Another one bites the dust....and I make my case for our stores

[moviesgamesetc]

Ingles, a southern grocery chain with 2 stores in my area was packing away their movie section inventory yesterday when I went in to buy groceries. I casually asked if they were remodeling and the lady told me, a bit sadly in seemed, that they were closing that department and getting a pharmacy.

While I should be happy to lose the competition, especially in used dvd sales as many of my customers have boasted that they get great deals on pvs from there, I'm not.

The more rental places close the more our industry is diminished. This isn't just from the the economic reasons behind the closures but from the lasting impression it leaves on the public. This looks like a dying industry and every article is already heralding our demise.
I don't believe the need for brick and mortar rentals stores is over, at least not in my area. I'm signing up new customers every day. One new customer told me that she was glad to find me. That where she just moved from that there was a Mom and Pop she did business with and she was glad to find one here.
People are still hurting economically, despite the propaganda to the contrary. They have cut back on cable and going out and just about everything else. Still, they need something to take their minds of how bad things are or have some sort of cheap family entertainment.
So they all hop in the pick up and spend time browsing my shelves to fine some reasonably priced entertainment. The experience of picking out the movie (or game) in a climate controlled environment with no one impatiently looking over their shoulder is part of the fun.
Here, they know they will be welcomed in, greeted with a smile, and treated with courtesy and respect. Call me old fashioned, but I think these things still matter.
Yes, I know the options for finding movies is expanding, everything from every convenience store selling repackaged pvs, to Redbox, to streaming, to bootlegs but all these options have their own set of problems. Not least among these problems is that it takes "fun" out of the experience.

Point by point, the purchase of a dvd is still more expensive than renting. The Redbox is really less convenient because many are outside or in other store lobbys (at least the ones I've seen) where you have no privacy and are rushed to make a decision. Streaming depends on a solid internet connection, not very viable in many locations or cost prohibitive for money strapped people. Bootlegs, whether procured from your brother-in-law's cousin's computer geek friend or bought from the local flea market, have their own problems, possible bad quality being the major one.
A big flaw I see with any of these is that customers can't get what they want when they want it. It's all catch as catch can. Take what you can find.
Our "friendly neighborhood video stores" have one huge advantage over these other options - US. Someone to be that neighbor from and in the community. Someone to complain to, converse with, get suggestions from and hold responsible.

So I still maintain that we are not finished as an industry. In fact, I believe we are about to experience a renaissance. Whether it be for nostalgia or just good economics, we are still the epitome of destination home entertainment.
Persevere, my friends! We aren't licked yet!

[steve]

I agree.  The independent store's biggest problem is getting that message out.  It is hard to cut through the doom and gloom in the media.  We don't have a big enough advertising budget to overcome the negativity.  Also if the MPAA were to take a stronger stand on bootlegs, we might see things begin to turn around.

[MerlinMikey]

All great points! Especially the point of customer service. Last year we had a store meeting with all employees, I told them customer service is going to be the key to survival. Not trying to match Redbox of Necklicks in price. Not trying to go up against PPV. But customer service. We acknowledge every customer that enters the store, even if they are just returning product, they get a "thank you". And every disc is checked for scratches at check in and check out. The customers really appreciate that! We have two Venmills at the checkout counters and two Azura's in the back.

To fight the gloom and doom people perceive of the "video store", we did bold signage at the top of our windows stating the other services we offer, disc repair, fax, copies, Discover Blu-ray, and list the games systems we carry. This last fall I mounted a 55" LCD HDTV 1080p TV (beautiful picture) with a blu-ray player in the store. My customers now enter and watch the promo dvd we get from Ingram and Video Buyers Group. When my employees "try" to watch an older movie, they never make it, it rents out right from under their eyes I did this because I walked in one night and had a house full of customers and a damn Necklicks commercial was playing on the radio that we "had" hooked up to the sound system. I said to self, "this is not cool". All of these changes makes a statement to the customers....WE AREN'T GOING ANYWHERE!!

So, make a statement with your store that your here to stay.

[paladin]

Well said, Movies!

[genx-mike]

Sorry boys. I'm packing it in on Feb 28th. We've been selling off our inventory since Jan 1. We should clear close to 250k when the sell off is done. The benefits of having a crazy collection.

The markets have shifted enough that the writing is pretty clear on the wall. You might be able to squeek out a living but the glory days are over and we are heading towards a digital era.

I wish you all the best but if your business keeps dropping, don't try to fool yourself that customer service is the solution. Your customers will still do VOD and netflix and redbox and piracy regardless of how well you treat them.

There are probably another couple okay years left but start making plans for an exit and don't get caught holding product that will be worthless. That's why I'm selling out now. I want my payout and if I waited much longer I'm not sure it would have been there.

I'll keep an eye on the boards and good luck to you all.

Mike

[MerlinMikey]

Guess it depends on your location.....I'm in rural Southern Oregon. Big metro areas, I guess, would have a lot more to contend with. We just got DSL internet in our neighborhood 5 years ago, so let em stream around here and see what happens. Satellite systems are huge around here (directTV and DishNet, so PPV is a contender for me, until they see the price. Yes, the customers do TRY Necklicks and Redbox, which is located at Albertson's supermarket and "the" Walmart (10 miles from my location). But they always seem to come back to the video store. Sorry to hear about your decision genx-mike, Good Luck to you.

[mcmarc]

Sorry boys. I'm packing it in on Feb 28th. We've been selling off our inventory since Jan 1. We should clear close to 250k when the sell off is done. The benefits of having a crazy collection.

The markets have shifted enough that the writing is pretty clear on the wall. You might be able to squeek out a living but the glory days are over and we are heading towards a digital era.

I wish you all the best but if your business keeps dropping, don't try to fool yourself that customer service is the solution. Your customers will still do VOD and netflix and redbox and piracy regardless of how well you treat them.

There are probably another couple okay years left but start making plans for an exit and don't get caught holding product that will be worthless. That's why I'm selling out now. I want my payout and if I waited much longer I'm not sure it would have been there.

I'll keep an eye on the boards and good luck to you all.

Mike

Now hang on a second.  You were always the one posting how good it was, and why you should keep your catalog prices high, etc.  What happened?

[EVW]

Customer Service is of very little relevence here IMO.  Customer service is why you pay $1.29 for coffee from the local shop vs. 99 cents at McDonalds or do your free banking at the Local bank vs. free banking at the National bank.  CS doesn't shore up the difference of paying $3-$5 vs. $1 or 9.99/mo for unlimited DVD's and Streaming with no late fees ever.

You should ALWAYS great your customers with a warm welcome and be as helpful as possible but if you don't get pricing in order and find other sources of income you stand no chance.  Price and convienience are far more important to people these days.  B-S-T coupled with placing everything back online has worked unbelievably well for me especially given how easy it is. 

[direct007]

We closed up our shop late December after 29 years in the business.  We are just doing online sales.  The industry has been shifting for quite some time now.  The economics of the business have changed so drastically that except for some pockets in the US, the cost of rent, insurance, payroll, utilities all of which keep going up substantially year after year cannot be supported by a business that has too many options for distribution.  In the end, streaming/downloading will be the winner just as it has been for music but there will always be niche markets that retailers will be able to fill either online or bricks and mortar.  If you intend on keeping a bricks and mortar business open, you will need to find new profit centers other than home video.

[genx-mike]

Now hang on a second.  You were always the one posting how good it was, and why you should keep your catalog prices high, etc.  What happened?

We still did almost 300k in business last year and paid out over 70k in salaries but expenses keep going up and rental levels keep dropping so I made the call. Multiple things have happened in our market. Older customers have used our library system more and more over the years. Can't compete with free. House prices in the area where our store is are too expensive for new families so they've all moved to the 'burbs. The students continue to trend towards downloads.

In the past, we always had a new batch of customers to replace the old ones. That has started to fade away over the years. I don't see it getting better. We are in a region of 450k people with 2 universities and a college and we will be down to 2 indies and a handful of chain stores. The people are not renting any more. Remember, that's with us being in Canada and having no Redbox and no real Netflix competition.

There were lots of things I could have done to keep the store open. We could have moved. We could have lowered our prices to try and attract more people. All of these things would have resulted in more work or cost money. I've been running the store for 16 years. I wasn't willing to do it any more. I don't see DVD keeping it's value over the long term and I wanted to get full value for our collection. We've sold about 1/3 of the collection so far and have made more the 100k from it.

Again, I'm sure indie stores can go for another 2-3 years and stay mildly profitable. I'm not sure I see much of a timeline after that. Watch your store's metrics and if they start to go bad, get out. This is not a business where you should throw good money after bad.

[EVW]

You can't agrue with somebody who can get a Quarter Million liquadating in just 2 months getting out.  With some reasonable intelligence, creativity and business sense, money like that can start a STRONG business.  Just don't sit back and "live" off it too long.  Take a good vacation, relax and let your mind go free and think of the next idea.  Everything in business comes down to 2 things: Time and Money, both unbelievable scarce.  Mike will have an abundance of both.  I'm highly jealous

[mcmarc]

Out of curiosity, did you change your prices at all in those 16 years?

My store as well is sitting on a gold mine, but I just see the prices of those out of print titles going up instead of down.  Especially now that Paramount has inexplicably taken many popular titles out of circulation.  Good luck with any future endeavors you might have.

We still did almost 300k in business last year and paid out over 70k in salaries but expenses keep going up and rental levels keep dropping so I made the call. Multiple things have happened in our market. Older customers have used our library system more and more over the years. Can't compete with free. House prices in the area where our store is are too expensive for new families so they've all moved to the 'burbs. The students continue to trend towards downloads.

In the past, we always had a new batch of customers to replace the old ones. That has started to fade away over the years. I don't see it getting better. We are in a region of 450k people with 2 universities and a college and we will be down to 2 indies and a handful of chain stores. The people are not renting any more. Remember, that's with us being in Canada and having no Redbox and no real Netflix competition.

There were lots of things I could have done to keep the store open. We could have moved. We could have lowered our prices to try and attract more people. All of these things would have resulted in more work or cost money. I've been running the store for 16 years. I wasn't willing to do it any more. I don't see DVD keeping it's value over the long term and I wanted to get full value for our collection. We've sold about 1/3 of the collection so far and have made more the 100k from it.

Again, I'm sure indie stores can go for another 2-3 years and stay mildly profitable. I'm not sure I see much of a timeline after that. Watch your store's metrics and if they start to go bad, get out. This is not a business where you should throw good money after bad.

[wannabevideostoreowner]

Older customers have used our library system more and more over the years. Can't compete with free.

You would think that but ugh. St. Louis County has offered VHS rentals since the 80's and now DVD. Blockbuster still lives on here tho. I remember requesting a specific movie I wanted to see from the library back in those VHS days. It was like Netflix with the "long wait" - took months to arrive - and I never used the library as a movie rental service again. (Same reason I cancelled Netflix after a month too btw).

It's convenience these days more than anything, I think. My grandmother still orders every single movie she watches from satellite PPV. It's like $4 or $5. She could care less.

[merscham]

Things have certainly slowed down, and I think that one of the main reasons is due to NFLX. Once the streaming started, the numbers dropped, we were down 9% from 2009, and 23% from 2008 numbers on revenue. Still, we remain busy on the weekends and I agree that we need to find another stream of revenue making ideas. This rental industry is dying, only the strong will survive. On the other side of it, with all of the Blockbusters closing, it will become increasingly harder for people to find new releases. Many of my customers have NFLX, and they tell me the only reason that they even come into my store is for new stuff. It bothers me on a personal level to see people who were last active in March 08 or April 09 pay a visit, but I'll take their money nonetheless. The ones that I can't stand are the people who come in to your store, ask you for 20 recommendations and then thank you and leave, telling you "Thanks so much for your help, I'll add all of these to my Netflix queue." I have told a couple of them to get out and not come back, that may be the wrong thing to do on a business level, but screw them. Anyway, keep informing your customers that you have the newest stuff before NFLX and Redbox, throw them a free rental for some old movie that is just sitting there on the shelf, and pretend like you're doing them a favor by waiving a late fee for something that you didn't need and you can hold your core.

[genx-mike]

Out of curiosity, did you change your prices at all in those 16 years?

My store as well is sitting on a gold mine, but I just see the prices of those out of print titles going up instead of down.  Especially now that Paramount has inexplicably taken many popular titles out of circulation.  Good luck with any future endeavors you might have.

Started at $3.00 a rental (tax incl) got up to $6.00 a rental (tax incl). Always offered a way for people who wanted to save money on a rental. Average rental price actually dropped over the last bunch of years because of offering discounts.

My concern about collections right now is that if more and more titles get released on Blu-Ray there will be a flood of DVDs from private collections hitting the market. Even the out of print titles. Then you see saturation quickly. We saw that happen between 2000 and 2002 with VHS. You could get amazing money for VHS during that time but it crashed quickly after that. You can still get decent money for good VHS but it is much slower in coming.

I see hints of that happening now. Especially with Criterion. Plus the digital side of things will ramp up over the next bunch of years which will kill demand for DVD sales while increasing the number of collections being dumped.

Like I said, I think there are a couple good years left in the industry but watch your numbers and watch the value side of things if you have a good collection. You don't want to have to dump $20.00 DVDs for 20 cents when the crash comes.

As for sitting on the money? I'm a lucky guy who has an Osteopath for a wife. She's just happy my stress from running the store is going to be gone soon.