VIDEO'S BIG PICTURE

David Merrefield

There's no doubt about it: Video is a big and growing business in supermarkets.

This week's issue shines a big klieg light on the subject with SN's fourth annual State of the Industry Report on Supermarket Video. Substance for the report was gleaned by a survey of 50 companies that together represent 6,660 stores. The survey was conducted by the Market Research Department of Fairchild Publications, publisher of SN. Results, which appear on Page 1 and continue on several inside pages, were written up by SN reporter Dan Alaimo.

The lens of that report brings into focus just how big a sales category video has become for supermarkets. To be precise, supermarket video is expected to finish 1995 as a $3 billion supermarket category, or a 13% increase in revenues against last year. How big is $3 billion in revenues? It's big enough. Think of it this way: $3 billion is in the same neighborhood as the net sales of the 20th largest supermarket chain in North America.

Facts about video revenues, such as these, are interesting in their own right since they show how important supermarket video has become. But, of course, the video report deals with a host of factors apart from category size. Indeed, some of the most important issues surrounding video go to whether the category has legs -- does it have staying power into the future? The answer is yes, but there are changes in the wind. Here is just a sampling of the harbingers of change the report details: · Rental revenues will continue to grow, but at a less feverish pitch than in the past.

· Sell-through revenues will grow at a faster rate than in the past.

· The import of alternate technology forms is coming to the attention of the supermarket industry, and should figure in a larger way in planning for the future.

Let's look quickly at each of these considerations.

The revenue numbers generated by video rental are slowing, but that's to be expected as the activity matures. As more and more supermarkets get on board with video departments, the potential for additional rollouts of in-store departments simply diminishes. Still, as the survey shows, rental-revenues growth is expected to be at the 9% level this year. Not bad. But by comparison, sell-through revenues are expected to increase by a huge 24%. Implications for the future of in-store sales are clear enough. It's important to realize, though, that the increasing contribution of sell-through really doesn't diminish the importance of rental since a full offering of sell-through and rental in a single venue provides valuable synergy.

Meanwhile, the future importance to supermarket operators of other technologies such as CD-ROM, game software, audio books and the like is less clear. Many supermarkets offer these products for rental, but the profusion of products makes it difficult to figure out just which way to go. The SN survey shows what many experts are thinking and trying when it comes to these technologies, and there can be no doubt that skillful product selection will yield big dividends. Finally, there's one more big fact that shines through all the data: The portion of the total video business done in supermarkets is growing at a rate that surpasses the net growth of business generated by the total video industry, counting all classes of trade. So, all in all, the big picture on supermarket video is an attractive one.