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05/12 11:14 Buyers Add Miles To Older Titles
May 12, 1999 (Tech Web - CMP via COMTEX) -- Retailers' traditional
prescription for slow-selling software is nothing if not
straightforward: Return to sender and tap a flood of new PC games,
educational titles and other products in their stead. But with industry
consolidation resulting in fewer new releases to fill the breach each
quarter, retailers and publishers are finding alternative remedies more
palatable.
Increasingly, computer retailers are marking down moderately successful
software titles to save on return costs and keep shelves full.
Publishers and distributors said the practice brings PC stores in line
with tactics more common to other retail sectors.
"When Tommy Hilfiger brings out his new spring line, he doesn't take a
return on the winter stuff that's out there. Macy's will mark it down,"
said Allyson Seelinger, senior director of North American sales for
Cupertino, Calif.-based Symantec and president of the Consumer Products
Council, a software publishers' trade group based in Irvine, Calif.
Industry watchers said Best Buy, Office Depot, and Staples have led the
way toward expanding budget sections and point-of-purchase price
changes, conditions most publishers require for end-of-life programs.
For their part, software publishers are managing end-of-life programs
for their titles better than ever.
"You're starting to see more of a life-cycle mind set from publishers,"
said Ian Warfield, general manager of computer products at distributor
Navarre, in Minneapolis. "But it's selective. The price of admission
for a number of retailers is very high. And to justify that price,
publishers have to sell a fair number of units."
Typically, entertainment titles receive a 30- to 60-day audition on
shelves. Productivity software, edutainment, and other categories are
afforded somewhat longer tryouts. If a product does not generate a
predetermined sales goal, usually measured by performance per square
foot, it is yanked from shelves in favor of a fresh offering.
"If it's a dog of a title, it goes back. I really don't need it in the
store at all," said Ahron Schachter, vice president and general manager
of DataVision, in New York. If an interactive title carries a
well-known brand name and performs moderately well, Schachter said he
will mark it down.
Although product returns can cost even large publishers 20 cents on the
dollar, the return process is painful for retailers, too. Shipping
costs, handling expenses, and the risk of damaging products en route to
the vendor add to Babbage's risks, said Bob McKenzie, director of
merchandising at Babbage's Etc., in Grapevine, Texas.
According to distributor Merisel, in El Segundo Calif., 25 percent or
more of consumer software is returned to its manufacturer because of
slow sales. Merisel considers half that number manageable.
Kris Rogers, senior vice president and general manager of U.S.
distribution at Merisel, said the "overwhelming" cost of product
returns contributed to the distributor's exit from the retail market
three years ago. Since the company revived its retail business in 1997,
Merisel has seen inventory management become a "robust" aspect of its
business, she said. Some retailers are asking Merisel to manage their
entire software mix.
That is not to say retailers and publishers consider markdown programs
a panacea for inventory management.
Todd Coyle, senior vice president of consumer products at Havas
Interactive, which publishes under the Blizzard Entertainment,
Knowledge Adventure, and Sierra On-Line labels, earmarks 20 percent of
an entertainment title's budget for returns. Havas' returns budget is
10 percent for edutainment titles, and 15 percent for productivity
software.
"If a product is not hitting its minimums and falling below the curve,
we want to get it out of there and bring in something in that will do
well," Coyle said.
"We're very reluctant to do markdowns because of the majority of
retailers' inability to change the price [of products] on shelves," he
said. "The only way it makes sense to do a markdown is if people who
wouldn't have bought it at $50 would buy it at $19.99."
According to Seelinger, Symantec will not offer price protection on
marked-down titles unless a retailer sells them in a separate section
of the store. Placing markdowns next to current versions of the
publishers' utility software cannibalizes sales of new titles, she
said.
"You're not going to do a markdown program to make money," Seelinger
said. "You'll do it either to keep product on shelves or for
accounting-related reasons." For example, a publisher can write off
returned inventory from its income statement.
Navarre's Warfield said it is in every party's interest to iron out
end-of-life inventory programs.
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Copyright (C) 1999 CMP Media Inc. |
