Responding to the Holiday Impact on Rentals7 Dec, 2003 By: Kurt Indvik
Our most recent poll on this Web site asked retailers how they compete with the big chains during the holidays, when competition is fierce and pricing is predatory.
Surprisingly, the majority of respondents to the survey (55.5 percent) said they make no seasonal adjustments to their business to try and counteract the threat of the heavy emphasis on sellthrough video and the loss-leader kind of pricing that's ubiquitous during the holidays and becoming prevalent throughout the year. More than 22 percent of respondents did say they put together some sort of holiday-based giveaway, contest or drawing.
In our report on the results of “Black Friday” in this week's issue of Video Store Magazine, it seems that low-ball pricing was even more extreme this year. Major new releases were being seen from a low of $11 at Wal-Mart to early-bird sales of $11.99 at Best Buy to $12.99 at Circuit City. And, of course, we have seen some dramatic price promotions on DVD players that have literally caused stampedes at some stores. Even catalog seemed to be selling well, according to John Hastings, president of Hastings Entertainment in Texas, who was reporting a stellar holiday season.
Not surprising, especially if you were one of the retailers who did not adjust your business in this challenging time for rentals, you likely saw your rental business drop. VSM market research shows that rental spending for the first two months of this fourth quarter dropped 5 percent, compared with the same period last year. And if rentals of new releases are being impacted by sellthrough, data shows it's hurting catalog business as well. Retailers report that catalog rentals, as a portion of their total weekly rentals, is less this year than it was last year.
Certainly, the holiday period tends to enhance the impact the sellthrough business is having on the rental business, and it should be pointed out that VSM market research notes that year-to-date rental spending is up more than 9 percent. I am not one to believe, as some do, that the rental business is going to quickly spiral downward in the next year or two. However, those retailers who do not ratchet up their own new and used sales efforts and rental specials during the holiday season to combat the drain on their business risk losing a slice of their customer base every season, until there are no more seasons left for video rental.