STOPPING DVD SHRINK 2004-10-04 (2)

DAN ALAIMO

Retailers are testing a new generation of anti-theft strategies to protect their DVD inventory.

With DVD theft a problem for many supermarkets (see SN's Sept. 20 issue), retailers are taking steps to prevent it and asking their suppliers for assistance.

So far, action taken to install theft-resistant technologies, or to address employee theft, which studies indicate is half the problem, has been slow, industry sources told SN.

The experience of Save Mart Supermarkets, Modesto, Calif., is typical of many small and medium-sized chains. "Although the studios and distribution companies that handle entertainment are concerned, they are really not answering the needs of most retailers that are in the self-service mode by offering security devices or other kinds of processes," said Tony Pooler, director of GM/HBC.

A range of anti-theft options are available, including vending machines; locking or oversized plastic cases; electronic article surveillance systems; closed-circuit television; locking display cases of various kinds; and displays that make a "snapping" noise when a DVD is removed that will help prevent "sweeping" or the theft of large quantities of product.

Meanwhile, the industry is watching radio frequency identification as a possible future solution to theft, and the studios continue to package top-selling DVD product with multiple layers of security tape, which sources said makes the packages difficult to open for all but the practiced DVD thief.

Save Mart has considered vending machines, Pooler said, "but that has not proved to me to be an effective alternative in terms of generating sales." The retailer has tried the locking boxes that are removed with a special key at the checkout. "That has proved effective in some locations and not very effective in others," he said.

As a result, Save Mart is evaluating its participation in video on a store-by-store basis, Pooler said.

One studio executive noted that the industry's willingness to help retailers with theft-deterring racks is related to how much product they buy. Other video industry insiders said they are testing various programs that will help supermarkets control shrink.

"Ingram is working with several companies to develop fixture options specifically to address the individual needs of each retailer," said Leslie Baker, vice president, grocery and drug, Ingram Entertainment, La Vergne, Tenn. "We are also consistently evaluating product mix, price points, turn rates, marketing and in-store placement of product to ensure the sell-through programs we offer are successful for the retailers."

Bashas', Chandler, Ariz., is pleased so far with a secured rack from Specialty Store Services, Morton Grove, Ill. Ingram is Bashas' video distributor. In a store visit, store employees told SN that the black fixture has been well accepted by customers. It is located adjacent to the service counter in front of the checkouts.

Ray Wolsieffer, video specialist at Bashas', said the rack holds 170 units -- 10 per wing. "The DVDs are locked up, but the display is still accessible to the consumer in a high visibility area. It is doing well as far as sales, and it has eliminated shrinkage almost entirely," Wolsieffer said.

Some sales might be lost because customers have to wait for help, "but that's the nature of the beast in the supermarket industry. If you need a little customer service, you've got to wait maybe a few minutes," he said. If the test program proves to reduce shrink, then the retailer may become more aggressive in merchandising sell-through DVDs, he added.

Meanwhile, lower-cost videos, which are also less attractive to thieves, are displayed in the open, Wolsieffer said.

Many retailers have found this to be a happy compromise, said one supplier, who asked not to be identified. "Many, many chains have found budget DVDs to be a quick sell-through category with very minimal theft. There is no black market for budget titles as there is for new releases," he said.

At independent Day's Market Place, Heber City, Utah, a closed-circuit TV system protects the video sell-through rack, said owner Carl Day. "The security system records everything; I've got cameras around my videos," he said.

Elsewhere, it has been widely reported that Tesco in the United Kingdom is testing RFID technology on DVDs. While Tesco is using it mainly to track inventory, some in the industry have been hoping that RFID might eventually be an effective solution to the video shrink problem.

ELECTRONIC ARTICLE SURVEILLANCE FOR DVD

Meanwhile many supermarkets rely on EAS systems, like those from ADT (formerly Sensormatic), Boca Raton, Fla., and Checkpoint, Thorofare, N.J. Besides having to deal with two competing and incompatible systems, suppliers are frustrated that not enough stores have them.

"We insert [an EAS] tag in every one of our DVDs -- it's just standard," said Bill Sondheim, president, GoodTimes Entertainment, New York. "Frankly, if people aren't using that, it kind of bums me out because it costs me 2 cents a disc."

For example, none of the 250 stores serviced for sell-through by Video Management Co., Tacoma, Wash., have EAS, said Greg Rediske, president. "That's a big problem." Rediske hopes that pay-on-scan systems like the one offered by MGM Home Entertainment, Santa Monica, Calif., catch on. Other suppliers have so far resisted implementing such programs because of the risk they assume of loss from theft, or simply from cashiers not ringing up the items correctly.

DVD is an ideal product area for pay-per-scan because the per-disc cost to the studios is low, while it is high for the retailers, noted Andrew Miller, director, supermarket division, Rentrak Corp., Portland, Ore. "If you are truly a partner who wants a viable business for everybody in the supermarket industry, then you should eat the shrink because it's not really costing you that much," he said.

This is a better solution than racks designed to lock up at night, as "75% of them probably never get locked" because of either a shortage of labor, or low-paid employees who are ambivalent about their jobs, Miller said. So even with locking racks, "the problem is still there," he said.

As part of a major push into supermarkets, Disney has had to confront the shrink problem, said Scott Guthrie, vice president, sales and channel development, Buena Vista Home Entertainment, Burbank, Calif. "I still say that this issue relates to the entire store, and it's not just a video concern. That said, thieves have a predisposition to product that's going move quickly on the street, and the reality is, video fits into that category," he said.

Disney is making available displays that help deter consumer theft, he said. "We've got a fixture similar to the ones used for shaving blades where you pull them out one at a time," he said.

"There are a substantial number of theft control devices in the marketplace that are effective," said Glenn Ross, president, Family Home Entertainment, and executive vice president of FHE's parent company, Lions Gate Entertainment, Santa Monica, Calif. "I think grocery stores owe it to themselves to look into those possibilities."

If supermarkets are going to make a large commitment to video, then they need to address the shrink issue with their suppliers. "I'm sure every video supplier would be willing to have that conversation with them," Ross said.

"Shrink is a problem everybody has to face, whether from the distribution side or the supermarket side," said Ted Green, chief executive officer, Anchor Bay Entertainment, Troy, Mich.