Tape market flat but kicking as DCC, MD enter - digital compact cassettes, mini discs

Discount Store News, Jan 4, 1993

With DCC and MD digital formats just hitting the market during the holiday season, standard audio tape has been pushed aside in press reports.

But not at retail. With millions of recording cassette decks in use nationwide, the audiotape market, while flat, remains significant. New packaging, less bulky casing and higher tape quality has added juice to the marketplace.

In video, while unit sales held steady and prices declined last year, sales of VCRs zoomed up 18%, the largest increase since the end of the VCR boom. Since most of these new units are upgrades, including hi-fi, stereo and four-head models, it's predictable that the biggest increases in tape sales will continue to be at the higher end.

And sales of tape to duplicators exploded, predictable, given the continuing explosion in prerecorded video sales and rentals. "[This offers] continuing proof of the viability of magnetic media over competing technologies ... or new distribution channels for software such as cable TV and Pay-per-View," noted BASF group vice president Dr. Hans Schmidt.

With declines in prices of products (like standard T-120), the most noticeable trend in both categories is that prices have clearly stabilized, perhaps because they went as low as they could go. Manufacturers have added value, in extra length, promotions, higher grades, and new packaging to stymie the years-long slide in unit price. And, retailers have been experimenting with different configurations, so that few are offering packages that stack up one-to-one. For instance, at Best Buy, most audiotapes are offered in eight-packs (often with a free step-up included), which can then be promoted without going head-to-head with the price of 10-packs at warehouse clubs and other discounters.

Wholesale clubs are responding by chopping their packs down as well, according to Memtek's Dave Williams. "They were putting out these mondo packs of 20 audio or 12 video tapes at a time," Williams said. "They identified their customer as the small audio r video retailer,and at first, they sold lot of them. But that's too much for the casual consumer to buy, so we see them cutting backto maller packs."

Maxell national marketing manager Peter rinkman oncurred. "Velocity is a function of price point, and as higher-grade bricks are coming on the market, we're working with retailers to hit their strategic price points," he said. "Smaller bricks accomplish that."

In-store, prices for two-packs and single tapes, at least in the audiophile range, actually seem to be increasing. While specialists, like record chains, may still be promoting price, general merchandise discounters like Kmart and Wal-Mart appear to be relying more on traffic, convenience and impulse to sell tape, while retaining healthy margins. And a new ticket builder a three-pack that merchandises three tapes in the space of two, also introduced by Memorex. "We just shrink-wrapped three together with a hang-tag on the back," Memtek's Williams said. "That way, the retailer gets a higher ticket item without disturbing his planogram. And the consumer who's looking for tape isn't going to be put off at buying three instead of two; it's not that much of a difference."

Similarly, video seems to be moving way from price-only to event-specific promotions, value-added packs, and sweepstakes/contests.

Memorex has sponsored on-tape promotions (Tale of the Tape, in which winners are notified by playing their tape purchases) and, later this year, a scratch-and-win promotion in which some 7 million winners will find out their prize (ranging from discounted frozen yogurt to all-expense paid trips anywhere in the U.S.) instantly.

Fuji tied promotions to specific events for several years, including the Super Bowl, with an NFL license, and the U.S. Open, for which it is similarly licensed. Fuji's Brad Friedrich noted that while such product areas as T-160 are growing, "the market is still in T-120; retailers who are going to be successful in the category are those who manage their skus to appeal to the mainstream buyer while also providing for niche categories." He said Fuji is accentuating camcorder (particularly fast-growing VHS-C) and high-grade, both of which are becomimg more important in the mix.

Polaroid's Don Patrican noted that while VHS-C is growing more quickly than 8mm, he expects to see parity of the two formats in the future. Polaroid plans to sponsor a major car race in the coming year, and will show new packaging at CES. "Most brand and formulation decisions are made at point of purchase," he said. "Our packaging is meant to help the consumer make those decisions." The company will also introduce a series of valuepacks, with upgrades included for the price of standard tapes.

Patrician said the company has not been able to quantify it yet, but there is a significant groundswell of use by the very young that could stimulate he market. "We think that a lot of the new VCRs being sold are not replacements, but add-on units for the use of kids," he said. "That will have significant ramifications at retail."