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!