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Measuring the Wind With an Online Gauge

25 Jan, 2006 By: Holly J. Wagner

It's not really a surprise that Netflix announced support for high-def DVD formats Tuesday.

Nor is it a surprise that Amazon.com raced to put up HD DVD pages as soon as Toshiba and several studios announced that HD DVD players and discs will reach the market in March.

Most of the chain retailers I've talked to plan to support both formats (assuming both come to market) until consumers make a choice, although they acknowledge that the format war is risky for both formats.

But online retailers may well have an edge in this arena. They don't have to pepper thousands of stores with a few copies of each high-def title and format. They can stock a smaller amount in distribution centers to start with, increase buys to keep pace with demand and they have the most efficient preorder systems which, crucially, will help them decide how much to buy when they wade in. They also have no concern for store fixtures, so they don't have to care if the packages are all different, their equipment will handle it all the same.

A retailer and I were talking the other day about the standard DVD rollout and how it was launched in limited markets. The studios may drop high-def formats nationwide at the same time, but rental and other specialty chains may opt to roll the formats out in selected markets to start with, then wait and see what adoption is like.

Blended retailers like Blockbuster, Hastings, Trans World, Best Buy and Circuit City will be able to transition the online advantage to the physical world. They will be able to see where customers are requesting high-def discs, regional format preferences and so forth, which should be a real plus in stocking stores and distribution centers. They could even decide to offer high-def online exclusively at launch, appealing to the techie audience and limiting their risk at the same time.

Indies with just one or two stores will have a home court advantage gauging what's popular in their markets. If your store is in Anchorage, Alaska, or Peachtree, Ga., you don't really have to worry much about what people prefer in Philadelphia or Los Angeles.

I'm not at all surprised the e-tailers are the first to commit. What will be more interesting will be to see what kind of fancy dancin' Movie Gallery and the other physical-only chains have to do to keep up with that kind of market intelligence.

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