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Warner to Tap Distributors by Class of Trade

26 May, 2002 By: Joan Villa

Warner Home Video is putting the finishing touches on a plan requiring distributors to sell all the studio's VHS and DVD product going forward to retailers by "class of trade," with each group serviced by one wholesaler, Video Store Magazine has learned.

The proposal would assign Ingram Entertainment to grocery and drug stores; VPD to rental specialists; Baker & Taylor to e-commerce and institutional accounts, including bookstores; and Flash Distributors to the general New York area. The proposal also would cover Warner's distribution deal with New Line Home Entertainment and HBO Home Video.

WaxWorks did not receive notice of the plan and would apparently be excluded from carrying Warner product.

"I guess we made the mistake of servicing all those [retail classes] really good and none well enough," observed a WaxWorks executive.

Distributors declined to provide details of the plan, citing confidentiality. But some industry sources said they expected Warner to fine-tune the idea and perhaps expand each wholesaler's class-of-trade assignments.

"Given that Ingram's market share for video specialists is larger than VPD's, I'd be surprised to see them not part of servicing that class of trade," noted one source familiar with the plan.

Warner executives wouldn't comment on the record. Insiders, however, say modifications still could be made prior to implementation. "Everything's negotiable," said one.

The proposed changes are an attempt to get "more focus" on Warner product, one insider says.

"When you look at distributors, you ask yourself what value they add to the supply chain," he said. "VPD adds a great amount of value because of how they service independents and Blockbuster franchisees and so on. The idea is to pick the guys who are the best at a particular class of trade and have them focus on Warner product within that class. Each distributor has its strengths and its weaknesses, and we're taking the strengths and working on them."

Warner is now expected to follow up with letters to retailers explaining the new structure and providing a distributor phone number to contact for future Warner purchases. The plan will begin with titles that street in September.

Some retailers question whether a single wholesaler will be able to adequately gauge demand and avoid product shortages.

"What happens if VPD is out of stock?" wondered Todd Zaganiacz, owner of Video Zone in South Deerfield, Mass., and president of the New England Buying Group.

Insiders concede this is an issue that needs to be addressed, but say several possible solutions have already been put on the table, including requiring wholesalers to maintain certain inventory levels.

Ted Engen of the Video Buyers Group said he would be surprised if Ingram could no longer service rental stores. He said just two weeks ago he met with Warner to plan upcoming promotions. "We planned out the rest of this year, and it was all through Ingram," he said.

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