NEWS & SOLUTIONS 1997-05-05 (2)

DAN ALAIMO

GAYLORD, Mich. -- While Glen's Markets here has discontinued its rental program, the northern Michigan chain has launched an all-out effort to tap the fast-growing video sell-through market.

The retailer is now rolling out in-line destination sell-through sections of 8 to 20 linear feet to all 24 of its stores, said Jim Paterni, category manager. The program started in March and was in 16 stores by mid-April. Paterni expects the sections to be installed in all stores by the end of this month.

"We wanted to create destination departments for video in our stores," said Paterni. "To do that, we felt we had to merchandise the product in-line, giving it the space and signage that it requires and categorizing the titles to make the sections easier to shop."

Paterni expects the program to generate an immediate improvement over the spinner racks the retailer used previously to merchandise sell-through. "With the in-line sections in place this year, we project a 20% increase in video sell-through sales because of the new fixturing, merchandising and schematic system," he said.

Profits also will improve, "because we have the higher-margin product in the mix now that we weren't able to carry before," he said.

The keys to Glen's sell-through program are:

Computer-generated schematics that take the guess work out of merchandising at store level.

A hands-on approach to inventory selection by Glen's management, with an emphasis on family entertainment.

A close partnership with video distributor Ingram Entertainment, La Vergne, Tenn.

Attractive racks and signage, and a product mix that includes hits, catalog titles priced under $10 and CD-ROMs.

Adjacencies to related products like candy, books, magazines and greeting cards.

When all the sections are installed, four will be 20-feet long, seven will be 16 feet, nine will be 12 feet and four will be 8 feet. All but two of the stores with 8-foot sections will have 4-foot CD-ROM displays, and this omission is being reconsidered because of the early success of the CD-ROM product, said Paterni.

In the retailer's flagship store, adjoining its offices on Main Street here, there was a 20-foot section capable of accommodating 900 to 1,000 pieces. Eight feet were dedicated to "Feature Attractions," the hot feature products; 4 feet were given to "Children's/Family"; 4 feet to "Hollywood Hits" priced under $10; and 4 feet to CD-ROMs.

The program is still too new to quantify sales results, noted Paterni. "But the initial response from Ingram, which is supplying us the product, is that they are very surprised at how quickly it is taking off. Another good gauge is our store-level general merchandise department managers. They are very impressed with the response from our customers and the movement they have seen so far," he said.

Glen's was among the first in the wave of supermarket chains to get into video rental in 1984. The program grew to 19 departments and four freestanding stores generating a total between $2.6 million and $2.7 million in volume last year, said Glen Catt, president and chief executive officer.

But in February, Glen's sold its rental inventory and freestanding stores, closing the in-store departments. Although the program was still profitable, Catt and Denny Freeman, executive vice president and chief operating officer, cited an increasing difficulty in reconciling their personal convictions with the content of many R-rated movies as the main reason for getting out of rentals.

"We got to the point where we really had a tough time with that being part of our business," Catt told SN at the time. The retailer recognized that it would be impossible to operate a successful rental program without R-rated new releases, he said.

There is no such obstacle with the company's new sell-through program, said Paterni. "Video is a very high-profit, high-dollar-ring category, and the way we've been doing it, it's a very family-oriented category," said Paterni. Glen's will not stock R-rated sell-through titles, even a major hit like "Jerry Maguire," which is being released directly to the sell-through market on May 29. "If it's R-rated, we are not going to carry it. It's as simple as that. No ifs, ands or buts. Even if it's the best-selling title in the world," he said.

"This is a standard that the president of our company has asked us to adhere to. We don't feel it is going to hinder the performance of our sections, because most of the good product that is turning is family-oriented. That's what sells," said Paterni.

With its new in-line sell-through sections, Glen's is again among the pacesetters in the supermarket industry.

"Glen's is one of the leaders in sell-through, although we are seeing a significant shift among all supermarkets in that direction," said Bill Bryant, vice president of sales for grocery and drug at Ingram Entertainment, La Vergne, Tenn. "But Glen's was one of the first to step in and make a full commitment to the sell-through category beyond feature titles," he said.

"They are taking a major leap forward and I think other retailers may follow," said Stewart Gershbaum, vice president of sales at JD Store Equipment, Manhattan Beach, Calif. "Even with 12 to 16 linear feet, it is becoming a destination shop for gifts and for movie purchases," he said.

In the distant past, Glen's had only carried shippers of the big-event sell-through titles, said Paterni. But two years ago, the chain put spinner racks holding about 100 pieces of sell-through product in all its stores, and some larger four-sided racks in bigger stores, he said. Last year, the company successfully experimented with a program offering product priced under $10 from Ingram, said Paterni.

"In the stores that had the space for it, we got into the under-$10 product, and that has done very well for us," he said. For example, in one case a store brought in 150 pieces priced at $9.99 and sold through 100 of them in a 10-day period -- with no promotion other than in-store signage, he noted. "This is the section that surprised me the most," he said.

In the larger departments, the under-$10 product has its own 4-foot section labeled, "Hollywood Hits." When all the departments are installed and video ads can be run in the chainwide circular, Glen's will step up promotion of this low-priced product.

"I want to really start highlighting the $9.99 product. Considering the turns we are getting just by putting it out on the shelf, we are expecting great things when we advertise it," he said.

The retailer will regularly advertise video sell-through once it is in all stores, Paterni noted. "We will promote it in our flyer and put it in front of our customers every week," he said. Glen's was among the first five retailers to test Ingram's under-$10 program, noted Bryant. "They were extremely successful with it out of the box. The programs that we have rolled out nationally have been a result of their initial success," he said. The retailer pays close attention to the individual titles being ordered for the stores, including those for the under-$10 section. "We are not just taking an assortment of $4.99 product where you don't know what you are going to get. We are hand picking every title so that we get the best turns possible out of the selection. That's what is nice about this program. Not many distributors would let you hand pick what you want," said Paterni. Glen's has always been very concerned about the titles it carried in its stores, said Dick Rolfe, managing director of the Dove Foundation, Grand Rapids, Mich. When Glen's carried rentals, it participated in the Dove Seal program, which identifies "family-friendly" titles.

"From day one, they have always shown concern for the content of their video product. I'm sure that is going to be reflected in their choice of sell-through titles, as it was in their choice of rental titles," he said. This concern came from the highest levels in the company, he noted.

Paterni is quick to praise Ingram personnel for the success of the program, particularly Henry Young, key account executive, and Henry Neuhoff, sell-through manager. "We've been with Ingram since day one" in the rental business, Paterni noted.

"I give Ingram a lot of credit for recognizing the needs of a relatively small company like ours, and giving so much attention to taking care of those needs. They've been good partners," he said.

Video sell-through fits Glen's objective of meeting the needs of customers in many of the small towns it operates in, noted Paterni. "We've always had a strong general merchandise program and video sell-through is part of it. We do our best to provide one-stop shopping for all our customers and video is a great opportunity in the general merchandise area," he said.

The retailer is pondering the creation of entertainment centers with video, books, magazines, greeting cards and other related products like film and batteries, said Paterni. "I can see an alcove of entertainment products in the store. That is something that we may be able to try in the near future in upcoming remodels. We've given it some thought," he said.

Glen's is paying close attention to the adjacencies with the new video sell-through departments. For example, in the Gaylord store visited by SN, video was in the same run as candy, right next to the bulk candy. Books and magazines were in that same aisle and the retailer's new Expressions From Hallmark greeting card section was one aisle over. "We purposely put video with the candy because of the traffic we feel is going to be generated in this aisle for candy purchases. We tried to keep it close to the magazines and greeting cards because it is all part of the entertainment concept for our customers, and we felt that it tied in very nicely," said Paterni.

A row of three-bag boxes of microwave popcorn selling for 89 cents was right below the videos, but pegged automotive products were on the space above, and on the shelves directly across the aisle. "You can't have everything placed exactly where you want it," Paterni commented.

The videos are merchandised on grid racks from JD Store Equipment, which are mounted on the store's regular gondolas. "We looked at wooden fixtures and we looked at grid, and we felt that, on gondolas, the grid was going to do the best job for us," he said.