It takes up little store space and is big on profits. Steve Hemsley reports on how home entertainment has been a hit for the multiples

The fact pop star Louise has used a supermarket rather than a trendy music shop to promote her new single shows how important grocery is to the music industry.

In fact, whether it is music, video or multimedia games, home entertainment has become a lucrative non-food category for grocery. The supermarkets have transferred their pricing and convenience expertise to an impulse sector that 10 years ago was the domain of the specialists.

Asda’s decision to ask Louise to sing Don’t Give Up across the Asda FM network in September not only raised
money for the chain’s Tickled Pink Breast Cancer Care campaign, it also created significant media interest to remind the public Asda is a serious player in music retail.

The music, video and games markets generate combined retail sales in the UK of over £6.5bn, and grocery’s share of each sector is growing all the time, helped by such innovative marketing tie-ins.

DVD is surging ahead, though music sales remain relatively flat with the battle to sell chart albums fought increasingly on price.

Supermarkets have only seriously entered the games market since 2000, but new hardware such as Playstation 2 and X-Box, plus a willingness by some games publishers to provide budget ranges that appeal to parents, has made this an area to watch closely.

Many of the purchases being made in supermarkets are by consumers who would rarely, if at all, visit a specialist store. Grocery is growing the market, not just stealing share.

“The supermarkets have added energy to the home entertainment retail market,” says Mike Hughes, MD of marketing agency CPM. “This is a different retail proposition to other categories. Different point of sale is needed and there are more individual products compared to food which means the dynamics of retailing are different.”

Indeed, the broad range of titles needed means the grocers prefer to be guided by the suppliers when it comes to category management. Asda and Safeway both employ Warner Home Video to ensure that they maximise video and DVD sales.

Working closely with the studios, record companies and games publishers also helps the supermarkets get the correct balance between offering the bestselling chart titles and understanding where the demand for back catalogue will come from in a category where the lead title can change every week.

Senior retail analyst at Verdict Research, Steve Gotham, says the supermarkets have deliberately moved away from having a token home entertainment offer to providing a more substantial
range. “The footfalls that supermarkets enjoy mean they can really cream this category. The number of products involved is vast, but home entertainment requires limited space in-store and a low service requirement with regard to staff time,” he says.

Verdict estimates the space given over to home entertainment in most multiple outlets is only 1% to 2% of total floor space.

Gotham adds: “The grocers have their price halo reinforced because they can offer the biggest titles at extremely keen prices but still selling above cost price and with the knowledge the net margin is still better than on many food items.”

Nevertheless, according to marketing experts, the grocers must commit the same level of promotional spend to home entertainment as they do to food. And where the supermarkets go from here is difficult to predict.

Building back catalogue is a logical next step to encourage shoppers to spend more time browsing, while working more closely on promotions with the suppliers to make the most of new releases must be a priority if the grocers’ market share is to continue to climb.