Sideways Buying on the Rise

12 Jul, 2006 By: Judith McCourt

Independent video rental dealers may not be buying as much product as they used to — studio estimates of indies' buying clout ranges from 15% to 20% — but those estimates may be diluted because studios are only tracking sales through traditional distribution.

A Home Media Research survey found that 52% of independent rental dealers buy DVDs at Wal-Mart, Target and other discount retailers and then redirect them into their rental or sellthrough inventories.

The May 2006 survey of more than 300 indie retailers found 27% saying they are buying more of their video inventories from other retailers than they were a year ago.

On average, the rental dealers who buy DVDs from other retailers obtain nearly 40% of their inventory in this manner. Rental dealers who buy from mass merchants and other discounters every week said they buy nearly 75% of their DVDs from this channel.

New releases are the most commonly bought product, cited by 91% of rental dealers who buy from other retailers. On average, these rental dealers said they turned to mass merchants and discounters for 28% of their Walk the Line inventories, 27% of their Chronicles of Narnia buys and 25% of their King Kong purchases.

Catalog titles draw sales to 40% of independent rental dealers, with 30% buying games, 28% buying children's video titles and 20% buying TV DVD titles.

Rental dealers also turn to discount chains for replenishment, with 37% saying they make a quick trip to the local mass merchant if they find they misjudged their initial order.

Wal-Mart and Sam's Club are the leading de facto DVD “wholesalers,” servicing 39% of independent rental dealers. Target is a distant second at 8%, followed by Best Buy (6%) and Costco (4%).

Nearly two-thirds of rental dealers said they buy DVDs from other retailers because the prices are lower than through distribution.