MovieStop Eyes Growth via Sellthrough

5 Apr, 2011 By: Erik Gruenwedel

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At a time when packaged media sellthrough is under siege from discount rental and streaming, MovieStop LLC is quietly expanding operations on the East Coast, targeting consumers who like to own — not rent — new and catalog movies.

If the name sounds familiar, it’s because Atlanta-based MovieStop () was founded in 2004 by video game parent GameStop and subsequently spun off as a private entity.

Now, the 46-store chain has 450 employees herding more than 15,000 titles (2,000 on Blu-ray Disc) per location, adopting GameStop’s buy/sell/trade business model that reward street-date sellthrough shoppers with competitive pricing and rebates on trade-ins.

CEO Russ Howard said a key to MovieStop’s strategy is not pinning its future on an emerging distribution channel such transactional VOD, EST or streaming. Instead, he believes packaged media continues to represent a growth vehicle driven by a knowledgeable staff that has generated positive same-store sales since inception.

“There is a digital component emerging … how quickly [it gets here] is highly debatable,” Howard said. “There are a lot of legs left in the packaged space.”

The executive said the typical MovieStop consumer ranges from early-adopter movie collector to moms buying a Disney film for their kids to watch 40 times in 20 days and never trade in. He said the trick is straddling both the retail and rental fences and finding common ground.

“There is a healthy business out there for kiosks and the $1-per-day space, and there’s a healthy business out there for retail,” Howard said. “We think we have a unique and very relevant model that works for the consumer.”

The CEO said the chain is launching an e-commerce site and considering kiosk vending (nothing finalized yet) within the scope of the buy/sell/trade business model, which he characterizes as a hybrid rental model. He said MovieStop matches street-date pricing on new releases with trade-ins that can be used on future purchases.

Sales of new release titles (often spurred by midnight release parties) compete in volume with national retailers — a reality he believes underscores the chain as a unique customer to the studios. Blu-ray represents more than 50% of new-release purchases.

MovieStop’s expansion includes revisiting areas once populated by Movie Gallery, Hollywood Video or Blockbuster locations. Indeed, chain plans to increase its store count 50% (23 locations) during the next 18 months.

The former video store spots are scouted for their regional, not neighborly, appeal. MovieStops feature a so-called “power isle” in the center of the store that is theme and holiday based. The isles feature revolving genre titles highlighted with special pricing and promotions. The average customer spends 20 minutes in the store, according to Howard.

Recent isle themes included Christmas, Valentine’s Day, now Easter and then Father’s Day.

“On any given week we have 1,000 titles featured on sale in the center isle,” Howard said. “That’s a gift-giving opportunity.”

He said the average MovieStop store footprint is 3,500 square feet compared with 5,000 square feet at a Blockbuster. New stores are patterned after the look and feel of Barnes & Noble.

While acknowledging the 800-pound gorilla in streaming home entertainment, Howard said MovieStop would not place a major stake on streaming, opting instead to up-sell packaged media customers with digital copy.

He said MovieStop offers opportunities to educate consumers on digital distribution and cloud-based media lockers that link packaged media with digital distribution. It’s a competitive advantage Howard believes reverberates well with the major studios.

“We see a lot of opportunity with UltraViolet, but we don’t know how it is going to resonate with the consumer,” he said. “We are somewhat bullish on the concept and think we have a great opportunity to sell it to the consumer who bought packaged media and wants to view it agnostically over multiple devices.”
 

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