RETAILERS TURNING TO CATALOG VIDEO

Dan Alaimo

As the video business continues to grow, more retailers are finding older movies on DVD and VHS to be a profitable and lucrative impulse business.

"I have done some in-and-out promotional floor stands with lower-priced DVDs of older movies," said Larry Schimpf, director, HBC/nonfoods, Clemens Markets, Kulpsville, Pa.

"We have seen some with a cost of $2.30, so you could be out there at $2.99 with DVDs, and these are some of the old classics," said a nonfood executive with a Texas retailer. "So, in the next year, you are going to see a lot of DVDs selling under $5 every day."

Studio programs with catalog product priced somewhat higher than that have potential "in the right market, in the right neighborhood," said Charles Yahn, vice president, Non-Foods Division, Associated Wholesalers, York, Pa. "I don't think it is a program for every store in every neighborhood."

VHS catalog also is an opportunity, said Steve Urgo, GM buyer/merchandiser, Save Mart Supermarkets, Modesto, Calif. "As DVD has grown, you are starting to see more and more value programs in VHS," he said.

"For the retailer, value products allow them to generate more store excitement for the shopper while earning really great video margins," said Rodney Satterwhite, vice president, retail business development, Warner Home Video, Burbank, Calif. "The retail price points we have seen -- most below $10 -- allow video to compete favorably with other retail entertainment and impulse items."

"New DVD hardware buyers continue to be voracious purchasers of DVD software," said Bob Chapek, president, Buena Vista Home Entertainment, Burbank, Calif., and president of the DVD Entertainment Group, Los Angeles. "We continue to see annual DVD purchases of approximately 15 units per household, exceeding our previous forecasts of 12.5 for 2003."

Not only is it in the studios' interest to grow the catalog business, but also the retailers', said Jim Cardwell, president, Warner Home Video. Catalog offers better margin than the hit titles that are used as traffic builders by some retail channels, he said, "and these are products that have stood the test of time." On top of that, owners of DVD players tend to buy four times the number of titles than VHS owners, he said.

"It's really critical that supermarkets participate in catalog and not just new releases" because of price competition from other retail channels, said Kelly Sooter, head of domestic home entertainment, DreamWorks Home Entertainment, Glendale, Calif. "At some point, catalog consumption may be satisfied, and so if [supermarkets] get into the catalog business two years from now, consumers may not be as active as they are now. They may have missed that window when pricing and margins are good."

Yet Jim Foster, senior vice president of video sales, Universal Music and Video Distribution, Universal City, Calif., said some studios may have cut the prices on catalog product faster than consumer research shows they need to. "Retailers need to support catalog on a multi-studio basis to offer the best selection to their consumers," he said.

"It has to be about content and price, and not just price, because no matter how great the deal is on bad content, consumers will not purchase it," Foster said.

"You need to have catalog in grocery in addition to new releases because you need it to balance the margins," said Tom Lesinski, president, Paramount Home Entertainment, Hollywood, Calif. New releases are still needed to drive product and encourage the catalog purchase.

"Catalog is going to be a huge property this year for the fourth quarter," said Steve Feldstein, spokesman, Twentieth Century Fox Home Entertainment, Beverly Hills, Calif.

"It's big for supermarkets because there are great margin opportunities," said Mike Dunn, president of the Fox home entertainment division. "DVD is a very efficient thing to stock."

"We can offer catalog at good value prices, whether it is $12.95 or $14.95, but grocery has to be able to merchandise it and change it out so that it is constantly fresh and new," said Lexine Wong, executive vice president, worldwide marketing, Columbia TriStar Home Entertainment, Culver City, Calif. "That is one of the challenges we have to work with in the grocery channel going forward."

DVD has "created a new pricing paradigm" for catalog, said Bill Sondheim, president, GoodTimes Entertainment, New York. "With catalog, we have an opportunity to offer an incredible value proposition."

"[With catalog,] we have an opportunity, from a grocery point of view, to have a continuity series," said Debbie Ries, senior vice president, sales and marketing, HIT Entertainment, Allen, Texas.

Warner has been placing fixtures with shrink-resistant features into supermarkets. "The retailers that we are doing significant business with are the ones that have really jumped into the category and done catalog in a bigger way," Satterwhite said.