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Mass Appeal May Be Dwindling

26 Aug, 2004 By: Thomas K. Arnold

I had a most eye-opening experience shopping for back-to-school supplies for my two oldest sons, 8 and 6. I made two trips to Target and one to Wal-Mart before I had most of the items on the list, but I was still missing erasable pens and a large pencil box. I dropped by Office Depot on a lark after I got gas at an adjacent service station, and not only did I find both items, but I found everything else I had scavenged from three separate outings neatly displayed and at similar prices.

Next year, I'm going to skip the mass merchants and head straight to Office Depot. I've learned my lesson.

Parallels can be drawn with home entertainment. The mass merchants have a reputation for having everything, at the best prices — particularly new releases, which they deep-discount for a week in an effort to drive traffic into their stores. So far, their strategy has been quite successful — the mass merchants dominate the video sellthrough trade and, according to numbers announced at this week's National Association of Recording Merchandisers convention in San Diego, now own 55 percent of the music retail market as well.

But as DVD continues to make inroads and becomes a true commodity business, will the mass merchants continue their dominance? Items that are readily available — and consumed regularly in significant quantities — aren't generally very price sensitive. I don't know anyone who comparison shops for, say, film or underwear.

Now, let's assume that DVDs continue to drop in price (Warren Lieberfarb's original plan called for the street price to eventually reach about $10). Let's also assume that the collecting habit really kicks off, fueled in large part by this price drop into the impulse-buy range, and people really, truly start buying DVDs the way they used to buy CDs.

The huge high-traffic racks of cheapo new releases won't be as appealing, but stores with broad selections — from Best Buy all the way to independent video stores like Kensington Video in San Diego — will all of a sudden have a new lure to movie buyers, just as Office Depot now does to me when I'm shopping for school supplies (and office supplies, I might add).

We've all heard that consumer behavior is learned — and my recent experience attests to that. But not everyone's a self-learner. Consumers need to be taught. And retailers of all sizes and shapes need to take a long, hard look at whether they're getting their message out.

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