Rental Rate of new releases and catalog

[Rad]

I'm trying to finalize my Business Plan and P&L forcast for my future store and would like to verify that I am not too far off on my rental rate forecast.   Now I know there are a lot of factors that determine the numbers (location, competition, customer base, etc.) but I need to have a target so I was hoping some of you can verify if I am close or way off on my numbers:

For Catalog DVD's I want to assume that for a 1500 -2000 inventory I can expect an average of 1 rental each per month for a total of 1500 -2000 rentals per month.  As the number of inventory goes up to maybe 5000 that average might drop to .75 rentals each per month

For new DVD releases I am forcasting that I can rent each one between 20-25 times before moving them to catalog.  This assumes that I will steadily reduce the numbers of copies on hand to keep the rental rate up.

As you can guess I am not planning to deal with VHS.

Are there any industry numbers out there?

Thanks in advance!

[ttran888]

Rad,

I don't think you can use the rental ratio of your inventory to determine your revenues. In the VSDA report, they provided an average spending per customer annually is $85. So for example if you have 2000 customer, your revenue would be around $170,000. So I think your you should develop your marketing plan to get people into your store at first...

Hope that helps,


Tom.

[Rad]

Tom,

Thank you for the reply.  I expected more replies and maybe a little debate so let me jump start the discussion (hopefully).  First let me say that I completely aggree that any marketing plan must be geared on attracting customers and it is critical for a new business.  The numbers I showed where for my target level once I get established and not what I ecpect out the gate.  The average spend per customer is some very useful information.

Not sure if I aggree about not using rental ratio's as one of my factors in predicting revenue.  If I spend money I need to understand what my return on investment will be.  Customers will determine what the rental ratio is but it is that ratio that will determine if it is a good investment.  If I do not achieve a certain ratio I will not make money no matter how many customers I have.  I am sure that there are some stores that have fewer customers that spend more per visit and some that spend less.  

What do the rest of you have to say??

Thanks

[vidvalt]

Operating a Video Store for the last 15yrs I find it very hard to answer your question.  Forcasting business especially a Video Store is VERY hard.
There are too many factors and variables.  The 1st I would ask you is How big is your store?  How is your location?  Any competition?  These are the 3 MOST important factors I feel then how many units you are starting with.

This business has changed in the last few yrs in many dramatic ways.  From what I can gather your are opening a DVD only store, with that I would suggest going more heavier on New Releases and less heavy on Catalog.  My reason for this is that NEW Releases are what most DVD customers want, in fact thats what most customers want wether it be VHS or DVD.  Yes it is nice to have catalog dvd's but it is very hard to get money back on those titles. Have some to begin with and then see what customers ask for.

Also getting 25-30 turns on New dvd's might be too high.  I would suggest using a 10-15 turns.  Most new releases last maybe 3 weekends which means that every NR DVD would have to be out every day and be a one day rental.  That brings up another question are you going to only rent your NR for one day?  

Also I would really suggest you get a DVD resurfacing machine!  Customers treat DVD's like coasters and frisbees and you won;t get any turns out of a scrathed dvd. In case anyone is wondering I  don't work for a resufacing company I just can't stress ebnough what a good investment it is to have one.

Rad, or anyone else, if you have more questions or just wanna pick my brain of this 15yrs veteran just email me

Dan
dmu1@cox.net