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Grocers Are Biting Into DVD Sales

3 Apr, 2003 By: Thomas K. Arnold

Pundits traditionally say the Canadian video market is virtually identical to the U.S. video market, just slightly behind.

But the order may be changing. In Canada, mass merchants — specifically, Wal-Mart — are in the lead when it comes to DVD sellthrough, just as they are here in the United States. Grocers, however, are a strong No. 2, led by chains like Loblaw and Safeway.

Here in the United States, grocers never really got into video as a primary product line. Sales were limited to small merchandisers for select hit new releases, positioned at endcaps or at the front of the store. Rental was big at some chains, nonexistent at others — and when revenue-sharing came into play, even some of the more aggressive supermarket players in video dropped the ball, figuring it simply wasn't worth the hassle.

But DVD may be changing the equation. Grocers live and breathe by impulse buys, and while in the VHS-only days grocers could only count on a handful of sellthrough-priced new releases, chiefly children's product, nowadays every new release is priced for sellthrough and that makes the concept of a regular video sales section all the more viable.

Meanwhile, on the catalog end, the fact that DVDs take up so much less space than videocassettes is also an enticing proposition to establishing a regular DVD section — particularly since studios are putting out more and better catalog product, much of it surprisingly current, than they did with VHS.

Already, the Vons near my house has a row of low-priced catalog titles in the front, under the photo counter, just like the nearby Target and Wal-Mart. And down by the liquor section is a cabinet with hot new releases. In the past, there were no videos to speak of in the store, aside from an occasional Disney title for the kids.

The change is no accident, as a recent grocery industry survey pointed out: mass merchants are grabbing grocers' traditional turf with food sales, so grocers are looking for ways to make up the difference.

Grocers may also be driven, at least in part, by the vulture mentality. It's no secret that music stores are suffering, with many big chains, including Wherehouse, shuttering a good chunk of their stores. And savvy supermarkets with outlets near these closed music stores may have a natural audience, as long as they get the word out.

It's funny — home video observers have frequently said the end goal of DVD is to become a commodity business. And getting copies of Spy Kids 2 and Road to Perdition inches away from the milk cooler and the Spam rack certainly brings that concept one giant step closer to reality.

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