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TOP 100: Supermarkets

By : Joan Villa | Posted: 18 Apr 2003

Grocers are sprouting new enthusiasm for video, thanks to better margins and the excitement surrounding DVD.

“There is a marked change, but I wouldn't call it a landslide,” said Greg Rediske, president of Video Management Co., based in Tacoma, Wash., which racks more than 300 supermarkets. “People who were out of video completely are getting back in, both in sellthrough and rental. Some are talking about DVD-only sections.”

In fact, things have improved enough beyond the VHS revenue-sharing days -- when many grocers abandoned video -- that supermarkets are looking twice at the category, and studios are once again using food-product tie-ins for video promotions just as they did in the heyday of VHS.

For Ingram Entertainment's grocery division, which serves more than 9,000 locations, supermarket purchases jumped more than 20 percent last year, sales VP Bill Bryant said. In 2002 he observed a “dramatic increase” in the space allocated to the product.

“Many supermarkets are [more likely to] install permanent in-line sections for catalog DVD and VHS, due to the low-impulse price points and higher margins, than feature sellthrough titles,” Bryant said. “On the rental side of the category, many national and regional supermarket chains have begun installing rental departments again, due to the consumer demand for DVD and the lower cost of goods of the DVD format.”

In mid-2002, supermarket rentals represented 4 percent of overall VHS rentals and 3 percent of DVD, a considerable dip from their 11 percent high about 10 years ago, according to Bob Alexander, president of research firm Alexander & Associates. But with DVD's popularity, grocers are once again venturing back to video rental and sales with a market share that keeps growing.

“In the fourth quarter we're definitely seeing this increase in market share for the grocery segment,” Alexander said. “Most of their business was in family live-action, followed by family animated and comedy. That contrasts with video specialty stores, whose two big lines are comedy and action/adventure, with much less family live-action and family animated. On the discount side, supermarkets do a little bit of everything.”

Supermarkets are staying awayfrom cut-throat new-release competition and trying out alternative categories, such as classic catalog movies, where they can preserve higher margins and still capture an impulse sale in the $10 to $12 range, Bryant said.

Look for supermarkets to gain more ground in 2003 in both the sellthrough and rental markets.

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To read about the Top Video Game Dealers, click here.



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