RECORD PROFITS

RANDY WEDDINGTON

With video relatively stagnant and increasingly competitive, supermarkets are looking to other entertainment software to increase sales.

Foremost among these alternative segments is music, which can generate tremendous foot traffic and revenue but is not without its pitfalls -- the high level of maintenance required, shrinkage and potentially offensive content among them.

For retailers willing to invest the time, effort and expense in music, there is considerable profit potential per square foot, said Michael Rigby, president of racker Fresh Picks, Richmond, Va. "Music is a $12.5 billion business annually and it's largely impulse. The consumer is moving ever more toward convenience and one-stop shopping, as are supermarkets, which makes a good fit."

But "music is a tough nut to crack," cautioned Kirk Kirkpatrick, vice president of marketing for distributor WaxWorks Video Works, Owensboro, Ky. "If you have a racker, you're a step ahead in music programs. It's high maintenance, and shoplifting is a big problem. You must also find the right mix for a fickle public. The Top 40 aren't necessarily the top 40 movers in your market."

Another issue that arises more frequently in the Top 40 arena than in budget lines is that of content. "Our music sales are in-and-out promotions," said Jamie Molitor, director of video operations at Dierbergs Markets, Chesterfield, Mo. "So we haven't done enough to have any content issues."

However, one retail video specialist, who asked not to be identified, said, "Normally this isn't a problem, but occasionally it does arise. We've brought in cutouts of rap and dance CDs stickered with warnings of explicit lyrics, which provoked some customer comments, so we pulled them in those areas. We don't have a companywide policy like Wal-Mart, so we vary from market to market. Our rural markets are definitely more sensitive to this than our urban ones."

These concerns have long kept supermarkets from adding permanent, full-priced lines of CDs and cassettes. "It's too difficult to track," said Craig Hill, video specialist for Harps Food Stores, Springdale, Ark. "By the time we can get a title into our stores, it's already been the No. 1 seller and most of our customers have already bought a copy."

Fresh Picks addresses these concerns by "using sophisticated inventory-management techniques," explained Rigby. "We have an accurate ability to estimate sales potential and to optimize productivity and profitability."

Fresh Picks currently has 63 locations in supermarkets, the majority in units of Star Markets Co., Cambridge, Mass. It has added a pilot group of seven departments in stores operated by Farm Fresh, Norfolk, Va., with further rollouts planned in the 38-store chain through the fourth quarter. Fresh Picks' program is also under consideration by at least four other chains.

The company uses data from SoundScan, Hartsdale, N.Y., "the recognized source of information for the industry," and supplements this with its own centralized sales tracking. "This is a volatile, fashion industry," said Rigby, "so we intensively manage inventory and replenishment. A district manager is responsible for seven stores, each of which they visit two or three times a week."

The operation Fresh Picks provides is completely turnkey, Rigby said. The company has developed modular units that can be arranged either in-line or as walk-around departments, totaling 16 to 40 linear feet.

The fixtures have roll-down shutters that allow store staff to close and lock down the department in five minutes.

For additional theft protection the company encloses products in a polycarbonate security trap. "You literally need to take it to a workshop with power tools to open it. It makes the product not worth stealing because you destroy it," said Rigby. A coded, channeled magnet at the register opens a latch so the product can be released without slowing checkout. Further protection can be provided by adding security systems like those from SensorMatic or Checkpoint, which the Fresh Picks system supports.

Another alternative for retailers seeking a secure, full-priced music continuity program is offered by Miami-based Intune, which markets music-CD vending machines. Designed for endcap use, the machine holds 30 selections from the Top 15 Billboard titles, 10 catalog titles and five best-of collections from artists like Bob Marley, the Steve Miller Band and Frank Sinatra. A highly directional parabolic speaker, attached to an arm above the machine, creates a virtual audio dome under which two or three customers can sample music before purchasing.

Although the units are just beginning to be tested in supermarkets, "they've been doing extremely well in universities, nightclubs, theaters and truck stops," said Joseph Risolia, Intune's president.

Most music sales in supermarkets, however, are still handled as special promotions rather than as ongoing programs. While many stores now have permanent planogrammed video displays, far fewer have extended this to music. "Our music sales have always been in-and-out promotions," said Hill of Harps.

This is typical of the industry, which relies heavily on tie-ins to holiday themes. "Most of our music business is with in-and-out seasonal displays for Valentine's Day, Easter and Christmas," said one wholesaler who asked not to be named. "We had great success with romantic ballads for Valentine's Day."

As with sell-through video, music sales are traditionally strongest in the fourth quarter. "Christmas is always our biggest time of year," said Eric Dilts, sales and marketing manager for Delta Entertainment, Los Angeles. This music supplier, which has recently added video to its product line, "has displays that are Christmas trees and Santa Claus, as well as holiday headers for regular shippers, both floor and counter. And our version of Tchaikovsky's Nutcracker Suite has been the best-selling budget CD for three years in a row," said Dilts.

Even chains without ongoing music programs often bring in CDs and cassettes during the Christmas season. "We always run a holiday music program through our book departments," said Dierbergs' Molitor, who also supervises books for the retailer.

"Supermarkets have had their greatest success with cutouts, the $3.99 and $4.99 impulse items," said WaxWorks' Kirkpatrick.

Some in-and-out budget promotions feature gimmicks with a multiseasonal appeal. "We tried Quality Video's aromatherapy kits for Valentine's Day," said Hill. "These contain a CD of modd music along with a vial of aromatic oil. Then we did another round of promotions for Mother's Day, and we plan to finish off the remainder with a Christmas promotion. They haven't been huge sellers, but they've done well in stores with exceptionally sales-minded department managers."