SHUTTERED DISTRIBUTORS LEAVE SOME TO FILL VOID

MARY ANN FARLEY

ST. LOUIS, Mo. -- Two video wholesalers bid a final farewell to distribution within four days of each other earlier this month, leaving competitors and retailers, including supermarkets, to ponder the future of traditional distribution.

The demise of M.S. Distributing, Hanover Park, Ill., on Feb. 27, and Sight & Sound, based here, on March 3 took many by surprise, despite the difficulties both were experiencing. Many attribute the closings to the shrinking numbers of independent retailers and the advent of direct revenue-sharing deals, which has caused others to falter as well, fueling speculation that more wholesalers will exit before the shakeout is through.

While both companies were considered regional distributors and serviced independents, Sight & Sound was the larger company that had built a substantial clientele among supermarket accounts both large and small.

Nash Finch Co., Minneapolis, was serviced by Sight & Sound. Clifford Feiock, video coordinator, said the distributor's closing came as a complete surprise. "We definitely didn't expect it," he said, declining comment on who would be the company's new distributor. "That's something we're working on; it's still a sensitive issue."

Country Mart in Hollister, Mo., is another grocer that has been left without Sight and Sound's services. "Right now, we're in a mess trying to get our movies," said Ryndie Liess, video manager. "MVC is handling our orders for now, but we want to see who else is out there and what they might have to offer."

Leiss said her deliveries were way behind, a fact she's openly sharing with her customers. "So far, people have been very understanding," she said. "We're explaining to them that our distributor was bought out, and we're caught in the crossfire of paperwork."

M.S., a 55-year-old company, had been plagued with problems since the summer of 1999, when it was sold to e-commerce concern Puzzlesoft. Just a few months after the sale, Puzzlesoft faltered in its ability to get product from the major studios, and accounts began to defect. By the time Tony Dalesandro, M.S. president, and John Salstone, executive vice president, regained control of the company a few months later, the distributor had lost too many key accounts to regain its footing, forcing it to close.

Houston-based ETD took over a bulk of the retail accounts, as did, ironically, Sight & Sound, which then stopped its own operations four days later.

Reasons for Sight & Sound's closing are less clear, but published reports point to the wholesaler's ill-fated deal to acquire rackjobber U.S. Video, Aurora, Colo., and the fact that a large retail account reportedly owed Sight & Sound $7.7 million in unpaid bills, had fallen behind on its payments. Major Video Concepts, Indianapolis, is reportedly handling Sight & Sound's accounts, many of whom are supermarkets, but calls to MVC were not returned to SN.

One industry executive, who preferred anonymity, said that while the announcements were sudden, many actually expected these closings to happen. "The real mystery is that they didn't go out of business two years ago," he said, noting that buy-back programs have increased operational costs for all distributors -- costs many regional wholesalers can't absorb. He predicts others will soon be squeezed out as well.

"[These two] went out of business for a reason," he added. "When you don't have a healthy business, you're not a viable player."

Bill Bryant, vice president of sales, grocery and drug at Ingram Entertainment, La Vergne, Tenn., noted that distribution consolidation has long been expected, calling it a "natural evolution" that was inevitable.

Published reports also indicate that the timing of the two closures was no accident. Apparently, M.S. and Sight & Sound had been attempting to merge, but that deal fell apart when bank financing fell through, according to published reports.