BLANK CDS SPIN NEW SALES

DAN ALAIMO

A new segment of the blank media category is spinning new sales opportunities for retailers.

Spurred by the growth of writable compact disc drives in computers, with consumers using them for everything from creating music CDs to computer back-ups to basic file copying, retailers are starting to find demand for these products as both convenience and promotional items.

The result is one of the fastest-growing categories in supermarkets, according to Information Resources Inc., Chicago. Sales of formatted and unformatted computer discs -- predominantly the inexpensive CD-Rs that cannot be overwritten -- were up 28% in supermarkets for the 12 months ending March 24 of this year vs. the previous period, said Ted File, IRI's senior vice president, retail client services. "That's a new area for supermarkets."

That number translates to $1.3 million in new sales, File said. This segment is increasing from a small base, but it has significant growth ahead of it, he noted.

In a series of interviews conducted during a recent conference held by the General Merchandise Distributors Council, Colorado Springs, Colo., retailers and wholesalers told SN that they have recognized this potential, and many are putting the CD-Rs into their sets as convenience items. They are either merchandising them with stationery items, or with batteries and film. A few are going head-to-head with the mass merchants and electronics stores with promotional efforts like they do with blank videotapes.

"You have to define what you want to do with it," said Lanny Hoffmeyer, corporate director, wholesale general merchandise, Supervalu, Eden Prairie, Minn. "We have the blank CD-Rs in our everyday sets where they play more of a convenience role. But it is not going to translate into heavy volume unless you do some promotions as well."

In the blank media category, Supervalu has responded to the mass merchants with competitively priced value packs, Hoffmeyer said. "It's hard to sell the premium products with the bells and whistles today. You have to come in with a compelling value. Unfortunately, that doesn't necessarily mean high margin."

Supervalu is still doing very well with blank VHS tapes, he said. "We still do a large volume. It is competitive, but it's still very viable." Overall, he said, "the growth is in the CDs, and the volume is still in the VHS."

At Supervalu's Cub Foods division, based in Chanhassen, Minn., VHS tapes are still the mainstay of blank media sales, said Joe Meurer, director of general merchandise, corporate retail. "We are selling more CD-Rs. It is growing business for us," he said. Cub has tried camcorder tapes, but without success, and will consider the media cards for digital cameras and MP3 players when the time is right, he said.

Save Mart Supermarkets, Modesto, Calif., recently installed 4-foot sets of magnetic tape and CD-Rs in 50 of its 85 conventional stores, said Steve Urgo, general merchandise buyer, category manager. "CD-R is something of an emerging category for us and, with space constraints being what they are, we are easing our way into it," he said. Typically, it is merchandised near stationery, batteries and film, he said.

For now, CD-R is a convenience item at Save Mart, "but we will continue to watch the mix and expand it as necessary," he said.

Big Y Foods, Springfield, Mass., is expanding its selection of CD-Rs, said Betsy Turgeon, category manager, general merchandise. "I've just redone my planogram and added more of the CD-R multipacks of three and 15 count." Once the writable drives come down in price the way DVD players did recently, "it's going to be the market to go into. It's starting to be that way now," she said.

Convenience will drive sales of CD-Rs in supermarkets, said Kevin Nicholas, general merchandise/floral buyer-supervisor, Coborn's, St. Cloud, Minn. "We are going to test it in two or three stores and see how it does before we roll it out to all stores."

But even positioned as a convenience item, CD-Rs can't be priced too high. "Your prices have to be in line with your competitors' because the customers know the retails of these products. They are not going to pay 20% or 30% more for an item if they can go across the street and buy it for less," he said.

Two other retailers told SN that they are close to putting CD-R in their stores: K-VA-T Food Stores, Abingdon, Va., and Carter's, Charlotte, Mich. "We haven't added it yet, but we are definitely investigating it," said Scott Casler, procurement specialist at Carter's. "We probably need to look at putting some of those in, although we haven't had many requests for them," said Richard King, direct of category management at K-VA-T.