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Sellthrough and the Specialty Retailer

26 Jun, 2005 By: Kurt Indvik

A recent poll by the Video Software Dealers Association shows that a growing number of video specialty stores are expanding their efforts to sell new product over the next 12 to 24 months. Though according to the VSDA new sellthrough at specialty stores lost ground in the last several years as mass merchants got aggressive with home video, certainly respondents to the VSDA poll appear to feel like there is an opportunity to get back some of that business.

Whether they are offering some new hit releases simply as a loss leader to keep customers coming back, or choosing their inventory more carefully to compete in categories where mass merchants don't participate, or a little of both, the fact is it makes complete sense for specialty retailers to do so.

Mass merchants are being conservative in devoting more shelf space to home video to accommodate the massive amount of product in the pipeline. TV DVD, most especially, is a very attractive business for mass merchants, and even with the slimmer packaging, it does command more shelf space. Mass merchants are also going to be expanding their commitment to video games by as much as 50 percent in the next several years, according to Piper Jaffray, and some of that is going to come at the expense of current product categories. (See story in this week's issue of Home Media Retailing.)The bottom line is the competition for shelf space is tough, and suppliers now understand that they have to think outside of the big box retailers to grow their sellthrough business, especially for non-hit business.

This year's upcoming Home Entertainment 2005 seems on track to out perform last year, and perhaps this is not coincidental. Pre-registration is significantly ahead of pace, compared to this time last year, according to organizers. The exhibits are almost sold out, and for the first time since 2001, all the major studios are participating as exhibitors. (Again, see story in this week's HMR.) The show, which attracts not just specialty video retailers, but other retail sectors as well, will certainly be an important place for suppliers of all shapes and sizes to explore ways they can not only maximize the rental channel, but increase available sellthrough shelf space as well.

As mass merchants manage their home entertainment business to maximize profit per square foot, video specialty retailers will continue to find growth opportunities by fulfilling their role as specialists. Certainly, there is a place for new sellthrough in that role.

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