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Discounters Grapple With Space Crunch

7 Jul, 2005 By: Judith McCourt

The shelf-space crunch is prompting suppliers as well as retailers to come up with increasingly inventive ways not just to optimize existing space in video departments, but also to get “eyeball time” for DVDs in other departments.

The majority (89 percent) of mass merchants and other discount retailers participating in a Home Media Research study said they still use full-front package facings to merchandise DVDs.

But with product proliferation at an all-time high — there are nearly 50,000 DVD titles available, according to The DVD Release Report — nearly half (43 percent) of retailers surveyed said they also are experimenting with spine-out displays.

More than half (55 percent) of the big retailers participating in the study said they also use stand-alone displays as part of their video merchandising strategies. These displays are often title- or supplier-specific, such as collections of Disney kidvids, and can be either disposable or permanent, with rotating selections of product.

One-third of all retailers use the popular “dump bins” pioneered several years ago by Wal-Mart to lure impulse shoppers with $5 DVDs. These large crates are often placed in high-traffic areas both inside and outside of video departments. They typically hold repriced or repromoted catalog or budget product.

Both Target Stores and Wal-Mart in the past year have started to carry dollar DVDs — mostly public-domain movies or compilations of TV shows or vintage cartoons. Just before the fourth-quarter 2004 holidays, Target put dollar sections near the front of its stores, with an ample supply of DVDs. The strategy was so successful that right before Christmas, several of the Target-exclusive titles made it onto the Nielsen VideoScan top DVD sellers chart.

The big retailers also are becoming more aggressive in cross-merchandising DVDs with other products and departments. Seventy percent of retailers surveyed by Home Media Research cross-merchandise DVDs at least some of the time, typically by placing DVDs at the checkout counter to attract last-minute impulse buyers.

To varying degrees, mass merchants and discounters also are cross-merchandising DVDs in the music (19 percent), book (7 percent) and electronics (5 percent) departments. Seven percent of retailers said they cross-merchandise DVDs with children's clothing, and 12 percent put DVDs in the toy section.

A space crunch in other departments is the most likely reason retailers cited when asked why they don't cross-merchandise DVDs in other areas.

Another way mass merchants and other discount retailers are hoping to spur DVD sales to even greater heights is through exclusives. Now that most everyone is selling the week's hot new release for less than $15, retailers want to differentiate themselves in the hopes of gaining the upper hand over the competition. One-third of all DVDs sold include some sort of “deal,” according to Nielsen research, from coupons to a retailer-specific gift with purchase.

This growing trend toward customizing DVDs for each of the big retailers can be challenging, according to studio home entertainment division presidents speaking at last month's Fourth Annual Home Entertainment Summit: DVD Magic 8. “The best examples with this exclusive opportunity is where the unique property we're offering [with the DVD] is tied to the brand of the retailer somehow,” said Craig Kornblau, president of Universal Studios Home Entertainment.

Steve Beeks, president of Lions Gate Entertainment, said his studio has embraced the “creative nightmare” of exclusive retail-specific add-ons for DVD.

“I think you're going to see more of it,” he said. “I think it is actually healthy for the business.”

While all the mass merchants use hot new DVD releases as loss leaders, not all prices are equally low. Nielsen research found that Wal-Mart typically charges the lowest price and also has been a leader in getting studios to provide exclusive offers or gifts with purchase.

This strategy has paid off: DVD buyers are more than twice as likely to buy their DVDs at Wal-Mart than anywhere else, according to a study from Simmons Market Research Bureau. Moreover, half of all Wal-Mart customers have purchased a DVD there, according to Nielsen data.

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