FOR SALE

DAN ALAIMO

The lower the better in supermarkets when it comes to selling videos.

New sell-through product with suggested retail prices under $10 is increasing in quantity and quality. Meanwhile, retailers who are carrying greater numbers of new release rental titles eventually have more to offer when the time comes to sell them off as previously viewed. So the used tape market also is growing.

But there's some bad news, reported retailers participating in SN's video roundtable. The new low-priced video product is causing some price erosion on the used tapes, which they count on to enhance video department profitability. Here's what the retailers had to say about the low end of the video sell-through spectrum:

SN: The amount of low-priced, under $10 sell-through product is increasing. What have you done to respond to that trend?

VANOVER: We don't buy repriced products to sell.

UFER: I haven't done too much with the low-priced sell-through. Our primary focus is on rental.

MUELDENER: We are trying to participate in the under $10 product category. We see great opportunity in it, just because of how well our previously viewed sales have been doing. We've got three palletized, corrugated programs that have been put together by the studios that are going to start going out this summer with nothing but theatrical product at a $9.99 suggested retail price. We will sell it lower. But we probably won't be able to advertise them because with its low cost, the accumulated ad dollars aren't that big. So it will mainly be an in-store impulse program.

REDISKE: There are some stores in competitive areas where we are doing better with low-priced sell-through product than before. Low-priced sell-through product continues to be a bigger part of our overall mixes, products and sales, and so forth.

SCHLOSS: We promote it quite a bit. We do as much as we can. It's another vehicle for generating volume. Any opportunity that makes sense as far as good strong categories, we'll buy and we'll promote. Price point is a major factor for the average consumer.

SN: How important has it become to your overall general merchandise mix?

SCHLOSS: It's important to our overall product mix because it gives us a new price image. That's probably the key ingredient right there: the price image that we can give to the consumer, especially in a highly competitive market. You have Wal-Marts and Kmarts out there, and everybody is fighting for sales and price points create sales, especially lower price points, so it's important to us.

SN: Do you see the low-priced new sell-through product cutting into the sales of previously viewed tapes?

VANOVER: We haven't run into that much.

MUELDENER: No. If anything, we've seen the opposite.

REDISKE: For the first time in several years, we are low on the previously viewed product because of it selling so well. So if anything, the amount of the under $10 stuff that's out there and the competition has increased the demand in our stores for previously viewed. SCHLOSS: The under $10 product creates some new business, but depending on how fast they lower the price, it has an impact on our previously viewed sales. The major concern is that if they lower the price too soon, it can cause us to have to sell off our older copies at a lower price. That can cause us some gross profit problems and some revenue problems. But we haven't seen any previously viewed sales migrating to the under $10 new product.

UFER: The low-priced new sell-through has had an impact on what we can get for a used tape. The customers' perceived value is that all videos are $9.99, so that has affected how much we can collect on a previously viewed tape. I would like to take greater advantage of those programs, but I haven't to this point.

SN: How are your sales of previously viewed tape going?

MUELDENER: Previously viewed is going so great that we are consistently running out. We can't keep up with the demand out in the stores. So I asked my suppliers if we were missing the boat on other live action product that we hadn't tried very hard with. The result was these programs.

UFER: Our previously viewed sales are fantastic. As a part of rental, they are a much larger percentage of our sales than they were even a year ago. They continue to grow because we are carrying more new releases, so we have more copies of good movies to offer our customers.

SCHLOSS: Previously viewed is doing good, but not as good as it used to be. We had to lower some of our price points because, where people use to build libraries before, they are not doing it as frequently as they used to. They still sell, but they are probably selling at a little lower price point than in the past. We used to get about $14.99 and now we are getting about $9.99.

VANOVER: Previously viewed sales have been going great. They've been growing every year, depending on what titles come out and what the customers want to buy. If you sell previously viewed, you make 100% profit, whereas if you buy in the re-priced product, you make a lot less profit.

We merchandise previously viewed in their own section right next to the sell through. They can be priced anywhere from 99 cents to $9.95. The 99-cent tapes are things like real old 25-minute children's tapes that we've had for a long time.