HOW TO START AND OPERATE A VIDEODVD RENTAL STORE
One of the newest, and most profitable retail business
opportunities available today is the VideoDVD store. Profits
from rental of video DVD movies have doubled each year over the
past years, and industry experts claim this is only the beginning.
Not long ago videoDVD recorders (now widely referred to as video
recorders) were being bought at the rate of one million units per
year, and this figure is increasing every year. Analysts say that
within a few years there will be as many video recorders in use as
television sets. It follows that all these video machines are in
need of DVDs, just as a car needs petrol.
Generally speaking, the average video DVD 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 video DVD
entertainment.
The typical customer will provide about 70% of your income, with
the remaining 30% coming from blue collar workers, college
students, and singles of both sexes. It's important that you be
"in tune" with what the DVD player owners 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.
You should strive to make the customer space in front of the
counter comfortable and relaxing. There should be an overall
atmosphere of friendliness. Place a couple of chairs or stools in
front of the counter so that your customers can sit and browse
through your catalogues. You might want a coffee table, free
coffee, and catalogues on everything from DVD player's to equipment
accessories to special order movies.
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 video DVDs can amount to 50 to 100 dollars per
shelf, depending on the length of the shelf.
Arrange the video 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 video DVD 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 your 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 video 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 videoDVD 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 benefits, 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 video 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 video DVD 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 cassette 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 videoDVD 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 player's 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, $4.50 for one day,
$10.00 for three days, or $20 for a week.
You'll need business insurance. And because video DVDs are hot
selling items on the black market, you should back up your
insurance with a good security protection system.
The video market is beginning to really boom. If you're
imaginative, organised and enjoy individual selling, this could be
the vehicle to make you rich. 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!
