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TOP 100: Online Retailers

18 Apr, 2003 By: Holly J. Wagner

The online rental-by-mail field got crowded in 2002, but even retail powerhouses like Wal-Mart and Blockbuster are still a distant second behind first-to-market Netflix.Netflix in February of this year announced it had 1 million subscribers and just 6 percent of them on free-trial subscriptions.

Just days later, Roth Capital Partners initiated coverage of the company and set a $20 stock price target, which Netflix bested for the first time March 26, closing at $20.60, on a $1.35 gain. The mark was a new 52-week high for the company.

The company's success also has brought a lot of other attention, much from smaller upstarts that hope to succeed by following the model in niche markets. Until recently, the only imitators catered to alternative and art-house films, with sites like greencine.com and cafedvd.com.

But last year saw an explosion in the number of online rental-by-mail startups. New contenders are catering to niches ranging from adult product to action sports, and even a handful of sites catering to the expatriate Indian and Pakistani populations with wide selections of Bollywood product.

More than 40 sites offering Region 1 product have sprung up since Netflix launched in 1998, most of them after the company's May 2002 initial public offering.

Even Netflix's largest potential competitor, Wal-Mart, has just 7,000 subscribers, industry estimates say (nobody really knows, and Wal-Mart isn't telling) after launching its service in last October with a price that undercuts Netflix by $1 a month. Of course, the discounter hasn't had much time yet to build a base, but Netflix plans to use its proprietary rental and recommendation software and distribution centers to make it an uphill fight.

Video Store Magazine revealed in October that Blockbuster had quietly purchased Arizona-based dvdrentalcentral.com and changed its name to filmcaddy.com to test the potential of online rental. Blockbuster also will not disclose its subscriber count.

In online sales, free shipping was the battleground, as pure-plays Amazon.com and Buy.com duked it out with brick-and-click Best Buy to give consumers the best deal.

Differences in pricing on hardware and software were so slim that reduced shipping charges were the only carrot left to dangle from the end of the stick.

Opportunities for consumers to preorder also increased in 2002.

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To read about the Top Video Game Dealers, click here.

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