The fourth quarter is coming, and while retailers, suppliers and other industry observers put on a brave face on their projections, nobody is entirely sure what to expect. There's not much new about this uncertainty. It's been this way since Sept. 11, 2001.
Two things have come into focus since that awful event. For one, consumers have become much more value-conscious.
In a recent report on the back-to-school season, which will still be relevant for the fourth quarter, WSL Strategic Retail, New York, reports that 52% of shoppers will go out of their way to get the best bargains. To find those bargains, 44% will shop more at mass merchandisers.
The biggest losers in this scenario are specialty and department stores, according to Wendy Liebmann, president of WSL, but drug stores and supermarkets will not likely fare well either. This does not mean that food retailers should fold their tents. It also does not mean that value precludes upscale goods. But "if low prices or great values are not embedded in your marketing message, the chances of getting more customers in the door are slim and none," she said.
The second major development in the last two years is that retailers are learning to incorporate these concepts into their marketing plans. As reported in last week's SN, promotion and new merchandising initiatives can help stores stay competitive with the low-price leaders.
In the nonfood area, there are a number of strategies. Dollar sections are a direct response to consumers' demand for value. While many retailers locate these departments in low-income areas, evidence suggests that mid- to high-income customers respond just as well to this kind of treasure-hunt merchandising.
Another strategy is based on new types of sections and partnerships. The move into mainstream toy retailing, sometimes partnering with branded retailers like Toys "R" Us, can add panache to the store environment, while still providing that all-important value image.
Finally, there is DVD. Whatever else might happen this fourth quarter, it is all but guaranteed that DVD sales will continue their rapid upward trajectory. Over 60% of consumers bought prerecorded media in the past year, reported Pam Danziger, president, Unity Marketing, Stevens, Pa., speaking at last week's DVD Entertainment Conference. "Americans are passionate about entertainment, and spend an astounding amount of money on a complete intangible," she said.
While supermarket executives continue to have concerns about DVD theft and competitors with loss-leader pricing, that's still a lot of people buying entertainment software. It's a safe bet most will be in a food store at one time or another during the fourth quarter. Alternate products, like the catalog programs now offered by major studios, are a good way to take advantage of this category without sacrificing profits.
Finally, on the rental side of DVD, at the Video Software Dealers Association show late last month, I listened as a panel of top studio executives predicted strong growth for this business that many in the supermarket field have long left for dead. David Bishop, president and chief executive officer, MGM Home Entertainment, Santa Monica, Calif., even predicted 50% to 60% growth over the next five years.
Given the convenience and customer satisfaction from a well-run video rental department, this is an offering worth reconsidering.