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Gunning For The Store Rentailer

20 Nov, 2005 By: Kurt Indvik

There's no beating around the bush for Netflix when it comes to its goal of reaching 20 million subscribers.

At an analysts conference last week CFO Barry McCarthy said, “We want to get bigger because the bigger we get the more video stores we put out of business. The more marginally profitable video stores we force to close the bigger our available market.”

If you are a video store rentailer at least you have to appreciate knowing Netflix's intentions.

What McCarthy is saying makes sense from the standpoint of growing one's business in the rental market. With DVD player penetration cresting, the available new DVD households become fewer and fewer so growing one's market share can only be done pretty much at a competitor's expense.

A recent Screen Digest report figures online rentals will account for more than 25 percent of the U.S. rental market by 2009. Time poor, cash-rich societies like the U.S. are putting their dollars into services that offer convenience, says Screen Digest, which adds that online rentailers can also market the perceived notion of limitless shelf space. Though of course Netflix has had its hands slapped recently for not being able to follow through on all its delivery and selection claims.

Another interesting competitive bit of news last week was the $20 million investment into vending machine purveyor Redbox by Coinstar, the ubiquitous coin exchange vending service one sees in many supermarkets today. That investment promises to ramp up the availability of video rental machines across the nation, again seeking market share from brick-and-mortar (and online) rentailers by catering to the same convenience factor, this in a place-based strategy versus a web/home delivery strategy.

Redbox, owned by McDonalds Ventures LLC, which has been rolling out machines in its restaurants, has farther to go before it proves itself to be a significant competitor. Redbox claims to have already rented some 3 million DVDs since ramping up in the past five months, but with the likes of McDonalds and Coinstar pooling resources you can bet the vending machine concept will have a much higher profile in the next year.

The store-based rental business must continue to add value, enjoyment and, yes where possible, convenience for customers if it expects to maintain market share. Indeed, that might include exploring rent-by-mail and kiosk options of their own. Customer retention has always been important for traditional rentailers battling the big chains, and now it's getting even more so as other competing rental platforms

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