Blockbuster Video Analysis

The video rental industry was one of the more growing services retailers in the mid-1990s. However, due to Blockbuster, many rental video companies have failed to compete against this category killer. West Coast Video, Video City, and Hollywood Video, which are among the few and only large competitor’s of Blockbuster in the tri-state area. Many family-owned video rental stores could not compete against Blockbuster’s assortment of videos.

Blockbuster opened its first store in 1985 and has grown to become the world’s number one video chain. Blockbuster is open 365 days a year with 9,800 stores worldwide. Customer base has risen above 50 million in the United States as well as several million more worldwide. The Gallup Organization, known for the Gallup Polls, declared that Blockbuster has 100 percent recognition. Most importantly, 70 percent of the population in the United States lives within ten minutes of a Blockbuster store. Category killers, however, usually attract customers from far distances. Because most customers are ten minutes away, small businesses in competition will fail.

A recent marketing campaign has been the promotion of DirecTV, a digital satellite service alternative to cable television. Also, an alliance with Radio Shack has been in effect promoting new technologies. To compete against the up rise of online rental services, Blockbuster has been testing online rental services which allow customers to reserve and rent videos from specific stores.

The other services retailer is West Coast Video, a Philadelphia-based company that was once a supreme challenger to Blockbuster. West Coast Video was at one point, New Jersey’s largest video rental chain in 1997. That preceding year, the company acquired stores from Palmer Video, Super Video, and Great American Video. It became the fourth largest video chain with close to half of its 568 stores in New Jersey. However, the company has approximately 225 stores to avoid going out of business. This year, West Coast has closed most of its North New Jersey stores, including this analyzed store. The West Coast store has been bought out by Video City, a recent competitor trying to tackle the Northeast market. However, they only operate a small number of stores in the area and specialize in e-commerce. They have no marketing strategies as of yet.

The Blockbuster store is located in Nutley, New Jersey, a middle-class town that is fairly large. The town houses over 30,000 people and the downtown area consists of a main street (Franklin Avenue) with a Shop Rite, small shops, fast-food restaurants such as Burger King, steakhouses, pizza parlors, and a number of schools. Blockbuster is located at the most condensed part of this avenue and is the largest and most noticeable business at this part of the area. This Nutley location is the largest store in New Jersey with 2 floors. There is only a second floor entrance/exit and the new releases are located on the first floor. Blockbuster also has a large assortment and variety of videos that include: drama, comedy, horror, action, martial arts, children, musical, as well as the newest line of video games. They also carry the largest number of DVDs for rent as well.

Pricing at Blockbuster is relatively moderate. New release cost has risen slightly the last few years and is currently at $4.23 per rental. The length of holdings for the newest releases are two days, the rest of the new releases are 5 days, and the videos must be returned before noon. Older category releases are 5-day rentals and cost $3.17, which is cheaper of the two companies. Games are 5-day rentals and cost $5.99. Blockbuster also offers the rental of game systems. However, they are quite expensive, they give the customer a chance to test out the system by renting it before they decide to purchase the item. New video game systems that have come out this year are X-Box and Nintendo Gamecube. These will be very popular rentals and Blockbuster will carry all the newest game releases for these video game systems. Late fees are also a problem with customers; Blockbuster charges the cost of the rental per day. Blockbuster also has a popular program called Rewards and members pay a small fee yearly, which keeps track of customer rentals. Customers receive free rentals when they purchase a number of rentals on certain days and through the month. The Nutley store also offers 30 rentals in a month and the customer must rent the free rental per day for the month.

The size of the Nutley Blockbuster store resembles that of a category killer because most video rental stores are moderately sized. There is lots of space, wide aisles, and the categories are spread evenly throughout both floors of the store. The new releases are placed on the walls around the floor so that the customer must walk through the whole floor to find the movie that they desire. By doing