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Rentailers Missing Out on Sellthrough

18 Aug, 2005 By: Judith McCourt

Nearly three-fourths of video specialty retailers will miss out on the biggest DVD consumer spending spree of the year.

Why? They don't carry new DVD for sellthrough.

In the final four months of last year, consumers spent $6.56 billion buying DVDs, or 44 percent of the total sellthrough expenditures.

And yet, according to a Home Media Research study of independent video specialty retailers, 73 percent said they do not carry new DVDs for sale.

With the biggest hits of the season getting ready to bow on disc and consumers wanting to buy them, mass merchants and discounters that sell the hits at the lowest prices, at least in the first week or two of release, once again stand to capture the lion's share of sales.

According to a study of mass merchants and discounters conducted by Home Media Research, nearly two-thirds (65 percent) said they will increase their DVD shelf space during the peak holiday selling season to accommodate more product.

Meanwhile, video specialty stores already hit by declining rental revenue likely will miss the boat again. While 60 percent of retailers with three or more stores do carry DVD for sellthrough, just 23 percent of single-store operations sell new DVDs.

The No. 1 reason? Sixty-three percent of retailers that don't carry new DVD for sellthrough cited competition as the chief reason for their sit-out.

Mass merchants that so many indies blame for keeping them out of the sellthrough business have their own worries that savvy independents could turn into opportunities.

Seventy percent of mass merchants said shelf space is a serious concern, and 62 percent said they retire product in the new-release section in four weeks — or less.

As a result, mass merchants tend to focus on the hits and tend to shove out titles long before consumer demand wanes — things a savvy independent retailer could capitalize on.

The vast majority (93 percent) of rentailers straddle the sellthrough business by taking special orders from their customers. Eighty-six percent said they place at least one special order a month, while 64 percent place special orders weekly.

Rentailers for years have been griping that they can't compete in the sellthrough business, and yet that's because they focus solely on price. Under that scenario, they'd lose their shirts —mass merchants routinely price the hits several dollars below wholesale solely to drive traffic into their stores. But rather than trying to go toe-to-toe with the discounters, it would be easier to exploit the problems the mass merchants readily concede they are facing — namely, a shortage of shelf space that's prompting them to cycle through inventory at a break-neck clip.

Rentailers should focus on those old retail standbys — breadth and selection — or specialize in some underserved niche the big chains don't have room for.

Clearly, rentailers need to get into the sellthrough business. And where there's a will, there's a way.

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