NONFOODS: David vs. Goliath

When "Finding Nemo" was released in November, mass and consumer electronics retailers near Stillwater, Minn.-based Cub Foods locations sold the DVD at the VHS minimum advertised price (MAP), which is a nice deal for any consumer.

Gary Bloom, Cub Foods' category manager for HBC, who also handles the chain's video departments, had no illusions about his ability to compete directly against them on price. "I just can't do that," he says. "My margins aren't that deep."

Many grocers in this situation find themselves thinking about abandoning video merchandising altogether. Not Bloom. Rather than give in to the competition, he found a creative way to tackle it head-on. In the case of "Finding Nemo," not only did his customers find three or four pallets of the DVD displayed right at the front of the store, but shoppers who bought a copy also received several free grocery items along with their purchases.

"Typically what we'll do is get a select number of grocery vendors to support a free item with the purchase of the video," he says. "I have a meeting with the grocery category managers beforehand and we'll choose products such as a cookie item or cereal item, for example. Then we'll build some huge displays on which we'll display the DVD and the accompanying free products. We sell those DVDs at MAP, and they have become the most successful types of video programs we run."

While this is a lot of work for one release, Bloom says it's necessary if he wants to stay in the video business. "The customer's expectation is that you have those new releases. If it is not a big release, at least we put some displays in the aisle. We have all the new releases on their street date -- within reason. I'm not going to sell 'Freddy 3' or something like it," he says in reference to the "Nightmare on Elm Street" series of horror films, "but for a movie like "The Matrix," we may advertise it, but we are not going to tie in a themed program like that. The kids' or family-related products appeal to our customers more."

Indeed, Bloom has run this type of promotion successfully for such movies as "Shrek" and "Monsters, Inc.," with the goal of keeping Cub Foods top of mind when it comes to new releases.

Bloom is no slouch when it comes to the rest of his video selection, either, and he employs a variety of merchandising tactics and promotions to keep the department fresh and stave off the competition.

Two guidelines determine the types of home entertainment merchandising that are done in Cub Foods outlets: store size and theft frequency. In a typical layout Bloom uses a merchandising rack and an in-line set. The custom-built rack is a four-sided, self-standing fixture that measures 55 inches high by 45 inches wide by 36 inches deep, allowing the sightlines to be maintained at the front of the store. The length of the average in-line set is 12 feet.

Approximately 35 percent of the space is given to DVDs, 10 percent to 15 percent to video games, and the balance to VHS. "The only reason we stay as heavy in VHS as we do is because most of the large guys -- the Best Buys and such -- have eliminated them," explains Bloom. "There are still VHS customers out there, and we do quite well with the format. Our primary price point for VHS is $7.99, and that's where we do the most of our volume."

All Cub Foods home entertainment fixtures and displays are developed by Dart Distributing, LLC of Chaska, Minn., a full-service distributor of video, audio, computer software, console games, specialty books, and entertainment titles. The firm also handles most elements of the chain's video operations. "Primarily everything in our everyday set comes through Dart, and most of the in-and-out promotions do, too," says Bloom.

In those stores where theft is a problem, however, Bloom takes some precautionary measures. "We probably have a half-dozen stores where theft is a big issue," says Bloom. "In these stores we only have a rack display that is near the customer service area; there is no in-line merchandising. Plus, as a standard companywide policy, any DVD $14.99 or higher requires theft-deterrent packaging -- the plastic sleeves that are fitted over the DVD case. In the stores where we have real theft issues, we will keep many of the high-priced DVDs behind the customer service desk."

To maintain the merchandising value of new releases in these stores, Bloom inserts a slip-sheet copy of the products' cover art into the jackets of empty DVD cases, and places these on the racks. Each one has a sticker that instructs the shopper to bring it to the cashier for the actual product. While this hurts sales a bit, Bloom admits, it prevents theft and allows him to continue merchandising DVDs to his customers.

Merchandising mix

When not limited by antitheft considerations, Bloom is able to employ a variety of merchandising schemes, using a unique array of displays and fixtures to showcase his home entertainment products.

Most of Cub Foods' home entertainment display choices are tailored to the particular promotions Bloom runs throughout the year. Dart works closely with him on all of them. "We usually work a six-month plan with Dart," he says. "We give them all of our ad dates, and we'll pick and choose what we want to promote for those specific weeks. Then we work the hit releases into the program."

For the big seasonal occasions, such as Easter, Halloween, and Christmas, Bloom does a large pallet drop in the seasonal section, featuring an assortment of video and audio. "We typically don't have audio in our base sets," says Bloom. "But during the Christmas season, for example, we'll have Christmas video and Christmas [music]. For the audio we'll try to have interactive displays so the customers can sample what's on the CDs. These are purely in-and-out programs. At the end of the deal, it's gone."

Bloom runs many such in-and-out programs throughout the year, featuring a wide variety of home entertainment products, among them audio, software, video games, value DVDs at $5.99 or $8.99, and even previously viewed videos. Each in-and-out program has its own separate display, whether it's a dump bin that shoppers can search through scavenger-hunt style, or a premerchandised shipper display.

The six-month plans Bloom works up with Dart allow flexibility for additional programs as he sees fit. If something is available that he thinks his customers would like, he'll just pop it in, or replace something in the program that may not have had as strong an impact.

One thing Bloom won't do again is cross-merchandise videos with specific departments. He experimented with such an idea in the past, but wasn't happy with the results. "One time we tried cross-merchandising by placing a children's food video in the produce section," he says. "We had it there for three months -- and the studio actually did some advertising in the market to tie us in -- but we didn't have success with it. I think it got lost in the shuffle. When someone is shopping the produce department, they know what they are there for, and they move from one section to the next. A small footprint like that, I think, just got missed."

But he's not afraid to try new strategies that might help Cub Foods stay ahead of the competition, and he'll continue to search out ways to leverage the company's offerings to create a home entertainment section that exceeds his customers' expectations. "To stay in video at all, you have to," he says.
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