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Dollar Stores: Catalog on the Cheap

30 Aug, 2014 By: Erik Gruenwedel

Looking for the first four “Final Destination” teen thrillers on DVD? Family Dollar has New Line Home Video’s 2010 4 Film Favorites: Final Destination for $7 — 20% below Amazon’s slashed price. How about Warner Home Video’s Clint Eastwood Dirty Harry Deluxe Edition? Family Dollar has the 2008 release for $6 — 11% below Amazon’s price.

Charlotte, N.C.-based Family Dollar, which has 8,000 stores in 46 states, markets catalog and previously viewed studio movies in select locations via point-of-purchase displays manufactured, distributed and stocked by Buffalo Grove, Ill.-based Top Hits Entertainment. Titles are bundled and wrapped with price points starting at $3.

Rivals Dollar General and Golden Pantry stores carry POP displays featuring genre-based catalog DVDs marketed by Echo Bridge Entertainment and Mill Creek Entertainment, with titles priced from $1.99.

“[Dollar stores] move through a lot of product, although Family Dollar does better with their DVD sales, probably because they can sell for more than $1,” said Ryan Kugler, co-president of DVA Inc., a family-owned wholesale and liquidation company specializing in buying and selling excess packaged media inventory, overstock, and closeouts.

Despite the convenience stores’ rising profile following Dollar Tree’s $8.5 billion acquisition bid for Family Dollar, and the latter’s rejection of a competing $8.95 billion offer from Dollar General, packaged media’s relationship with dollar stores remains tenuous.

Dollar Limitations

With ongoing fallout from the 2008 economic recession, dollar stores have evolved in recent years from a rural convenience to go-to destinations for budget conscience consumers looking for more than a quick staple item.

While dollar stores represent little threat to Walmart’s packaged-media domination, the world’s largest retailer has seen a recent softening in its store foot traffic, which some analysts attribute to a changing consumer demo and surge in popularity of dollar stores.

The average Family Dollar customer is a female head of household in her mid 40s making less than $40,000 a year, according to the chain. Dollar Tree, which operates 4,900 stores in 48 states and Canada, says its average customer purchase in the most recent fiscal quarter was $8.

Dollar Tree CEO Bob Sasser reiterated the chain’s commitment to limit product selections to items with a $1 price point, including expanding frozen food and alcohol offerings. He didn’t say anything about home entertainment.

“We want to own the seasons at the $1 price point,” Sasser said, adding the chain had reintroduced its “See What $20 Buys,” and “Stretch Your Dollar” campaigns via in-store promotions, signage and digital media.

“It's right for the times,” he said.

At the same time, what’s right for Dollar Tree isn’t necessarily right for packaged media. Deeply discounted DVDs still on average retail well above the dollar threshold. A business model in which all product is priced around $1 leaves little margin for sellthrough.

“Wholesalers like myself can’t always sell product that low,” Kugler said.

Dollar Legacy

Back in the early 2000s, dollar stores owned the budget movie business, hawking public-domain titles, cartoon compilations and vintage TV shows on VHS and DVD to a clientele looking to build entertainment collections on the cheap.

With Walmart, Target and Best Buy pricing “bargain” discs around $10 — about twice the price of $5 DVD dump bins today — dollar stores remained true to their brand name when it came to home entertainment.

Indeed, according to a December 2004 USA Today story, during one week before Christmas, 19 of the 50 top-selling DVDs — according to Nielsen research — were $1 DVDs from Genius Products, at the time a leading supplier of budget videos. Compilation discs of “Popeye” cartoons and the “I Love Lucy Show” came in at No. 17 and No. 18, right behind The Star Wars Trilogy and Dawn of the Dead, among others.

In subsequent years, however, big-box retail began offering budget-priced DVDs on higher profile titles, upping the competition for dollar stores. When prices began freefalling for major theatrical titles, demand for dollar stores’ ‘C’-list DVDs waned. As a result, some dollar stores don’t carry many DVDs; others limit inventories to genre and actor-based titles bundled on POP displays near the register aimed at the impulse buyer.

Kiosk Collaboration

Dollar General and Family Dollar in 2012 each inked distribution agreements with Redbox. With the kiosk vender offering new-release movies on DVD and Blu-ray Disc for up to $1.50 a night, dollar locations with a Redbox have increasingly shrunk their disc selections.

“The Redbox kiosk is the definition of convenience for movie and game rentals and will provide value, convenience and additional reasons for customers to visit Family Dollar stores more often,” former Family Dollar COO Mike Bloom said in a statement in 2012.

Regardless, John Kaminski, EVP of sales at Mill Creek Entertainment, contends Dollar Tree’s acquisition of Family Dollar should continue both brands’ business models offering competitively-priced packaged media entertainment to consumers.

“Family Dollar obviously gives us more flexibility on the breadth and selection of titles we’re able to offer given their price structure, and we hope that will continue with this acquisition,” Kaminski said. “We think that both individual price structures can and should continue within the market, for our industry.”


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