HOW TO START AND OPERATE A DVD RENTAL STORE
One of the newest, and most profitable retail business
opportunities available today is the DVD Rental store. Profits
from rental of DVD movies have doubled each year over the
past years, and industry experts claim this is only the
beginning.
Generally speaking, the average DVD rental store can be set up
with an modest investment, and a good credit rating. Utilising
good management techniques, and taking advantage of natural
promotional opportunities, such a store can gross $200,000 per
year. Some stores are realising a net profit of 35 to 45 per
cent.
The secret to achieving and maintaining these kinds of profits
is in establishing and properly running a video club that offers
really outstanding benefits to club members. These benefits
should include special discounts on DVD rentals and purchases;
a regular catalogue or newsletter that tells your members about
the new DVDs available; special workshops; get-togethers; and
even outings.
Think about the potentials: video recorders are now within the
price of just about everyone in the country; new technology,
better performance, and greater development of the market will
reduce the cost even further. More and more people are
switching from costly evenings out to the comforts of home and
DVD entertainment.
It's important that you be "in tune" with what the DVD renters in
your area want, and fulfil those wants.
In selecting a location, look for a shop front in an area
surrounded by stores the typical DVD player owner is likely to shop in.
Six hundred to nine hundred square feet should meet your needs
at first, but plan ahead for future expansion. The ideal
location would be a corner affording visibility of your shop
from several directions. And try and make sure there's plenty
of parking space available.
The layout of your store should be planned with maximum
efficiency in mind. Basically, a glass topped sales and display
counter across the front, separating the customers from the
sales area, while at the same time conveying a feeling of
openness, works best. Glass counters with shelves may be
purchased at tremendous savings by contacting the rental fixture
suppliers and used equipment dealers in your area. Check the
yellow pages for names and addresses of suppliers.
One of the important secrets to success will be the way your
store is perceived by the customers. You and your salespeople
can dress casually and project an overall relaxed manner of
doing business; taking care of each customer individually, using
their first names (if appropriate), and relating to what's
happening in their lives. With this approach you will get to
know them, and will establish long-term customer loyalty faster
than by any drum beating promotions.
The best idea for the display seems to be on wooden shelves
lining the walls of the sales area behind the customer counter.
These shelves can be built by a local handyman, and either
painted or stained. It's important, however, that they be
strong, because the weight of the DVDs can amount to 50
to 100 dollars per shelf, depending on the length of the shelf.
Arrange the DVDs on the shelves, in book fashion. Stand
them upright with the title art on the boxes clearly visible to
the customers. It's important that you do not allow your
customers to browse through your inventory, as they do with
books on the shelves at the public library. In other words,
your inventory of DVDs is money to you and should be seen, but
not touched, by your customers until they either want to rent or
buy.
An arrangement that works well with many stores is to remove the
DVDs from the jackets, and display the empty jackets in the
viewing area for customers. Many of the jackets carry
descriptive sales literature, which entices the prospect to
either buy or rent. The DVDs themselves, which do not carry
any outside printed message, should be kept behind your
counters, in an area accessible only to your people.
You can locate your manager's desk and files in front of the
inventory shelves. Spare partitioned off in the back of the
store will be quite adequate for storage, packaging and/or
whatever minor repairs might be necessary.
Our suggestion would be to allocate 60% of your store for the
display sales office area; 20% for the reception or customer
area; and 20% for storage/work area. Check out a few successful
stores. You should be able to assess the entire arrangement in
a few visits, and pattern yours after it, or consider
improvisations or changes you would make.
Use your imagination and utilise your in-store decorating as
well as merchandising ideas to move your product. For help in
decorating your store, talk to a few students in the art classes
at your local college, or to the set designers at your local
theatre group. Be sure to explain the mood you want to create.
The customers will be coming into your store to rent or buy
movies and associated equipment, and you want to create a mood
conducive to persuading your customers to rent or buy your
products.
Some of the imaginative DVD rental store owners have even gone
so far as putting in a miniature movie marquee that lights up;
spotlights and theatre-type track lighting overhead. Another
idea might be the use of old film reels, glossy pictures of
movie stars and pictures, newspaper clippings, or other
memorabilia from original premiers.
Your display equipment should include one of the better brand
name color TV sets and a DVD player/recorder. It's vital to go
with a VHS system, because there is only a very limited demand
for Beta products. You'll need this equipment in order to test
your DVDs and give your customers an instant preview of the
movies they are interested in renting or buying.
You should also plan to get a good typewriter or word processor
that will accommodate several different styles and types of
print. This will be your key to the make-up of new pages for
you catalogues and the preparation of youv newsletter.
Be sure to organise yourself with a bank in order to handle
major credit cards. Simply advertising the fact that you accept
credit card purchases will do wonders for your turnover. Since
most of your sales transactions will be by credit card or cash,
you won't need a fancy cash register. A simple metal box,
available at most office supply outlets, will work very well
until you need something fancier.
You should either hire a person to be your store manager from
the start, or else select a person you can train to take over
your duties as store manager. The person you select needn't be
an electronics wizard, because there'll really be no need to be
an expert in the technical workings of the equipment. However,
he should have a creative flair for retail management, sales
promoting and selling.
In addition to yourself and a manager or management trainee,
you'll need a`part time sales person to help you out during busy
times.
It will be to your benefit if you and your employees keep
themselves up to date on the industry by reading everything
possible relating to DVDs, movies, and associated
equipment. This means advertising; brochures, newsletters,
trade papers and magazines from every available source. Armed
with this wealth of information, you'll be more knowledgeable
than 99 percent of your customers, and be able to recommend
movies according to the preference of the individual customer.
As DVD rental outlets increase in number, the industry as
a whole will become more competitive. To beat out the
competition, the enterprising entrepreneur will develop a list
of loyal customers, and pamper them with the benefits of an
exclusive club membership. Word of mouth advertising from this
select group will follow as a matter of course.
The basic benefits to the members will be first rights to rent
or buy new DVDs, plus nice discounts on all rentals or
purchases. Generally, club member discounts range from 30 to 50
percent compared to prices charged to non-members.
First time membership fees range from $50 to $100 the first year,
with renewal costs about half the price the following years.
Basically, club membership fees are predicated upon the benefits
available to members, the need for cash within the business, and
the pressure of the competition. You will also want to research
the membership fee structure of other stores in your area, and
be guided by current policies.
Each member should get a current catalogue of DVDs available, a
numbered membership card, a listing of club benefit3, and
perhaps a special DVD player accessory or free rental.
By all means have a sign made up for your shop window inviting
people to join your club. Display a similar sign on the
customer counter, just to remind them. Have some circulars made
up reiterating the invitation to join your club. Keep a stack
of these handy on the customer counter, and make sure everyone
who comes into your store gets one, perhaps by putting one into
each bag/package that leaves the store.
Regardless of the popularity of DVDs, the local demand,
and whatever competition you have, you'll have to promote your
store's special features and advertise skilfully. Plan to spend
at least two thirds of your investment money on advertising
during your first six months in business.
Your most effective advertising medium will be your local
newspapers. Regular display ads on the entertainment pages of
Thursdays, Fridays and Saturdays will go a long way towards
making your store known, and creating the traffic into your
store that you want and need. In these ads you should stress
the money saving features, special membership benefits and
advantages of belonging to your DVD rental club.
Another promotional idea is simply to place a TV in your shop
window, running continuous showings of the video movies most in
demand in your area.
The general idea is to be as creative and attention grabbing as
possible. You need to think of as many things as you can that
will cause people to notice your store, stop, come inside, and
find out what's going on -- what you have available.
Think of your business as being part of the entertainment field,
which it actually is, and gear your promotions accordingly. Be
as creative and imaginative as you can. Take advantage of every
promotional opportunity that comes along. Get news releases off
to all facets of the media in your area. Keep sending them in,
and keep dreaming up new angles for staging something the public
will notice. Work with the TV and DVD player equipment dealers if they
will hand out advertising circulars to new recorder owners to
join your club, in exchange for which you will send new
equipment customers to them.
Store hours for most video stores are 9:30am to 7:00pm, Monday
to Saturday. These hours will cover the demands of your
customers, with your busiest days being Thursday, Friday and
Saturday. These are usually the days when people are committing
themselves to entertainment plans for the weekend. Daily
operations usually entail signing up new members, taking care of
those who want to rent DVDs, and selling DVDs to walk in
buyers. You may want to make "special order services"
available, perhaps even a reservation list for especially
popular films that may seem to customers to be always out on
rental.
Determining how many copies of a film to stock will be a
judgement decision based upon what you know about your
customers. However, we feel it is better to have extra copies
in stock than a waiting list more than three names deep.
Whenever you have to put a customer's name on a waiting list,
you should always try to interest him in another film. In other
words, try never to let a customer leave your store without a
DVD in hand - a good one, even if it's not the one he
originally sought.
Keeping track on your inventory on a daily basis will be
necessary in order to know what the people are buying or
renting, and which of your DVDs are not moving. Ideally, you
would want to have 50 to 60 percent of your inventory rented out.
Each time a DVD is rented, a rental agreement should be filled
out, and the rental fee collected in advance. You file the
rental agreement, in a "one to thirty one" file under the date
the DVD is to be returned. Using this system, you look at the
rental agreement filed under any given date, and know
immediately which DVDs are due to return. This facilitates
dealing fairly with your waiting list, by the way.
Usually, DVDs are rented from 2:00pm one day through to 2:00pm
the next day. If a film is not returned by 2:30pm on the date
due, you should have one of your sales people start phoning
those people who are overdue, theoretically to remind him that
the DVD is due, but in such a manner that he can rent the DVD
for another day if he wants (unless, with the most popular
films, you can put a limit on rental time).
Sometimes even the best customer will forget that a DVD is due.
Probably the best way to handle this is not to make a big deal
out of it, and if he gets it in promptly, don't charge him an
extra day's rent (if he gets it in later in the afternoon). If
this is a good customer, or a potentially regular customer, you
want to keep him.
Outright theft is very rare, but when a customer does lose or
steal a DVD, bill his credit card number if you have it, and
flag the rental agreement in his file. On all first time
renters, or people who aren't members of your rental club,
always collect a deposit on the rental, equal to the value of
one DVD. Another thing: don't rent out more than one DVD at a
time until you know the customer.
Your income will be derived from several different sources.
Stores operating rental clubs average about two new members a
day. This could amount to a nice sum every month, depending on
what you charge for membership.
By and large, revenue from DVD rental will be your biggest
source of income. This money will be from club members and
non-members, but your club members will be the biggest spenders
by far. Rental revenues can average anything between $6,000 -
$20,000 per month.
You can probably count on another $2,000 per month in DVD sales
to walk in customers, as well as to your club members who want
to buy DVDs of certain favorite movies. The sale of blank
DVDs, editing machines, enhancers, stabilisers, and other
accessories will pretty much depend on how much you promote them.
Success will come from offering a wide variety of movies for
your customers. How heavy you stock up on movies in any one
category will depend mostly on your customers' preferences. In
other words, if your store caters mostly to families with
children, then you would stock up on family type films.
Checking out several successful DVD rental stores and seeing
their stock will give you an idea, and you will alter your own
stock as requests dictate.
Most stores open with at least 300 titles in stock, with an
average of seven copies of each title. How many copies of each
title you stock should be determined by the demand in your area
for each movie title.
Whenever you realise you've got a "loser" in stock, you can
either mark the price down and offer it on sale, or treat it as
a "freebie" for joining the rental club. You'll avoid getting
stuck with real disasters by keeping yourself abreast of what's
happening elsewhere via regular reading of all the trade
publications.
Whether or not to sell DVD players to your customers is a personal
decision, but if you do so, it will add to your income. Work
with the area distributors. They will supply you with tons of
sales materials and a display model. Then when a customer wants
to buy one through you, you simply "special order" it for him.
Keep your systems simple and make it easy for your customers to
shop in your store. Rent your DVDs at, say, $2.50 for one day,
$3.50 for three days.
You'll need business insurance. And because DVDs are hot
selling items on the black market, you should back up your
insurance with a good Security protection system.
The DVD market has been booming and is a really healthy market. If you're
imaginative, organised and enjoy individual selling, this could
be the vehicle to give you wealth. You've got the plan, and if
you've got the ambition, all that's missing is the action on
your part. Get with it, and the best of luck to you!
