Chicken Little
From an article last week in ITWire:
“If we are to believe ASX listed online DVD rental crowd Quickflix , the bottom is falling out of the bricks and mortar video rental business while online video rentals is a booming business.”
Now I can’t find Quickflix saying bricks and mortar is going down the gurgler, apart from standard competitive positioning to convince punters they are a better choice to renting locally. However, I do recognise the DVD rental industry is rationalising and the next 10 years will see bricks and mortar stores contract. Those left standing will emerge from a Darwinian survival-of-the-fittest battle for customers. Future strategy will also play a big part in backing the winner.
But, lets get some perspective on the ratios of postal to bricks & mortar renters. Using the article’s figures, there will be 1389 rental stores by year end. At, lets say 3000 members per store, that’s 4.1 MILLION bricks & mortar renters. Lets extrapolate quickflix’s 18,000 members (of which 2500 are on free trial) by a factor of 4 to give a total postal base of 80 THOUSAND renters Australia wide. Using my bush mathematics, that give bricks and mortar 98% of the rental market, with postal renters 2%.
That’s a HUGE gap.
Now, markets can change quickly, but renting by back-order (oops, by post) is going to need a huge transference of customers from their established rental behaviour to something completely different, before postal operations threaten the local DVD store. The threat to bricks and mortar is well established - it’s the mass merchant retail sector that has changed the rental industry forever.
July 22nd, 2007 at 10:04 pm
Based on the figures you highlight, it appears the decline in independent neighborhood DVD rental stores doesn’t reflect the emergence of postal “snail-mail” DVD rental models.
Perhaps the figures somewhat relate to the increasing proliferation of larger DVD rental mega-stores. In any case, such emerging threats to the local DVD rental market (eg DVD rental mega-stores, the retail sector, etc) would similarly represent a threat to all DVD rental models, including the postal model.
Perhaps it’s time for both the traditional and postal DVD rental business models to evolve.
Based on the figures, the overwhelming millions of traditional DVD rental members have chosen to not migrate to the postal model – despite the widespread advertising coverage. Whilst Applebox does not appear to be an evolution just yet, it does provide a somewhat hybrid business model of delivering the benefits of the internet to the established traditional profit driven DVD rental business model and its many members.
Perhaps the real evolution will come when you provide your slice of the millions of traditional DVD rental members, already happily interacting through your hybrid Internet store model, with the choice of VOD when it eventually becomes more viable.
A better mouse trap – time will tell.
Good luck.
Daz
July 22nd, 2007 at 11:49 pm
Yep! It’s the retail action - ie people buying DVDs - that has caused the shrinkage in the rental market. And yep, that will also affect postal operations, although the local vid store will feel it more (hence we see them downsizing, and see a reduction in overall store numbers).
It’s interesting that APPLEBOX and Quickflix both offer online rental models. Our main difference is our distribution processes. Quickflix by post, APPLEBOX by local pickup. And (as you point out) with people now selecting on-line, the ultimate evolution will be to switch the distribution model to VOD (once it becomes truly viable).