Dvd new release rental

Every smart retailer knows that business growth depends on identifying a consumer need and then filling it. For Elephant Pharmacy, an independent drug store in Berkeley, Calif., the consumer need is DVD rentals.

Elephant founder and chief executive officer Stuart Skorman felt that video outlets underserved the East Bay area. While a VHS-rental section required more of a space commitment than the 9,500-square-foot store could spare, a slimmed-down DVD department was another story.

"The whole department needs only about 500 feet, so it's much easier to have a huge selection in a small space," Skorman said. "It's also a lot easier to deal with DVDs than VHS cassettes. DVDs are cheaper to buy and ship, and they are easier to handle than VHS cassettes."

Checkout can be a big stumbling block, but Elephant already dedicates a separate counter to photo processing, so checking out DVDs there was a practical solution. "Having a separate checkout counter for rentals is one reason supermarkets are successful with video rental," Skorman said. "You can't have a customer holding up the line arguing about when he brought a video back. But since we already had a separate checkout, we could offer a dedicated checkout for DVDs." The photo clerk also makes follow-up and late-fee calls, so additional labor isn't needed.

Setting up the department was no problem for Skorman, who owned reel.com and a chain of video stores in New England before he opened Elephant.

Elephant's DVD section features 5,000 titles--about half the selection of a typical Blockbuster store. The store concentrates on new releases and merchandises one-third of new release titles face out. "About 95 percent of our older releases are merchandised spine out, but there are drawbacks to that. When too many DVDs are merchandised spine out, it can become difficult for the customer to shop the section," he said. A rental fee of $2.50 gets customers a new release for two days or an older title for five days.

The sleeper part of the category is previously viewed DVDs. "The $9.99 price point is magic. It becomes an impulse item, and people are willing to pay under $10 for a movie they watch once," Skorman said. "The previously viewed video segment is the biggest opportunity for sell-through."

The store currently generates about $3,000 per week in rental sales, and Skorman estimates impulse sales of other merchandise purchased by renters are three times that figure.

In fact, he said the biggest bonus to adding video is the traffic the department generates on otherwise slow nights. "Our slowest nights are Friday and Saturday, and this was a key way to pick up traffic, as well as draw a younger crowd into the store," Skorman said. "We're seeing customers we've never seen in the store before because of the new department." And the store is seeing them twice--for rental, as well as return.

Skorman is bullish on the video business. "Video isn't for every store--it really depends on what the competition is like, but it's something independents and chains should consider on a selective basis," he said.

Even stores in neighborhoods that already are served by video chains could consider their own departments. "If the local video stores are always busy, they may not have enough copies of a new release that's in demand," Skorman said. "If your store becomes known for having new titles, you can grab some of that business."