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TK's MORNING BUZZ: Now's the Time to Turn DVD-Renting Customers Into Buyers

29 Sep, 2000 By: Thomas K. Arnold

On my flight back to Orange County after the East Coast Video Show closed yesterday afternoon, I couldn't help but dwell on a conversation I had at our booth with a retailer who says his 10-store chain has developed a burgeoning DVD rental business, but isn't in the game when it comes to sellthrough.

"I can't compete with the mass merchants," he told me. "They sell it for less than what my distributor charges. It's VHS all over again."

That may be the case, but it certainly doesn't have to be "VHS all over again."

When video specialists effectively gave up on the VHS sellthrough business, they lost a potentially powerful profit stream. Sellthrough in the last 10 years has grown into a nearly $9 billion business, but specialists, sad to say, are only reaping a small percentage of that.

Let's not have the same happen with DVD. When this retailer told me he couldn't compete against the mass merchants, I told him I thought he was wrong. Dead wrong.

He may not be able to match the mass merchants' price and still make a reasonable profit, but he certainly can play up his strengths and use them to his competitive advantage. Why not offer two or three free rentals with the purchase of any DVD, or apply the rental fee toward a purchase? That's something the mass merchants, who have never really gotten into rental, can't offer, and it also plays right into the public's "try before you buy" mentality. "Hmmm," he responded. "I never thought of that."

Well, it's time he did. It's time you all did. Don't be lured by the short-term potential of DVD rental. I've said this until I'm blue in the face, and I'll say it again--get to work now, turning your DVD-renting customers into buyers.

Sure, not every new DVD owner is going to want to buy every disc that comes out. But if you can add a few sales to every dozen or so rentals, you're generating incremental revenues that are sure to add up after awhile.

You're also re-establishing the video store as the MOVIE store in your customers' minds, a place where they can satisfy all their home entertainment wants and (perceived) needs.

And, perhaps most importantly, you're hedging your bets against the day when DVD rentals cannibalize so much of the VHS rental business that the studios, who make a lot more money selling you rental-priced VHS cassettes, begin tinkering with the current model, perhaps even to the point where you're going to start seeing day-and-date releases on video and on pay-per-view.

The time to spring into action is now, with the fourth quarter right around the corner. Enjoy DVD rentals all you want, but don't skimp on the sales side.

Your future depends on it.

Comments? Contact TK directly at:TKArnold@aol.com

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