Can Blockbuster Turn Its Stores Into Destinations?

from the worth-a-shot dept

Blockbuster clearly knows it's facing mounting challenges to its business. The company has been mostly outplayed by Netflix in the online rental market (though, Blockbuster's competing offering has done much better than some others who have tried to play the Netflix game). The company's financials have been a bit of a mess, but it's still planning for the future -- and that includes recognizing that the market is changing drastically, and it needs to change with it. While no one knows if it will be able to survive these changes, it's still rather refreshing to at least see the company try to meet those challenges head on. Recently, it's talked about a strategy to create its own set top box as well as put out an unsolicited bid to buy Circuit City. While both ideas have some problems (the Circuit City acquisition would be particularly hard to pull off for example), it does show that the company is trying to branch out.

What may be even more interesting, though is that Blockbuster clearly recognizes that it has an asset in its brick-and-mortar stores that Netflix can't easily copy. While some may say that the stores are a liability, that may depend on what Blockbuster can do with them. Already, it tries to leverage the stores in its online rental service (allowing you to return movies to the stores and immediately pick up a new film as part of your subscription), but as Gizmodo points out, it's also experimenting with making the shops into real destinations, rather than just rental shops. It's playing with a few different "formulas" to see how people respond -- including setting up a bar where people can buy soda or coffee and another where there's free WiFi and people can play video games on a big screen. It's also testing out setting up a store where shoppers can buy consumer electronics. You can consider that last one a test run for what would happen if the Circuit City deal goes through.

Turning the stores into more of a destination, with a variety of options on ways to make money off of the customers is a necessary strategy -- though, it's hard to pull off well (so, at the very least, it's good to see the company experiment before rolling something out nationally). Sam Goody, the big record store chain, tried to do something similar a few years back, and it didn't work out all that well. A large part of the problem may be really convincing people that it's a worthwhile destination. This is one case where the company's reputation matters, and Blockbuster's reputation isn't great. Still, this is the right strategy -- though, success or failure is very much dependent on the execution, which isn't exactly Blockbuster's strong suit.
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Filed Under: destinations, movie rentals, retail stores
Companies: blockbuster


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  1. identicon
    James, 28 Apr 2008 @ 9:56am

    I don't know that I agree with the thought process that simply diversifying an existing store will attract more foot traffic to the business. If I am wanting to go rent a video, I am not thinking to myself "Ok, which video store in the city is going to give me the best experience for the 10 minutes I am in there?".

    Similarly, if I want coffee I go to a coffee store, if I want electronics I go to an electronics store, if I want to shop at a circuit city I will go to a circuit city. Having all these things in a blockbuster might actually deter me from going there. If I want to chat over a cup of coffee, I don't want to be bothered by the noise of a video store or bask in the glow of fluorescent lighting. If I am shopping for a big screen TV, there is something a little less comforting to me when buying one from people who work along side minimum wage blockbuster employees.

    Diversification works for some businesses, however "some" is the key word. Certain businesses, such as video rental stores, need to figure out that they provide a very specific service, which is that people want to watch movies in the comfort of their living rooms (big screen TVs or not) and adding additional 'experience' will not shake my desire to pull up to the store, get in, grab my movie, pay, and get out.

    What they need to do is figure out ways to make that experience more convenient. Blockbuster was right on track by differentiating themselves from the competition by eliminating late fees, and providing a service similar to Netflix with the option of 'in-store trade-in' as it enhances their core service by making the same process more convenient. Blockbuster should look at something like digital on demand services over the internet if they are looking at expanding anything.

    Realistically, digital content is coming, so why would they sink more money into stores that likely will eventually become obsolete?

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