow of sell-through hits and a large quantity of catalog.
But there is much more to it than that. There's the need to motivate upstream to management, downstream to the stores, and across the raging river that separates some internal departments. There's competition from increasingly sophisticated operators, like Blockbuster and Hollywood Video in rental, and from Wal-Mart and Best Buy in sell-through, from other supermarkets and from new delivery technologies, like the satellite dishes popping up on so many rooftops. Then there are day-to-day problems like collecting late fees from good grocery customers and getting unreturned tapes back.
Finally, there's the challenge of bringing the glamour and excitement of the movie business into local supermarkets across the country.
It's a tough assignment, but worth taking on, said the eight participants in SN's fifth annual state-of-the-industry video roundtable, held here. The roundtable proceedings are presented in this special supplement to SN, which coincides with the Video Software Dealers Association's convention in Las Vegas, July 9 to 12.
In a lively and wide-ranging discussion, the retailers talked about how to make the most out of their video operations. Topics included rental and sell-through issues, management concerns, new technologies, promotional opportunities and interactive products like CD-ROM and the new generation of video games.
"Video is new every week," said Jamie Molitor, director of video operations at Dierbergs Markets, Chesterfield, Mo. "We try to keep it exciting and try to let them know that what they saw last week is not what they are going to see this week. They have to come back and look again, because there is always something exciting happening," she said.
The participants in this year's video roundtable represented a broad range of retailers in terms of geographical location, company size and type of operation. For example, there were representatives from a large Northeastern chain; an independent in the Tulsa, Okla., area; several medium-sized players around the country; and two leased-space operators, including a Blockbuster franchisee with store-within-a-store departments in three Ohio supermarkets.
"You have to constantly reintroduce the consumer to the video experience -- day-in and day-out," said Carton of Buckeye. "The challenge is to keep the consumer interested in coming back to your store so you can continue to drive rental margins, as well as enhance sell-through opportunities," he said.
"The biggest challenge is coming up with fresh and creative ideas to keep your stores as strong and profitable as possible," said Feinstein of Marbles. "With all the competition popping up every day outside your supermarket, whether across the street or in the same parking lot, you always need to keep up with the changes and make sure you are one step ahead."
At Grand Union Co., "the challenges that we face are not new. They are financing, support and space," said DeSordi. "Not all of our stores can accommodate the space we feel video really needs today, and the banks are coming in. But we haven't lost ground or new store opportunities. We are putting video into those as well," she said. Putting sell-through videos on the main selling floor, in addition to the rental department, has helped build sales and rentals for Dierbergs, said Molitor. "Even if people are running through the store for a couple of things, it reminds them that we also have video," she said.
Where video was once there to draw traffic, management has come to see its importance as a profit center, said Maxwell of Reasor's Foods. That has created a greater sensitivity to competitors, he said. "Now we have to look at every retailer in video as our competition," he said.
At Southeast Foods, management recently made a significant investment in the video point-of-sale software, noted Darnell. "They made a big commitment to our department. They have really come around in terms of expecting more from video than a customer draw," she said.
Lucky recently signed long-term leases for Marbles to run 12 video departments, most in stores taken over from Smith's Food & Drug Centers, Salt Lake City, said Feinstein. "It shows that Lucky is very excited about video and very committed to it in the years to come. That is good news for us and for video," he said.
A recent research study from PolyGram Video, New York, showed that video rental customers spend a significant amount of money on other products while they are in the supermarket. This was welcome news to the retailers at the roundtable, but not surprising. "I've been telling upper management for years that's the reason we have video in our stores," said Bob Gettner, video buyer and coordinator at B&R Stores, Lincoln, Neb. "Many of our customers are primarily video renters, but they do go into the store to pick up a gallon of milk or a loaf of bread or whatever," he said.
Reasor's saw evidence of this when it put rental departments into stores that didn't have video, said Maxwell. "They would give up some display space that had been used for promotional grocery items and saw sales for the store increase," he said.
"We saw the same thing when we went in with video eight or nine years ago," said Matt Dillon, video director at the Boogaart Retail division of Fleming Cos., Concordia, Kan. "We saw a 5% to 10% increase in our base sales, not including the video revenues, and it continued to grow from there," he said.
Having retailers like Blockbuster and Marbles in the supermarket may even build on that trend, said Carton of Buckeye. "People are coming into the store as destination shoppers for those trade names,"he said.
But in some rural areas, satellite systems are starting to cut into video revenues. "It's an ongoing struggle with the satellite saturation, especially in our area. We are mostly in rural towns and nearly everybody in the country has got a satellite dish now. That has affected our business," said Boogaart's Dillon.
Reasor's has seen the same thing happen, said Maxwell. "I've got some stores in Tulsa and some stores in little towns where the sign says 'Population 800.' We were running some very good volume in those small towns, but I'm seeing some of it fade away. I attribute that to the satellites and the 18-inch dish. That's where it has to be going. There really is no competition. They're not driving anyplace else. The only options they have are us and TV," he said.
Southeast Foods' video program also has been affected, said Darnell. "Several store managers said their sales were down a little bit because of the satellites," she said. But video will continue to appeal to customers, she said. "We have to keep the store-level people motivated, and come up with products and services that they can't get from the satellite," she said.
Getting more market share for supermarket video operations depends on coupling sell-through with rental, noted Carton of Buckeye. "Every time you have an opportunity to buy a particular movie, you can build on the rental opportunities," he said. For example, by offering free rentals with the purchase of a movie. "But I don't see that kind of growth without that really revolutionary opportunity," he said.
"You really have to enhance the shopping experience," said Carton. "The one advantage that you have over looking at a list of movies and pushing a button, is to make the shopping experience an enjoyable event that people look forward to. If you can get your personnel to join in that joie de vivre of the shopping experience itself, I think that you are going to end up with customers that may prefer shopping in your stores as opposed to pushing a button and paying $4.50 a movie," he said.