Category focus: CD ROM explosive growth - compact disc read-only memory - Consumer Product Retailing Supplement

Discount Store News, Jan 3, 1994

Explosive Growth Area

CD ROM hardware and software products are destined to be the VCR's of the 90's, with quantum leaps in sales of both hardware and software projected for 1994 and beyond. This incredible growth trend is expected to exceed the strong interest consumers have already shown in the category during the past three years. In 1991 for example, 700,000 CD ROM drives were purchased, followed by nearly 1.7 million in 1992, 2.4 million in 1993, and projections of 3 million or more in 1994.

As the cost of these drives dips down to $300 and below, hundreds of new software applications are expected to make CD ROM systems irresistible to a wide spectrum of consumers -- youngsters, teenagers, young adults and whole families. The potential market for this fast growing category is limited only by the number of U.S. households with a personal computer -- which will soon be one third of all homes.

The allure of this category lies in product performance. When combined with an external or internal drive on a personal computer, CD ROM produces full-motion video, incredible graphics, the audio quality of a compact disk, and data storage capacity that is nothing short of amazing. it is a technology that has captured the imagination of consumers, and software companies are scrambling to keep pace with demand for more entertainment and education titles and, more recently, interactive and personal productivity applications. Mass merchants already in the category are reporting 25 to 30 points of margin on software sales.

The Mass Appeal Of CD ROM

CD ROM has shed its novelty status and moved into the mainstream of consumer computing products. This new category poses an opportunity for mass merchants because of the instant credibility and currency CD ROM brings to an assortment. But this rapidly expanding, fast changing category also presents a challenge for retailers that requires expertise and an in depth knowledge of the marketplace when creating and managing an assortment.

That's where Merisel's CPD comes in. With thousands of software titles to draw from, Merisel can create a CD ROM software assortment of 10 titles or 100 to meet the needs of the mass merchant. And when the timing is right, Merisel can also help its retail partners build on the original program by expanding the assortment to include accessories and hardware.

Cutting Edge Assortment

Once Merisel has created the right assortment and designed a planogram to achieve the right presentation, it monitors inventory, sell-through and turns. Adjustments can be made monthly to keep the mix fresh, or be adjusted almost overnight to capitalize on a special opportunity

For mass merchants who have made a strong commitment to consumer electronics, Merisel recommends that 15 to 20 percent of a computer software assortment be dedicated to CD ROM, with the right selection of titles to match the mass merchant's customer demographics. As millions more consumers instal CD ROM, retailers' initial software assortments will form a foundation for hardware and accessories in the category and create opportunities for bigger ticket sales.

CD-ROM Moves Mainstream

Mass merchants changed the way America shops with their winning retail formula emphasizing price, product assortment, immediate availability and shopping convenience. The same set of consumer expectations is now being applied to the CD ROM category The allure and fascination by consumers for this intriguing, high-performance technology has helped CD ROM expand beyond speciality stores and into the mass market. Consumers who have already made the investment or the commitment to CD ROM he same from retailers.

Microsoft Brings Multimedia CD ROM Home

Microsoft is the world wide leader in software for personal computers, and within the company's broad assortment of software, "Microsoft Home" is the company's newest brand of educational, entertainment and personal productivity applications for the entire family.

Many of the Microsoft Home titles are in the new, multimedia CD ROM format, combining the appeal of fabulous graphics, animation, video and great digital sound with fabulous text and fast search capabilities. and this new family of software fits comfortably with mass market assortments because it represents a solid value to consumers, with price points that bring CD ROM technology within easy reach.

"Microsoft Encarta," for example, contains a complete 29-volume Funk & Wagnalls encyclopedia, with 8,200 photos and illustrations, 100 animations and video clips, 800 maps, 100 interactive charts, an illustrated timeline, an atlas, plus eight hours of sound.

"Microsoft Cinemania '94," is an interactive movie guide. It is the newest and best way to see and hear the reviews and biographies, the faces and voices, and the scenes and music.

Cinemania has video scenes from 20 of the best movies of all times, the music from 100 well-loved films, famous lines of dialogue from more than 150 movies, and 900 movie stills from some of film's most memorable moments.