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Super Market: Grocers See Green in DVD

31 Jan, 2005 By: Erik Gruenwedel

When Food Lion recently opened its first high-tech Bloom supermarket in Charlotte, N.C. — where customers pick up a personal scanner to track prices, purchases and speed checkout — DVD sales and rental ranked high on management's agenda.

Throughout the first of five pilot stores, kiosks perform a variety of tasks, from dispensing product information to helping customers locate DVD displays, and conduct $1-per-day rental transactions with the swipe of a credit card.

Year-round DVD product is a switch for Food Lion, which operates 1,200 stores in 11 states and stocks DVD titles largely on a seasonal basis.

“We like to say, ‘At Bloom, you can get dinner and a movie,’ spokesperson Jeff Lowrance said.

Albertsons, the nation's second-largest supermarket chain, with 2,305 stores, continues to befuddle video market trends by offering up to 2,000 titles for rent ($1.99 per day) and 1,000 sellthrough titles in about 954 locations.

“Video is a big component, because our customers ask for it,” said Lilia Rodriguez, public affairs manager for Albertsons.

The simple buying process and mass appeal of DVD has brought the supermarket chains back, after competition from Blockbuster Inc. and Hollywood Entertainment Corp. and complex VHS rental buying formulas turned most supermarkets away.

Total unit sales at grocers in 2004 were up 20.3 percent from 2003, according to Nielsen VideoScan data. Aggregate video revenue was up 15.5 percent for the same period. DVD unit sales were up 67.4 percent in the grocer channel, compared to 21 percent growth overall.

DVD accounts for 90 percent of grocer video sales, according to Bill Bryant, VP of sales at Ingram Entertainment. Catalog sales seem to be growing as new releases account for 80 percent of grocer sales, down 10 percent from a year ago, he said. “There are more DVD titles priced at an optimal sellthrough price point [$9.99],” he said.

La Vergne, Tenn.-based Ingram distributes product to many supermarkets, including Albertsons, Kroger, Safeway, Price Chopper, Giant Eagle, Hy-Vee Food Stores, Stop & Shop and Wegmans.

Bryant said supermarket DVD sales in 2004 topped 11 percent of home entertainment industry totals. Others, however, say market penetration is less than 4 percent.

With Wal-Mart heralding the practice of pitting vendors in a near-Faustian battle for product shelf space, DVDs in supermarkets are primarily sold in studio- and title-specific displays in high foot traffic areas — not necessarily on store shelves.

MGM Home Entertainment, Warner Home Video and Buena Vista Home Entertainment, among others, in the past year instituted a variety of displays.

Situated at the entrance and checkout counter and stocked with impulse-priced DVDs, displays are a golden opportunity for both vendor and seller, according to Tom Adams, of Adams Media Research in Carmel, Calif.

“That's why there are the 64-unit and 128-unit shipper configurations,” he said. “Supermarkets aren't going to sell DVD if they have to rack it. But if you can provide a turnkey unit on the big titles, they are willing to do it.”

“Supermarkets are looking to increase the market basket and return trips of their customers,” said Pat Fitzgerald, Buena Vista's EVP, sales distribution. “[DVD] fits in that sweet spot.”

Buena Vista for Valentine's Day is promoting Mulan II with in-store displays in select supermarkets, including Ralph's. Other grocer promos include Winnie the Pooh titles, Sweet Home Alabama and Under the Tuscan Sun (Mother's Day).

Despite grocers' DVD boom, Adams feels supermarkets are still missing an opportunity. “Each customer going through the checkout counter is three times the video buyer they were six or seven years ago,” he said. “I think a lot of supermarkets haven't really woken up to that yet.”

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