SELLING THE CATALOG

DAN ALAIMO

Catalog video continues to gain sales momentum in supermarkets.

Whether low-priced DVDs, bargain-priced VHS, classic titles or previously viewed movies in either format, older video titles are establishing a beachhead as a supermarket staple. "We are selling DVDs fairly well right now in the lower priced catalog," said Carl Day, owner, Day's Market Place, Heber City, Utah.

"We have a video rack in the store and we've actually moved to 80% DVD. We put the new releases in various places around the store. The other releases just go on the video rack and we do well with them; it works. They are just selling," Day said.

"In the last six months, we have been full out and have been for some time now, doing speed table promotions with the low-price set," said Greg Rediske, president, Video Management Co., Tacoma, Wash., which supplies sell-through video to about 250 stores and a rental program to 100 stores.

"We are using the $4.95 retail price point for VHS and $6.99 for DVD. Margins are around 40% on the stuff to the stores and it's flying out of here. Stores are extremely successful with it. We have a lot of great product, especially on the VHS side. The VHS titles are excellent because a lot of people are dumping catalog," he said.

"We are going to continue to be very aggressive with it. We've got bigger and bigger accounts signing up, so we anticipate over the next few months to do more than we've done in the last few months. So it continues to grow very nicely at the moment, and I expect it will continue, at least through the bulk of this year," Rediske said.

"We've been doing a lot of in-and-out promotions with distributors on real cheap, cheap VHS catalog," said Bob Gettner, video buyer/coordinator, B&R Stores, Lincoln, Neb. "We're talking $5 product, two for $10, and it's moving really, really well at that particular price point. We don't really do much on the DVD catalog as the Wal-Marts and those guys have a glut of that stuff and they deep discount it so darn bad that we don't do much with that. However, we've been moving a lot of the VHS catalog."

Although it's selling at a "bargain price," these are relatively new titles, Gettner said. "We're talking maybe a year or under or so. I don't know where they're getting it. I just order a lot of it," he said.

As long as VHS catalog is priced so aggressively, it will continue to have a market next to DVD, considering most U.S. households still have VHS hardware, retailers said. "People are going to continue to snap that up because it's so cheap. But DVD seems to be a big, growing market too. People are either replacing titles with DVD or getting those old movies that they've always wanted but never bought on VHS," Gettner said.

The studios are putting a big push on catalog video, noted Ray Wolsieffer, video specialist, Bashas', Chandler, Ariz. "I am certainly still looking at the possibilities of putting in low-budget titles, on DVD primarily. We don't do a lot on low-budget VHS any longer," he said.

The big issue for Bashas', as for many retailers, is theft. "We are currently involved in finding some kind of security method that can be workable in our stores to minimize shrinkage," he said.

Some have said that shrink is less of a concern on low-budget video products, but Wolsieffer disagrees. "Unfortunately, there are people that will take anything. That's just a reality we have to look at. If there's a DVD or any kind of movie sitting out there, there is a population that is going to steal it, regardless of what the cost factor is. This is from experience," he said.

"Selling catalog video should offer an opportunity to make profit margin on DVD," said Mark Fisher, vice president, membership, Video Software Dealers Association, Encino, Calif., and a former supermarket video executive. "The ticket price is low, and having the right title mix is a way to make a catalog DVD a destination purchase as opposed to just an impulse," he said.

"I think catalog video has a great success opportunity for the next several years," said Bill Mansfield, a nonfood supermarket executive formerly affiliated with Tom Thumb, Harris Teeter and most recently Marsh.

"Catalog still has a life in DVD, but perhaps selecting only certain genres would benefit the retailer. The retailer that knows and understands his clientele and what they would want, to be able to offer that kind of product would be beneficial," Mansfield said.

"There's a lot of catalog sell-through in supermarkets because of the low price point and the high impulse, and because of the traffic, of course. It's the perfect thing to put in a supermarket," said Andrew Miller, director, supermarket division, Rentrak Corp., Portland, Ore. "I like it better than the new release titles where you're making 10 cents per unit profit on it, and watching it all disappear because of theft. It's more profitable with less shrink," he said.

Catalog video is growing in popularity because the retail margins are higher and it offers the retailer a way to compete with mass merchants, said Leslie Baker, vice president, sales, grocery and drug, Ingram Entertainment, LaVergne, Tenn. "A good blend of feature and catalog product will naturally increase the overall profitability of the category," she said.

"It adds value to the consumer's shopping trip and promotes the one-stop shopping concept, while bringing the excitement of Hollywood into the store," she said.

The key to merchandising catalog is making a "home" for it in the store, she said. "That will send a message to the consumer that the retailer is committed to the video category. In a short time period, that retailer will become a destination point for video."

Like other video products, sales can be maximized through cross promotions, Baker said. "Themes like 'pizza and a movie' work extremely well," she said.

Top 10 Supermarket Video Rental Titles

Rank, Week: Title (Weeks Out)

1, N: Mona Lisa Smile, Columbia

2, 1: School of Rock (1), Paramount

3, 2: The Missing (2), Columbia

4, 3: Matchstick Men (2), Warner

5, 5: Cold Creek Manor (1), Buena Vista

6, 4: Runaway Jury (3), Columbia

7, 7: Duplex (1), Miramax

8, 6: Good Boy! (1), MGM

9, 9: Radio (9), Columbia

10, 10: Secondhand Lions (5), New Line/Warner

N = New

As of March 14, 2004

This chart, tailored for the supermarket video market, is based on information taken from more than 1,000 supermarket rental locations serviced by Ingram Entertainment, La Vergne, Tenn.