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The average consumer in a major metropolitan area is likely to pass at least one grocery store on his walk to Blockbuster video. A consumer in a rural area might be lucky to find a video store at all. Both of these people have to eat, and if during their weekly trips to the supermarket they are able to treat themselves to a video or two, so much the better.
They were planning to buy one anyway—just not there.
This scenario sums up the problem with home entertainment in the grocery industry today. People are buying more videos and DVDs. But they are buying them elsewhere. Studios, however are educating grocers on how to better manage the category and create video destination points in their stores.
According to Rodney Satterwhite, v.p. of retail business development for Burbank, Calif.-based Warner Home Video, more than $8 billion worth of DVDs were sold last year, with grocery sales accounting for only 1.6 percent of that. "That's pretty anemic," says Satterwhite. "We think it should be at least in the 10 percent range. The key to attaining this, though, is teaching grocers how to build a category versus just selling new release to new release."
The important thing, first off, is to let consumers know the videos are there. "It is almost a self-fulfilling prophecy," says Justine Brody, v.p. of marketing and promotions at New Line Home Entertainment. "If you don't have it, you can't sell it."
And many grocers do not have videos because they feel they cannot price competitively against the Best Buys of the world. According to Brody, they are correct, but only for the first week a movie is out. "Sales of a new release in grocery are going to be slow the first week, which is when the consumer electronics stores and other channels are selling them for below cost," she says.
"Unfortunately, many grocers give up at this point, when they should be keeping the new releases out for at least two or three weeks. The second week the video is out they are at parity, and grocery would have a very reasonable sell-through if they would remain committed."
Just selling new releases by themselves isn't going to do it, however, says Satterwhite. "We found that there was a 40 percent increase in new release sales if the retailer also had an everyday video section, where the consumer can be trained to go and find consistent availability of product."
Satterwhite recommends dividing the video category equally among new releases, family, non-family, and value. "The new releases are the ones the consumers have the most awareness of, but if you look at the value end—which at grocery sells anywhere from $6.99 to $9.99—that actually gives the consumer an alternative to renting. Especially now, when many households have two machines, you want to have the variety."
Barry Blechman, president of Morgantown, Pa.-based Movies U Buy, a distributor of previously viewed videos and DVDs, agrees. "As I tell retailers, your customers' favorite movie didn't come out last week," he says. "There are certain titles, what we call intent-to-own, that always sell well. For example, Grease will sell better than a movie that came out two weeks ago. A movie like that will last through two or three different generations, and if it is there at a reasonable price, customers will scoop it up."
Most important for supermarket operators, is sending out the message that they do have video sections and driving consumers to it. Grocery shoppers generally do not enter a grocery store looking for videos, but will pick them up as an impulse purchase while they are in the store. The trick is to keep them coming back after they make that initial purchase.
Warner Home Video has developed several types of fixtures to address availability and location of product. They range from in-line to outpost standalone fixtures to a spin rack that locks to prevent theft to a dump bin for value videos. Warner also has an endcap program, as well as smaller fixtures that can be placed at the point of sale. "Finding a consistent location in your store to merchandise the videos is important, because the videos will sell themselves," says Satterwhite.
The studio has recently launched a grocery-specific program called Meals & Movies in New York State. It is a turn-key program for grocers looking to get started in video. Warner provides the grocers with fixtures, product, planogramming, and category management.
Movies U Buy also has a self-contained pallet display program created especially for the grocery industry. Designed so a power jack will fit under them, the bins can be moved from dock to floor in a minute, and setup is just a matter of removing the wrapping. The bins hold a mix of videos for one price point. The $8.99 bins hold videos that were released over the last 12 months; the $6.99 bins have product dating back one to four years; and the $3.99 bins contain catalog and intent-to-own products that are at least two years old.
In one major grocery chain, these bins sell through in a week. "I went in as an in-and-out product more than two years ago and I am still there," says Blechman. "Now we just come in and replenish the stock to keep it fresh."
With tens of thousands of SKUs, grocery stores are an ideal setting for cross-merchandising. Consumer packaged goods and food and beverage manufacturers have joined forces with some of the studios to help cross-promote videos.
Just this past February, Procter & Gamble and Columbia Tri-Star joined forces with a Swiffer/Maid in Manhattan promotion.
New Line Home Entertainment has partnered with Dr Pepper/Seven Up in promoting the home entertainment release of The Lord of The Rings: The Two Towers. The promotion will include a mix of marketing activities, such as national advertising, in-store and interactive lobby displays, product packaging, and Internet support.
"Every grocery store is looking to drive traffic, increase transaction size, and generate excitement, and we believe this promotion will give retailers a way to tie in to the highly profitable nonfoods areas of their stores," says Dr Pepper/Seven Up manager of corporate communications Kyle Rose. "What we try to do is help grocers create incremental, profitable purchases."
Online auction points
As part of the promotion, consumers will be able to collect points from specially marked product packages and bid on Lord of the Rings collectible merchandise in an auction-style process at www.liquidloot.com, which is the Web site for Dr Pepper/Seven Up's online loyalty program presented by eBay.
Dallas-based Hit Entertainment, which owns the rights to children's properties that include Angelina Ballerina, Bob the Builder, and Barney, relies heavily on its television distribution of preschool properties to promote its videos. "Being on television certainly helps with the brand recognition," says s.v.p. of sales and marketing Debbie Ries. "The Wiggles are on Disney Playhouse, Angelina Ballerina is on PBS, and Bob the Builder is on Nick Jr., so they are very well-known by the parents."
In addition, Luvs Diapers and Gerber license some Hit Entertainment characters for their products, allowing for cross-marketing opportunities in the store.
Overall, the goal is to make it convenient for consumers to find and buy whatever types of videos suit them. "The key thing with grocery is providing the added convenience to the customer," says Warner Home Video's Satterwhite. "It is a point of differentiation from other grocers and other channels. Anything you can do to get a few more dollars out of the shopper will work to your benefit."