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Are the Days of the Rental Superstore Over?

14 Jan, 2010 By: Thomas K. Arnold

Blockbuster put tons of indies out of business by being significantly bigger in size, and having lots more copies of the latest hits on hand. But in an era when the hottest rental store in town is a phone booth-size kiosk with a few hundred titles, the glory days of the rental superstore are clearly over.

I remember back when Blockbuster began its swift ascension up the ranks of rental retailing. The perception of the average video store at the time was of a small, dimly lit place, with faded posters on the windows and walls. Granted, there were a lot of really good indie operators out there, but this was the perception--and it was one Blockbuster capitalized on with its ad campaigns that highlighted its huge, brightly lit stores and vast inventories.

Other chains with aspirations of going national copied the Blockbuster model, including Movie Gallery and Hollywood Entertainment (now merged and having a tough time). Gradually Blockbuster stopped playing up its selection and, as the rental business matured and business growth began to slow, focused on the hits. Towering new release walls became a hallmark of Blockbuster, and the chain prided itself on satisfying customer demand for the hits, only to shoot itself in the foot. The rental business, you see, was built not on consumer satisfaction, but on consumer dissatisfaction. People went to video stores and if the hit of the week was out of stock, they rented two or three other movies. Sure, they complained, but it was an accepted practice that if you didn't hit the video store early on a Friday or Saturday night, you probably weren't going to go home with the movie you intended to rent.

Blockbuster took those complaints seriously and, with the studios' support, rolled in the hits by the truckload. For awhile, it worked, but then came DVD and the sellthrough explosion, which left Blockbuster out in the cold.

The trouble was, Blockbuster had trained its customers to settle for nothing short of the biggest hits, so when those big hits became available at a sellthrough price, consumers flocked to the mass merchants--who by their very nature are all about mass appeal--to buy them. Now that the economy's in the toilet, consumers are renting again, but they don't want to wade through 10,000-square-foot stores to check out the titles they want. They want them right at their fingertips, a desire that's quite successfully met by both kiosks and Netflix's rent-by-mail proposition.

What's the solution? Jim Keyes surely would like to know. He's tried everything, from offering DVDs and Blu-ray Discs for sale at competitive prices to launching his own mail-order and kiosk programs. Heck, about the only thing he hasn't done is put Redbox machines in his stores.

I'm joking, of course. But then again, maybe there's some truth in that. Maybe Jim should lose the biggest stores and completely revamp the smaller ones. Put in an expanded vending machine with the latest hits, and another machine offering these same titles, both DVD and Blu-ray Disc, for purchase. Toss in a couple of tables and chairs and a rack of movie magazines and maybe a couple of computers so customers can access sites like Home Media Magazine, Moviefone and others that talk about new DVD and Blu-ray Disc releases. Devote a corner of the store to a Blu-ray theater, with an HDTV and a Blu-ray Disc player offering continuous showings of the latest new releases. And then depending on the store's demographic, have a foreign film section, a horror movie section, a cult classic section--whatever works--in which each disc is available for either sale or rent.

Blockbuster would evolve from a chain of superstores to a chain of smaller, individualized movie stores, catering to both the quick-in-and-out "give me the hits" crowd and the neighborhood's film buffs.

Neither group may be enough to sustain a store on its own, but both are put off by the cookie-cutter superstores Blockbuster continues to be known for to this day.

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