Transforming into a "snack e-commerce" cinema to reduce inventory to survive

Cinemas, which rely on box office revenue as their main source of income, are now considering selling their in-store snacks, drinks, movie peripherals and other inventory after getting over the worries of having no money to earn in the early stage. A Beijing Business Daily reporter found that, as of now, Dadi Cinema, Bona International Cinema, and Suning Cinema have all sold their snacks, drinks, movie peripherals and other products in the form of value-added gift packages or low-price clearance sales, trying to survive this unexpected late spring cold snap by selling out inventory.

The price is higher than e-commerce

"Dadi started a sideline business during the epidemic. He opened a small shop. Anyone interested can come and visit." On February 12, Dadi Cinema Group officially showed its new sideline business to the public, and put water cups and cinema snack packages of different shapes and themes online for sale. From the package price list released by Dadi Cinema Group, it can be found that there are six categories: limited-time discounts, value recommendations, snack gift packs, plush dolls, top-up products, and couple water cups. The prices range from 9 to 228 yuan. At the same time, in some areas, free shipping is available for purchases of only 99 yuan.

Dadi Cinema Group is just one of the companies that has transformed into an e-commerce snack company. A Beijing Business Daily reporter found that at this stage, many cinemas, including Bona International Cinema and Suning Cinema, are selling their products in the form of limited-time specials or snack gift packages. In addition, the Weibo movie blogger "Cinema Film Database" also released a message of "mutual assistance in clearing inventory of cinema products". Cinemas in need can leave a description of the city and product types, prices, and postage in the comment area to find buyers. At present, cinemas in many cities including Xi'an, Chengdu, Suzhou, Hefei, Yangzhou, and Hangzhou have left messages, wanting to sell popcorn, cola, grilled sausages, Haagen-Dazs and other inventory products.

According to the price list displayed in some cinemas, a bag of 50 frozen pure meat sausages costs 140 yuan; Vita lemon tea costs 5.5 yuan per bottle and 150 yuan per box; Haagen Dazs 81 grams costs 30 yuan per piece. Comparing the above prices with supermarkets, the supermarket price of Vita lemon tea is about 6-8 yuan per bottle, and Haagen Dazs 81 grams costs 35-40 yuan per piece. The price in cinemas is relatively cheaper by 1-5 yuan.

However, if compared with e-commerce platforms, the online sales price of a box of Vita Lemon Tea is only 100-130 yuan per box; the lowest price of 10 Haagen-Dazs 81 grams is only 230 yuan, which means 23 yuan per piece; and the online price of 50 grilled sausages ranges from 30 to 100 yuan. The prices of cinemas are dozens of yuan higher than those of e-commerce platforms, making it difficult to show a competitive advantage.

At the same time, the sales of some items are also relatively limited. Among them, the two limited-time discount packages sold by Dadi Cinema Group, namely the couple doll packages with original prices of 217 yuan and 305 yuan and current prices of 158 yuan and 198 yuan respectively, had sales of 2 and 4 sets respectively as of 16:00 on February 13.

Sales revenue is just a drop in the bucket

Cinemas are selling their merchandise one after another, which reflects the impact and operating pressure that cinemas have endured due to the suspension of operations during the epidemic. According to a relevant person in charge of Yingjia Xingmei Cinema, "the cinema had previously set a box office target of 4.8 million yuan for January, but in reality only about 1/5 of it was achieved, and there was no source of income in February."

However, although some cinemas have gained a certain amount of income by selling merchandise and reducing inventory losses, many cinemas have said that they will not choose to sell inventory merchandise. According to relevant persons in charge of Yingjia Xingmei Cinema, the cinema did prepare stocks according to a month's sales volume for the Spring Festival period, but currently only about 5% of the products in the store are expired or about to expire, and the loss is relatively small. Other puffed foods, bottled beverages, etc. have a shelf life of up to one year and will not expire in the near future and cause losses. There is little meaning in selling them at this time. On the contrary, they can achieve greater utilization when resuming business in the future. Therefore, they will not choose to sell promotional merchandise for the time being.

Staff at Hualian Cinemas Xiaojiahe store also said that there are currently no plans to sell merchandise in the store, and that in the cinema's revenue structure, merchandise itself only accounts for a small proportion, and box office revenue is the main source of income, accounting for about 90%. Therefore, the sales revenue brought by the sale of inventory is relatively limited, and the labor cost will also increase due to arranging employees to go to the store to distribute and deliver goods.

A Beijing Business Daily reporter learned that although cinemas have currently suspended operations, costs such as rent are still being incurred, and rent alone can reach 200,000 yuan per month or even higher. If they were to start selling merchandise and staffing them at this time, expenses would increase by thousands to tens of thousands of yuan.

According to the annual reports of listed companies such as Wanda Film and Jinyi Film and Television, the annual revenue scale of merchandise sales is 1/10 to 1/4 of the box office revenue. Among them, Wanda Film’s film screening revenue in 2018 was 9.067 billion yuan, and the merchandise revenue was 1.868 billion yuan. In the same year, Jinyi Film and Television’s film screening revenue and merchandise revenue were 1.589 billion yuan and 160 million yuan respectively. Although the gross profit margins of the two business revenues are compared, the merchandise revenue is about 60%, far exceeding the film screening revenue of about 10%, but Zhou Xiang, a cinema practitioner, said that merchandise sales are still more like ancillary sales products of cinemas. They are consumed while watching movies. Few people go to the cinema specifically to buy merchandise. In addition, the price advantage of cinema merchandise sales is not obvious at present, and the sales situation is unclear. Compared with the rent of hundreds of thousands of yuan, the sales revenue of merchandise sales is just a drop in the bucket and cannot solve the fundamental problem.

Energy saving, cost reduction and expenditure control

In order to ease the operating pressure of cinemas, all parties have taken action. On February 12, the Beijing Municipal Film Bureau issued an "Open Letter to the Capital's Film Industry", and announced that it would start the application process for this year's Beijing Publicity and Culture Guidance Fund (Film Category) and Film Special Funds in advance, and introduce relevant policies to increase support for film and television cultural enterprises, effectively reducing the operating costs of cinemas and producers.

Previously, the Beijing Municipal Government has issued two policy documents to reduce the impact on small and medium-sized enterprises by extending the collection period of social insurance premiums, increasing financial support, and suspending some administrative and institutional fees. In addition, the Beijing Film Association, Guizhou Film Exhibition Industry Association, Fujian Film Association and other local film associations have also issued public letters calling on property owners and property managers to reduce or exempt rent and property management fees for cinemas.

The cinemas themselves are also trying various methods. "It's not easy for cinemas to make money. More than half of the total revenue needs to be paid to the cinema chain as a share of the revenue and related taxes. The remaining less than half of the revenue needs to cover the costs of rent, labor, water and electricity. At present, our approach is to reduce various costs as much as possible. For example, we only keep the staff on duty for the time being. In addition, we are trying to negotiate with the network service provider to suspend the service for two months. After all, the network will not be used during the suspension period. If the service fee during this period can be reduced, it can also reduce certain costs." said a staff member of Hualian Cinema Xiaojiahe Store.

Wei Pengju, dean of the Institute of Cultural Economics at the Central University of Finance and Economics, believes that the losses suffered by companies related to the film and television industry in the short term during this epidemic are inevitable, but while operators are overcoming this difficulty, they can also take a long-term view, and the country has a high consumer demand for cultural entertainment.

In the opinion of relevant persons in charge of Yingjia Star Cinema, cinemas are currently looking forward to the end of the epidemic. After cinemas gradually resume operations, with the release of high-quality films and the gradual outbreak of people's previously suppressed desire to watch movies, cinemas are also expected to usher in a peak in movie-watching.