Point of Purchase Displays: What the Retail Industry Can Learn from the Movie Theater Market

The dynamics of the movie theater market over the last 20 years bear striking similarities to the turbulent forces at work in the retail industry.  Can the structure, conduct, and performance of the movie theater industry provide a glimpse of what the future holds for retail? What are the key lessons learned from the movie theater industry that might benefit retailers? What are the implications for point of purchase movie theater displays? In today’s blog, we’ll examine the parallels between these two industries and attempt to answer these key questions.

You may remember in the late 1990’s and into early 2000’s, brick-and-mortar video shops were thriving. Rapidly growing chains like Blockbuster and Hollywood Video seemed to be on almost every corner. At its peak in 2004, the iconic Blockbuster had 9,000 stores worldwide with 60,000 employees, $5.9 billion in revenue and a $5 billion market cap. These video shops offered a simple and compelling value proposition: rent a movie to watch in the privacy and comfort of your own home, at a time of your choosing, and at a price that was deeply discounted relative to the price you would pay at a movie theater.  At the time, many predicted that the demise of the movie theater industry.

But, as history well knows, that’s not what happened. Shortly before its peak, the entertainment industry was hit hard by technology-driven disruption that decimated the video shop business but left the movie theater business still standing. Movies on demand, pirating, Redbox and streaming services like Netflix, Hulu Plus, and Amazon Instant Video are cheaper, easier, and more convenient that renting a movie from a video shop. The entire video shop industry collapsed when both Blockbuster and Hollywood Video filed for bankruptcy in 2010.

But contrary to many of the dire predictions, the movie theater industry has managed to survive the same disruptive forces that torpedoed the video shop industry. In fact, as the chart below shows, annual ticket sales increased from 1.2 billion in 1995 to 1.3 billion in 2015. At the same time, inflation-adjusted box office revenue increased from $10.3 billion in 1995 to $11.3 billion in 2015. Granted it doesn’t sound like a great growth story, but it is an impressive survival story. Not every industry can boast growth in real terms after enduring more than a decade of technology disruption that has rewritten the rules of consumer engagement, introduced new social norms, and created a new industry order.

Domestic Movie Theater Market

Note: Box Office Totals are not adjusted for inflation.
Source: Nash Information Services, LLC

Over the last decade the brick-and-mortar retail industry has been hit hard by the same type of technology-driven disruption that has impacted video shops, movie theaters and the broader entertainment industry. A cadre of disruptors led by Amazon, Google, and others have fundamentally changed the way we shop and driven a culture built around convenience and instant gratification. Retail e-Commerce sales worldwide are expected to more than double over the next 5 years, reaching a projected $3.5 trillion by 2019.

Source: Statista

To keep things in perspective, despite the fact that U.S. online retail sales are growing at 15% per year and have tripled over the last 10 years, they still only represent about 8% of total retail sales.

Source: U.S. Census Bureau
It’s pretty much a given that online sales will continue drive market share erosion among brick and mortar retailers. In addition to participating aggressively in e-Commerce, what else can brick and mortar retailers do to hold their own and not go the way of video shops? And, what can they take from the playbook of the movie theater industry?

To address the existential threat it faced, the movie theater industry focused on two key initiatives that can also benefit retailers:

1)    Improve the customer experience- Over the last decade, successful movie theater chains made it a categorical strategic imperative to identify and implement alternative options to enhance the in-theater experience for movie-goers. While many movie theaters have survived despite crummy seating and overpriced concessions that feature the same old tired and unimaginative mix of popcorn, candy, and soda, the more innovative theaters have installed kinetic seats that tilt, spin, and rumble in concert with the action on the screen. Others have put in recliners and love-seats. Many have upgraded to more sophisticated digital audio sound systems that blow away even the best home theater systems. Better seating and upgraded sound systems have combined to create a uniquely immersive experience that cannot be reproduced at home. The ultimate immersive experience is, of course, IMAX screens and IMAX domes which create an experience that even Virtual Reality technology won’t be able to duplicate.

In addition, the more forward-thinking theaters have incorporated real food into the customer experience. Some serve dinner with the film, while others offer coffee and ice cream or a selection of craft beers. To create a “higher experience,” some theaters have installed private screening rooms which offer on-demand start times, dinner, and all the comforts of home.

These ideas have created more “value-added,” thereby enabling theaters to justify significant increases in ticket prices. Average ticket prices in the U.S. increased from $4.35 in 1995 to $8.43 in 2015. Getting the price increases to stick and developing multiple income streams from new products and services have helped the industry survive the last decade of disruption.

Retailers can benefit from the same creative thinking with regard to improving the customer experience. Imagine how a retailer could transform a customer’s experience by serving coffee and ice cream, offering free 5-minute massages, adding an on-site fashion consultant or nutrition counselor, or creating other products and services that would enhance a shopper’s experience. Point of purchase displays can play a big role in creating a totally immersive shopping experience. POP displays can engage the shopper through interactive technology, provide valuable customer education, and create unique visual experiences. There are so many opportunities to create a unique shopping experience that cannot be reproduced online.

2)    Offer Exclusive Content- Offering exclusive content has been another effective strategy of successful theaters. New releases that are hard to get elsewhere have worked to give movie theaters a first mover advantage. Some theaters have also found success in rotating their content during the week in an effort to create unique content offerings. When asked what motivates people to go to the movies, 75% of respondents said it depends on what is playing and if they are interested in the genre/type of content.

The same is true with retail. What attracts shoppers more than anything else is the merchandise offered by the retailer. To the extent that merchandise is unique or exclusive, the attraction is even stronger. This is really nothing new for retailers. Many retailers go to great lengths to hire famous designers and develop their own product lines; however, it is good reinforcement that unique “content” or products that you can’t get elsewhere can be a key sales driver.
In conclusion, the movie theater industry and the retail industry share many of the same characteristics and face similar challenges posed by disruptive technologies. Winners in both industries will be those who innovate, create a better customer experience, and have a unique product offering.