BALANCING ACT: MIXING IT UP WITH VHS, DVD

STEPHANIE LOUGHRAN

ATLANTIC CITY, N.J. -- How to maintain the delicate balance between DVD and VHS inventory was a hot topic during the East Coast Video Show held here recently.

During the show, a panel of regional and independent video retailers discussed strategies on how they succeed at mixing both formats for sell-through and rental inventory.

"Retailers only optimize their profits if they transition from VHS to DVD with care," said Mark Fisher, moderator of the seminar panel and vice president, membership, Video Software Dealers Association, Encino, Calif. Fisher formerly headed the video program at Stop & Shop Supermarket Co., Quincy, Mass.

Figuring out the right split between VHS and DVD product is "the most challenging moving target the retailer has to hit," said Bo Andersen, president, VSDA, a co-sponsor of the conference.

The explosive growth of DVD raised questions about how quickly the transition from the older tape-based format to the more technologically advanced, "hipper" format should occur. DVD rental market share will equal VHS rental market share by the end of 2003, and DVD hardware household penetration will reach 48 million by next year, according to Kagan World Media, Carmel, Calif. However, some retailers are remaining loyal to a comprehensive VHS offering.

"I like VHS, and I'm trying to hold onto it for as long as I can," said Mark Nathanson, owner, Video Horizons, Arlington, Mass., a speaker on the panel. Roughly 75% of Video Horizons stores are devoted to VHS titles, he said.

Others are quicker to carve out shelf space to DVD. Video Quest, St. Joliet, Ill., expects to convert its inventory to 80% DVD by this Christmas, said panelist Tom Hannah and owner of the independent retailer.

"The right thing to do isn't necessarily clear," said Fisher. Supermarkets in particular must be mindful of space constraints, he told SN after the presentation.

Supermarkets seem to be more hit-oriented than catalog-driven, Fisher said, and that creates a need for "a quicker transition from VHS to DVD."