As the software market matures, the retail distribution base is broadening and supermarkets are primed to be a natural channel for budget-price wares, software executives say.
"I think it is a market of huge potential if you look at the number of computers in the U.S.," said Michael McGeeney, senior VP-sales, marketing and corporate development at Sher Distributing, Totowa, N.J.
As personal computers become a mainstay in the home, the market potential grows. There are more than 40 million U.S. households with PCs, and by 2000, there will be 2.2 computers per household, said Ron Obsgarten, president of Value Software Corp. Deerfield Beach, Fla. The budget software company markets a line of IBM-compatible products retailing for $5 or less.
Value Software's merchandise is now inmore than 600 stores in the metro New York area. Supermarket retailers selling the software include Great Atlantic & Pacific Tea Co., Pharmhouse, Pathmark, Finast/Ohio and Finast in the Northeast, Giant Eagle, Grand Union Co., Food Town and ShopRite, Mr. Obsgarten said.
Computer games, education/entertainment and small office/home office are three main Value Software product lines. For example, one computer disk offers two computer games-Alabama Smith in Paganitzu and Hugo's House of Horrors-for only $4.99.
Value Software encourages retailers to advertise and offers co-op ad dollars, supplements to fliers and coupons, handled by Advertising for Business, Boca Raton, Fla. The marketer also offers a direct manufacturer rebate inside the package; consumers can get one free product if they buy four at retail, Mr. Obsgarten said.
The rise of computer software in supermarkets was compared to the increasing number of other non-food items by Art Siemering, publisher of Trend/Wire, a newsletter that forecasts food and consumer trends.
"The reason for all these peripherals getting into supermarkets is these products offer higher margins than any grocery line," Mr. Siemering said.
Software "is an additional sale. It is an opportunity to do so at a very attractive price point. It doesn't require huge inventory, and it turns over very quickly," said Mr. McGeeney of Sher, which distributes Value Software Corp.'s line of budget-oriented software to retailers.
Pointware Corp., Newport Beach, Calif., is in discussions with several distributors about placing its 24 products in supermarkets, said President David Cosh. The marketer's line is mostly computer games and education-oriented software, all Macintosh-compatible and retailing for $9.99.
"In many supermarkets, computer software is already a proven success-for example, in Kroger in Texas and Albertson's out here. It is an impulse item," he said.
Mr. Cosh said supermarkets are becoming a hot distribution channel sooner than he expected: "In the year and half it took us to evolve as a company, the supermarkets and drugstore channels have evolved more quickly. We found that the time is now for supermarkets, not one year from now."
Emily DeNitto coordinates Grocery Retailing News.