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VSDA Report: Rentailer 2001 Revenue Up 9 Percent

25 Oct, 2002 By: Kurt Indvik

Video specialty retailers managed to grow their annual revenue by 9 percent and their average revenue per customer in 2001, according to the 2002 Benchmarking Report issued recently by the Video Software Dealers Association.

The study, which looked at financials shared by 68 responding companies running 120 stores, also made comparisons between the “typical” retailer and the “high-profit” retailer performing in the upper 25 percent of the results.

The typical retailer in the study generated revenue of $334,650 in 2001; the high-profit retailer, $369,224. But the median after-tax profit margin for typical retailers was 4.9 percent in 2001, while high-profit retailers managed their businesses to a 20.3 percent margin. The typical retailer generated $74.37 per customer in 2001, while high-profit stores generated $90.29 per customer.

High-profit retailers were able to generate a larger percentage of their store revenue from extended viewing fees, previously viewed sales and adult rental than the typical retailer, the report summarized.

Increased sales in such areas as used video sales and extended viewing fees is revenue that goes directly to the bottom line, while adult rentals are also high-margin revenue.

The typical store generated $5.53 per transaction in 2001, while high-profit stores generated $6.14 per transaction. Typical stores saw 10.5 annual transactions per customer, but high-profit stores were able to raise annual transactions per customer to 12.4.

One other productivity standard that showed a marked difference between the typical and high-profit retailer was average revenue per square foot. For typical retailers, the average was $87.09; for high-profit stores, the average was $106.38.

According to the study, rental prices did not differ significantly between the typical and high-profit retailers. In 2001, the median rental price for new releases was $3.05, down from $3.20 in 2000. The median price in catalog rental was $1.99, for adult rentals it was $3.50, and for games it was $3.25.

In controlling expenses and operating costs, again high-profit retailers were able to spend less while generating more revenue. The typical retailer spent 41 percent of gross revenue in acquiring product, while high-profit stores spent 33.2 percent. Overall, according to the report, high-profit stores spent 8.4 percent less of revenue for their store operations, or about 44.3 percent of total revenue, while typical retailers spent 52.7 percent. Of total respondents, 50.9 percent of retailers' operating expenses went to labor, 22.4 percent to occupancy, 5.1 percent to utilities, 4.2 percent to advertising and promotion, and 17.4 percent to other operating expenses.

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