Blockbuster

1
Blockbuster
2
Gap in the market

• Video stores did not have a clear understanding
  of customer wants lack of variety, X-rated
  movies, rental time
• Did not recognize important segments children,
  families
• Did not have capabilities and resources
  brightly lit stores, good locations, good
  customer service (checkout times, selection)
• Growing video rental market
• Filled by addressing each element

3
Key strengths

• Store management and operations
• Checkout procedure (quick and consistent service)
• Tracks customer preferences
• Store layout
• Distribution
• Efficient transfers warehouse to stores and
  store to store
• Lowered costs of servicing video stores (cluster)
• Size gives negotiating power and discounts
• Marketing
• Campaigns, Blockbuster kids, Kidprint, Joint
  promotions
• Leadership
• Expertise in fragmented areas

4
Problems in 1996

• Intensifying rivalry consolidating industry,
  large regional rivals
• Suppliers (movie studios) selling directly to
  consumers
• Growth of substitute products - Development of
  new technology, Pay per view, video on demand
• Problems with diversification risks and low
  returns in music and movies

5
Blockbuster

• Possibility of merger with Columbia House
• Shrinking video retail business
• Quarterly profits rise 47 (quarterly revenue
  1.4 billion) due to cuts in promotional spending
• Consumers averse to late fees
• 16 of revenues in 2000
• Faced lawsuits that allege late fees are
  excessive
• Competition from NetFlix, Walmart Offering
  online DVD subscription service and testing
  service in select stores(late fees replaced by
  monthly charges)
• Technological trends EZ-D (alternative to late
  fees)