BOOSTING VIDEO'S POTENTIAL

David Merrefield

Anyone interested in learning more about profiting from video software should take a look at SN's sixth annual State of the Industry Report on Supermarket Video in this issue.

This annual survey of the video industry is the most comprehensive look at the status and progress of the video-software business in supermarkets that's available anywhere. It's nothing less than a roadmap to sales and profit. The survey was conducted and tabulated by SN researchers. Analysis was provided by SN writer Dan Alaimo. To find the report in this issue, refer to the front page.

But first, let's take a quick look at what the survey says about key video-industry trends, and at how those trends can be put to work.

The big picture is the category's dramatic upside: Video revenues rose 7.6%, to $2.54 billion last year. SN projects that by year's end, category sales will leap another 8.3% to $2.75 billion.

The survey also shows that sell-through is the portion of the category driving growth: Sell-through revenues rose 18% last year, while rental increased by 2%. SN projects that sell-through will increase by 19% this year and rental will go up by 1%.

Although these numbers are optimistic enough in their own right, they beg a couple of questions: What could supermarket retailers do to make sure they are riding the crest of potential revenue enhancements, and -- better yet -- what actions can be taken to make software perform above expectations?

Here are a couple of ideas on these critical questions:

Dinner and Entertainment Solution: It would be difficult to know how many Americans go out on a Friday or Saturday night to a freestanding home-meal-replacement outlet to pick up dinner, then go to a freestanding video outlet to rent or buy a movie. But the numbers are vast. So why not appeal to the market by positioning the supermarket as the one-stop video, meal, snack and beverage center?

Promotions using a "Dinner and a Video to Go" tagline, or something similar, might hand supermarkets a portion of the shoppers now making multiple stops for a dinner and entertainment solution. That's solution-selling at its best.

SN's video survey shows that many operators are acting on this concept, or contemplating doing so. Nearly 30% of respondents said they used some form of HMR/video tie-in; another 27% are considering it.

Line Extensions: Video software is king in the supermarket arena, but there may be additional opportunity found in other software, such as computer games, audio tapes and music or computer CD-ROMs.

Alternate software forms haven't always been found to be supermarket-friendly -- challenges include space limitations, shrinkage and price competition -- but many supermarket operators are taking another look. That's because better distributor service is available now, and new technology spells good margins. Moreover, more software fuels synergistic selling, lifting both video and nonvideo.

SN's survey shows that many operators are considering adding games, music and more. And, even if local market conditions recommend against giving alternate software permanent space, much of it -- notably music CDs or tapes -- makes an appealing seasonal in-and-out offer.