TK's MORNING BUZZ: An Aggressive Push by Remaining Wholesalers May Snag Some of Major's Clients From Ingram19 Oct, 2000 By: Thomas K. Arnold
As the percentage of rental product channeled through distribution continues to decline, remaining wholesalers are intensifying their fight over the scraps.
Ingram Entertainment yesterday issued a press release informing us that its purchase of Major Video Concepts has closed--and reiterating its claim, made in the original announcement, that it now has a market share of more than 50% of rental product sold through distribution.
That original announcement provoked an outcry from other distributors, including VPD's Marty Jorgensen, who rightly point out that such a market share estimate hinges on Ingram picking up all of Major's accounts--which they maintain is unlikely, given Ingram's prior track record of retaining only about half Commtron's accounts when that distributor "merged" with Ingram in the early 1990s.
Further reducing Ingram's chances of hanging on to all Major's accounts is an aggressive push by other wholesalers to snag at least some of the former No. 2 distributor's clientele. Their efforts to do so may be aided by two factors.
For one, Ingram has traditionally serviced bigger accounts in metropolitan areas, and Major's accounts--mostly smaller retailers in rural markets--might be reluctant to sign up with a very different organization. Smaller retailers tend to be a lot more loyal than their bigger peers--witness WaxWorks' success over the years in holding on to its largely mom-and-pop clientele, despite the presence of an Ingram sales office in WaxWorks' hometown of Owensboro, Kentucky, just a few blocks from WaxWorks' headquarters--and many former Major accounts might feel more comfortable hooking up with a smaller organization they feel is more geared to their needs.
Secondly, by snagging administrative duties for Warner Home Video's Rental Direct program, landing the Universal account and buying Major, Ingram is seen as a hungry conglomerate--distribution's answer to Blockbuster, if you will. Smaller retailers, who believe anything big is bad, might shy away from Ingram simply because of its size. Ironically, Ingram is only furthering this perception by touting its big market share estimate.
Of course, Ingram has a reason for bragging about its market share. As independent retailers become less and less important to the studios, simply because their ranks--and buying power--are dwindling, the distributors who service them also slide down the perceptual food chain. That means less incentives like co-op dollars and, most significantly, mailer ads, which we all know is distribution's primary source of profits.
It's sort of a conundrum that Ingram is in right now. By consistently touting its commanding mark share, the company might be turning off many of the retailers it needs to establish and maintain that market share.
It's hard to be a big fish in a shrinking pond.
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