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Shelf-Space Squeeze An Opportunity for Specialty Retailers

5 Sep, 2004 By: Kurt Indvik

The volume of home video releases into the market is staggering, and suppliers appear to be capable of keeping the pace up for the foreseeable future. The question on the minds and lips of both suppliers and retailers is how to cram all of this into that finite realm we know as shelf space.

Obviously, the answer is that they can't, at least when it concerns major retail shelf space. There will be “winners” and “losers” this holiday season as suppliers of all sorts do everything they can to get their hit movie, their catalog release, their special-edition collection or special-interest title on as many retailers' shelves as possible.

Major nonspeciality retailers, especially big-box retailers, for the most part now appear to be holding firm on their total allocation of space for home video, though certainly they have adjusted product mix to accommodate the huge success of DVD (goodbye VHS) and certain hot genres (hello TV DVD), and extended their sections with end caps and dump bins in other parts of the stores, among other efforts.

Virgin Megastores, for example, is beginning to move certain DVD genres, such as music and fitness, out of traditional DVD sections and into themed areas where these products can be cross-merchandised with related CDs, books, etc. In this week's issue of Video Store Magazine, senior reporter Jessica Wolf writes about this issue as it came up in several panels during last week's Entertainment Media Expo in Hollywood. Part of the issue is of the mass merchants' own making: That is, they have created the first-week loss-leader phenomenon for new-release hits that have made the margins for at least that portion of their video business (and it's their most significant portion, at least in units) unattractive to such an extent that home video doesn't warrant greater allocation of space.

Meanwhile, as DVD households continue to grow — albeit at a quieter pace — consumers seem as ready and willing to buy now as when the format was in its formative stages.This is where the specialty retailers and rental chains, including online models such as Netflix, have the opportunity to capture a growing share of the sellthrough market. Because not only does the volume of new product present an opportunity, the ever-increasing fickle nature of mass merchants' buying models will pass up an increasing number of mid-tier (less than $25 million box office) theatrical titles and any amount of other great product that just doesn't fit their ROI scheme.

Major rentail chains continue to reconfigure their stores, continue to jettison VHS and move aggressively toward sellthrough in all variations, from new and previously-viewed to trade-ins, not just in the hits, but in the wide range of terrific mid-tier theatrical and non-theatrical product mass merchants just aren't going to carry.

The opportunity for specialty stores in sellthrough will continue over the next several years.

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