analysis by Steve Hemsley - Grocers move fast forward in video - Aggressive pricing hits music specialists - Asda sets sights on being UK No 1 - Adults are driving new formats Bearing in mind how fast sales of music, video and games have grown in grocery recently it is difficult to believe the category barely existed in the multiples less than 10 years ago. Asda ­ the first multiple to introduce a limited home entertainment range into its stores in 1995 ­ has been leading the expansion and expects its music sales to grow by 30% this year. It has made no secret of its desire to become the UK's biggest entertainment retailer and sales of music rose 35% in the last two years. Music and video is the third most important category for its customers, behind food and clothing. The company switched its distribution from Entertainment UK (EUK) to US company Handleman in February after the Wal-Mart deal and in May the number of staff in its entertainment department rose from six to 13. As a sign of Asda's commitment to music it remains the only supermarket chain to stock singles ­ achieving a market share of more than 15% for some chart releases and an overall slice of the market of 6.2% in 2000. "We are very focused on our plans for this category and we will be devoting more space in our larger stores to games, DVD and music in the coming months," says Asda's music buying manager Becky Oram. Asda is not the only grocer enjoying bumper trade from music. Sainsbury, which has extended its deal with supplier THE for another three years, reports entertainment sales rising by 50% in the last 12 months. It is in the album market where multiples are getting stronger, and the supermarket sector as a whole has increased its volume market share from 9.6% in 1997 to 13.6% in 2000 [source: Millward Brown]. Much of the growth has come from an aggressive pricing strategy on chart product which the specialists have either struggled or been unwilling to match. TN Sofres Audio Visual Trak says the multiples' average price for albums in the 52 weeks to May 6 dropped from £11.44 to £10.52 against a market average of £10.93. Pricing was a key issue last Christmas when a number of chart albums, including Westlife's Coast To Coast, were sold for less than £10 in the multiples. This policy helped the supermarkets increase their festive market share from 10.2% to 14.4%. Safeway reports a strong return from its £9.99 Album Of The Week promotion, while at the end of June the chain held an Italian event to support the Pavarotti concert due to take place in Hyde Park tonight (Saturday). The company sourced a selection of CDs and videos and promoted them at £2.99 and £3.99. Safeway is also trialling listening posts in a handful of stores and intends to install them in its new hypermarket format outlets. Most key albums are released in the final quarter so details will not be unveiled until the record companies hold their sales conferences in the autumn. Important albums scheduled for the end of July and August include Super Furry Animals' Rings Around The World and Catatonia's Paper Scissors Stone while Asda expects encouraging sales from new singles from Atomic Kitten, Geri Halliwell and the Tweenies. Grocery is taking a strong grip on the video market too. Over the same 52 week period the supermarkets' share of expenditure on VHS titles rose from 14.8% to 17% and their volume trade was up from 15.1% to 17.3%. Children's video has fuelled much of this growth (see box) but grocery must still convince teenage and adult consumers to buy videos from their stores rather than from specialists. "There is not always the awareness among younger consumers of how the range of home entertainment products in the supermarkets has grown," says Paul Ludlum, head of sales and marketing at EUK which supplies Tesco and Safeway. "Overall the multiples have grown their share through better instore layout for music and video and by recognising that consumers require a different shopping experience when buying entertainment products." On new formats such as DVD, grocery is generating most of its sales from the over-24s, particularly the 35-44 demographic, demonstrating that DVD titles are a popular destination purchase for adults and parents. The supermarkets' share of the DVD market rose from 2.9% to 8.5% (value) and from 3% to 8.5% for units in the 12 months to May. Among the top VHS sellers in June were Gone In 60 Seconds (Buena Vista), Buffy The Vampire Slayer box set (Fox Video) and End of Season ­ Liverpool FC (VCI/Granada) which celebrates the team's cup treble. The most popular DVD titles included The 6th Day (Columbia Tristar), Road Trip (Universal Pictures) and The Magnificent Seven (MGM). Big releases coming up include Disney's 102 Dalmatians and Snow White (Buena Vista) while there will be considerable activity around the 100 years of Walt Disney celebrations. The movie blockbusters Bridget Jones' Diary and Pearl Harbor will also be released on video later in the year. Among companies reporting strong DVD trade is Safeway which says sales represent 25% of its total video revenue. "The format will increasingly get more space in store. Our new superstore and hypermarket formats are giving priority positions and space to non food to grow the home entertainment offer," says a Safeway spokeswoman. Andrew Broadhurst, head of category development at Buena Vista, expects to see triple-digit growth in DVD sales over the next two years as more hardware is purchased. Estimates suggest that more than 100,000 DVD players are bought each month. "Research has shown that people purchase a lot of titles when they buy a player. Consumers are beginning to understand the benefits of DVD and many of the bestselling titles are for the family market which suits the supermarkets' customer profile," says Broadhurst. Buena Vista undertakes numerous studies for retailers to help stores boost category sales. Its Ease of Shop survey has identified the importance of impulse purchases in the video market claiming that while 43% of all videos bought are impulsive, the figure rises to 46% in grocery. Tesco worked closely with Buena Vista last Christmas on a project called New Buyer Strategy. Using its Clubcard database, Tesco identified consumers whose profile suggested they should be buying videos when they shopped but were not. By adapting its instore marketing Tesco was able to increase its market share at a time when the supermarkets lose out to specialists. Further research revealed that a third of those who go to a store to buy a specific video leave without making a purchase because they cannot find the title. This emphasises the importance of strong point of sale support for key releases and the need to ensure maximum compliance among individual store managers for promotional and merchandising campaigns agreed with suppliers. Nick Jones, commercial director at field marketing agency CPM which works with the major grocery players, says supermarkets will lose sales to the specialists if promotional material is not in place across all branches on the day an important music or video title is released. "Any delay for a big movie or album could severely hit volume sales as fans will want to make a purchase on day one," says Jones. "We operate a pre-release hotline for store managers in case they are missing merchandising material and we will visit stores to help staff set up displays." If instore displays are maximised, recording media such as audio tape, MiniDiscs and VHS video could be a growth area. Tesco has chosen supplier TDK as its marketing partner for this sector and the two have thrashed out ways to improve sales of formats which are rarely destination purchases. Promotions this year have included Clubcard points and bogof offers, and fixtures have been revamped. One promotion being considered is giving away magazine subscriptions with purchases of recording media. The promotional and pricing activity in the home entertainment market leaves the independents with problems as they find competing on price and range difficult. Association of Convenience Stores spokesman James Lowman says home entertainment has never been a big market for members but there are opportunities to exploit. "Rental video has been a core area but there are opportunities to become collection points for internet orders of entertainment product. As for increasing their stocks of retail items, this will often come down to space in the store and whether buying music or videos is what consumers really want to use their local convenience store for," he says. One company helping independents grab a bigger share of the home entertainment market is video leasing company Video Box Office. It says school holidays bring the greatest return while consumers renting a video will usually buy other products while they are in the shop. VBC claims 40% of renters will spend up to an additional £5. The company's latest product is a DVD Collection fixture which can display 30 titles. The growth in home entertainment is set to continue because every one who walks into a grocery store will have a favourite film or band, and new formats such as DVD are retaining their interest. All of which should be music to the ears of every retail manager. {{FOCUS SPECIALS }}