Survivors sell themselves
By Tom Paine -- Video Business,03/31/2006
MARCH 31 | If remaining independent video rentailers are anything, we are survivors. We survived a crowded marketplace, with video stores seemingly on every block, then chain video stores with their copy depth and other chains with low-cost sell-through DVDs. Now, due to new technology, we are facing increasing fragmentation of our market.
Paine
How does the independent rentailer survive this new challenge? How do we compete with online subscription services, increased pay-per-view options, video streaming and downloading? To get answers, we must understand our consumers, what we provide them and why.
Consider online subscriptions. Let these Internet companies have the customers who watch three movies per week. They lose money on them.
They make money on the customer who watches three movies per month. If you have lost that customer, get them back by promoting the advantages of a la carte rentals.
We can promote the idea of instant gratification. There is no advance planning required to come to the video store. In a short time, the customer can choose a movie from thousands and have it playing on their TV.
Another disadvantage to subscriptions is the monthly billing. We can advertise that the consumer watches what he wants, when he wants, and he only has to pay for what he watches.
Many bricks-and-mortar rentailers are also now offering in-store subscriptions to be competitive. The advantage to the customer is that they are not required to manage a list and be dependent on the mail.
In the end, I don’t believe the growing popularity of online subscriptions is about the lack of late fees. It is about convenience, selection and price.
As new services increase the selection and flexibility of movies available to watch via cable, satellite and digital video recorder, the video rentailer’s competition with TV will become more fierce. But the video store still has the advantages of selection and timing. We need to make sure the customer is constantly aware of this.
When movies are available on “on demand” TV, tell your customer that you have them too. Consider competing against the on-demand pricing, and promote the same movies showing on demand. How about a section in the store with signage saying something like “Watch on cable for $X, or rent for only $X”?
Video streaming and downloading also may eventually take a share of our customers. They require more hardware at home, however, and a commitment to the new technology.
Though we might have some customers willing to change to these technologies, most of our customers are not early adopters. Right now, it is too early to tell which, if any of these specific initiatives are going to affect us the most.
Each store has a long list of customers—their names, addresses and the kinds of movies they like. I am convinced the savvy rentailer will find ways to partner in the online world, using the existing customer base as an asset.
This all adds up to a lot of competition in a market we once shared only with movie theaters. As long as there are traditional renters, we should continue to provide the a la carte rental in the most competitive way possible while finding innovative ways to compete against the new and emerging competition. The use of well-targeted advertising and in-store promotions are necessary to keep the advantages of the video store forefront in the customers’ mind. Knowing and focusing on our customers and their needs and desires is the key to success. Tom Paine is owner of six-store DVD Now, Redmond, Wash.Post a comment Return to article View other article discussions
| Submitted by: | BARRY GLOVSKY (bglovskyvds@aol.com) 4/12/2006 7:29:42 AM PT |
| Location: | BOSTON, MA |
| Occupation: | WHOLESALER |
To Tom Paine in response to his SURVIVORS piece.<br><br>
It was refreshing to see an article from someone in the business that’s fighting the battles we all fight every day.<br><br>
I’m a small independent wholesaler serving the Northeast and share all of your observations. I have these conversations often with my accounts. What you say about subscriptions, VOD etc is all true. What I tell my account base is very similar except that we take it a step further. Whenever a retailer has to tell his accounts about “on demand” and that you have the titles too, more often than not, you’ve lost the sale and failed to make much of an impression.<br><br>
The thing we instill in our accounts is that you can’t run your store the way you did 3-5 years ago. Make a section of your new releases into an ON DEMAND section telling your customers what is now available and how much more convenient and less expensive it is to rent them while here in the store. Even if you have to rent them for $1.50 per night as a promotion, it is better than have them sit on your shelf for $3.00. We can’t pretend these other sources don’t exist, we must fight them each step of the way. Verbally mentioning to your customer simply is not enough, better than most, but not enough.<br><br>
You refer to partnering with an online rental business by using your account base and movie tastes. Not sure about that either. NetFlix has done extremely well without our help. Why would these folks want to bother? What can we really offer them as a value? These folks already have all of the information anyway as it is pretty easy to get. Really, what is a savvy retailer going to do today? The real savvy retailer was preparing himself for this day at least three years ago. Doing subscriptions after the fact did not work. Oh, don’t forget delivery services. That’s been around for 20 years and is very difficult to do successfully.<br><br>
Your closing paragraph “as long as there are traditional renters” is a bit disconcerting. You seem to be saying that you can’t win over the non traditional renter and are resigned to the situation as it is. I agree that knowing and focusing on our customers and their needs is critical, but this must include customers we have all lost as well. Otherwise, we are focusing on a constantly shrinking market. The real key to success is adapting to what ever is new and threatening and being very proactive about it. Waiting until after it has happened, well, you might as well lock your doors.<br><br>
Barry Glovsky<br><br>
OWNER<br><br>
VDS<br><br>
| Submitted by: | JAMES R. BRESLIN (MOTU6969@SBCGLOBAL.NET) 4/3/2006 9:37:27 AM PT |
| Location: | NEW ALBANY, IN |
| Occupation: | ACCOUNTANT |
As the former CFO of Roadrunner Video in Louisville, KY (38) units when I left in May, 1994, and it's subsequent failure (approx November, 1996) is a perfect example of how no forsight or management cripple most small chains and independents as the market was poised for consolidation and that is exactly what happenned. For that reason, the remaining independents need to evaluate the new technologies and the direction of the market and have adaquate management in place or at least consultants (accountants, lawyers, businessmen on their boards, etc.) to thrive and return to the days of at least 10% bottom line. There are a number of developments that will require significant attention to keep pace in this type of business.
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