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TOP 100: Three Channels, Three Results

30 Apr, 2004 By: Kurt Indvik

It was a big year for mass merchants and club stores, a topsy-turvy year for consumer electronics/music chains and a relatively quiet year for supermarkets — three significant channels for home video retailing.

Wal-Mart's share of home video sellthrough grew to 31 percent in 2003, according to Video Store Magazine Market Research. Though VHS remained an estimated 25 percent of the retail giant's business, the chain has been able to generate that kind of growth as it continues to deploy more DVD titles into its selection, having been a little later on the pickup of the disc.

Though a very distant second and third, Target and Costco, respectively, also enjoyed similar growth to Wal-Mart, with Target, as with its category brethren, embracing more lower-priced catalog, expanding its bargain discs selection on endcap displays, and Costco offering a variety of special, exclusive studio packs, and even aggressively courting the video retailer business with a February telemarketing campaign.

According to Tom Adams, president of Adams Media Research, mass merchants have been enjoying the benefits of high DVD buy rates with not only more product coming from studios, but higher turn rates of that product from retail shelves. But there is a potential cloud looming, Adams said.

“The business is 50 percent bigger than it was three years ago, but departments at mass merchants have not grown to nearly that extent, so something has got to give,” he said.

What gives could be industry growth rates in 2004 and beyond. To keep growth coming and buy rates up, mass merchants are going to need to expand their floor space to offer consumers more choice, especially as studios ratchet up their catalog releases on DVD to get those high-profit sales while the buy-rate getting is good.

“The getting could remain good for catalog for some time to come,” Adams agreed.

“There is a real opportunity for specialty retailers to get after it if mass merchants don't.”

Meanwhile, it was a wild and wooly year for music and consumer electronics chains. Best Buy shed its problematic Musicland business to an investment group in 2003, moved out most of its VHS in favor of DVD in October, pursued some controversial “exclusive” deals with suppliers and managed to generate an estimated 28 percent increase in its home video sales. Circuit City, too, enjoyed double-digit sales growth in the category in 2003.

The music business pummeled other companies such as the venerable Wherehouse Entertainment, purchased by Trans World in September, but video revenue grew for Trans World 16 percent, while Hastings saw its home video revenue jump 8 percent in 2003 as it battled flat rental comps for the year and a declining music business. Tower saw its video sales drop 8 percent in 2003, as the struggling chain put itself on the block in May of last year before succumbing to a Chapter 11 proceeding earlier this year.

In the grocery channel, the Top 10 performers in this category saw their estimated home video revenue grow only a cumulative 2 percent, with no notable exceptions to that pattern. Supermarkets increased their copy depth in rental thanks to lower cost of product, said Bill Bryant, SVP at Ingram Entertainment. Supermarkets will look to be aggressive in catalog budget DVDs this year, he said.

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