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THE TOP 100: Wal-Mart Leads the Way in Video Sellthrough

1 May, 2002 By: Thomas K. Arnold

This week, Hive4Media will bring you Video Store Magazine's Exclusive Annual Research bonanza, the Top 100. Two parts of this unique research series will appear every day this week in this space. Today we continue the series with a look at the Top 10 mass merchant and club stores and the Top 10 grocers in the video arena. To view supporting charts and tables, see your copy of Video Store Magazine.

Mass merchants have long ruled the video sellthrough roost, commanding a market share in excess of 50 percent. Last year their grip tightened, as big discount chains like Wal-Mart continued their aggressive push into DVD while holding out eager hands for catalog videocassettes many other classes of trade are abandoning.

The biggest presence is Wal-Mart, which has seen total revenue from cassette and disc sales double over the past two years thanks to a steady store rollout and a stronger commitment to the category. The latter is evidenced by the selection in April 2001 of Warner Home Video as “captain” of the video category, the proliferation of budget VHS and DVD merchandisers in high-traffic aisles and a greater focus on video products on the chain's Walmart.com Web site.

“We have unlimited shelf space; that's why we're able to offer more than 10,000 movie titles,” said Cynthia Lin, media manager for Walmart.com.

Indeed, Wal-Mart alone owns more than one-quarter of the video sellthrough market; its 28 percent market share is more than three times that of its closest competitor, Target Stores.

As in so many other classes of trade, DVD is the video growth machine for mass merchants. Software buy rates among new DVD households have held steady, to the surprise of many observers who thought the market would shift toward rental as DVD went mainstream. DVD has become an impulse item, and that's right up the mass merchants' alley, said Merrill Lynch retail analyst David Lichtman, noting that DVD “has really been selling well at all the discounters.” He added that mass merchants also are becoming aggressive on the hardware end of the business, focusing on lower-end players and cross-merchandising them with software.

Meanwhile, at a time when many progressive retail chains like Best Buy were cutting VHS inventories to the bare minimum, mass merchants were picking up the slack, rescuing catalog cassettes that some observers say would otherwise have ended up with liquidators.

Wal-Mart, in particular, has been very aggressive with budget-priced cassettes, blowing them out for as little as $6.44 in merchandisers topped with signs that read, “No Late Charges … You Own It.”

Not surprisingly, the mass merchants have upped their stake in the VHS sellthrough market, with Wal-Mart alone accounting for 35 percent of all cassettes sold to consumers, according to one studio executive.

“When it comes to video,” the studio executive said, “[mass merchants are] doing a lot of things right.”

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