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TK's MORNING BUZZ: Everybody's Playing the Cross-Merchandising Game With DVD Hardware and Software -- and It Makes a Lot of Sense

29 Nov, 2001 By: Thomas K. Arnold

Everybody's playing the cross-merchandising game with DVD hardware and software, it seems, and that's a good thing.

Best Buy, of course, is the leader. The chain's been selling DVD players and software since the format was launched nearly five years ago, initially in the same section.

Then came Circuit City, dumping home appliances so it could bring in more DVD software.

Now, even the video specialists are getting involved, led by Blockbuster. Big Blue is selling DVD players in all 4,300 of its corporate stores, and employing a series of promotions tying hardware and software together. Buy a Philips DVD player and get a coupon card good for 10 free rentals -- that's one that's been working particularly well, Blockbuster execs tell me. Over the Thanksgiving holiday, a new promotion was launched: buy a 52-week DVD rental card for $199 and get a free Philips DVD player.

Back in the early days of VHS, the cross-merchandising game was also in high gear. Stereo shops that brought in VCRs began carrying VHS cassettes, on a limited basis. Conversely, video specialty stores began selling VCRs. In each case, the goal was the same: to stoke consumer confidence in a new format.

Once VHS took off, the cross-merchandising stopped. Video rental stores were making money hand over fist and didn't care for the low margins of hardware sales. Stereo shops -- which by then had evolved into consumer electronics stores -- were ill-equipped to rent videos, and because there was no viable sellthrough market in those early days the few hardware retailers that were renting tapes soon stopped, once their player sales took off.

Hopefully the same won't happen with DVD. Selling hardware and software together makes a lot of sense, and with DVD geared to sellthrough, it just might work this time around.

Comments? Contact TK directly at:TKArnold@aol.com

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