Wal-Mart Takes on Video Rentals
BENTONVILLE, Ark. -- The Friday night trip to the video store could become a thing of the past. At least, that's what Wal-Mart is working toward.
The discount giant -- known for its aggressive pricing on gasoline and groceries -- is taking on the video rental industry with a $15.54 monthly service in which users order DVDs online. The business model is similar to online video rental pioneer Netflix.com, according to the Raleigh News & Observer.
To keep up, Blockbuster is coming up with a similar service. The nation's leading video store chain has been testing the concept with a site it bought last year called filmcaddy.com. It expects to introduce a combination service using the Web and its vast chain of stores next year. But video store owners, which includes many convenience store operators with in-store video rentals, say that despite the new services, old-fashioned video stores will never disappear, mostly because of their convenience and customer service.
"By and large, renting a movie is still an impulse activity," said Randy Hargrove, a spokesman with Dallas-based Blockbuster, which is expected to open between 300 and 400 more stores this year. "A lot of people make the decision to rent the day of. They don't want to be tied down by the mail system."
So far only a handful of people are taking advantage of the online option. Of the $8 billion spent on movie rentals last year in the United States, less than $200 million was spent online, Hargrove said. Wal-Mart, on the other hand, thinks the mail system will convert traditional DVD renters because Wal-Mart and others' online service eliminates the dreaded late fee, one of the biggest complaints among movie renters. U.S. consumers annually pay about $1.2 billion in fees, said Cynthia Lin, a Wal-Mart spokeswoman.
With Wal-Mart's and Netflix service, users keep the movies for as long as they want. Once they return the DVDs in a prepaid postage envelope in the mail, more DVDs are sent.
"That's why consumers will respond to this," Lin said. "They don't have to worry about going out at midnight to make sure a movie is returned."
The discount giant -- known for its aggressive pricing on gasoline and groceries -- is taking on the video rental industry with a $15.54 monthly service in which users order DVDs online. The business model is similar to online video rental pioneer Netflix.com, according to the Raleigh News & Observer.
To keep up, Blockbuster is coming up with a similar service. The nation's leading video store chain has been testing the concept with a site it bought last year called filmcaddy.com. It expects to introduce a combination service using the Web and its vast chain of stores next year. But video store owners, which includes many convenience store operators with in-store video rentals, say that despite the new services, old-fashioned video stores will never disappear, mostly because of their convenience and customer service.
"By and large, renting a movie is still an impulse activity," said Randy Hargrove, a spokesman with Dallas-based Blockbuster, which is expected to open between 300 and 400 more stores this year. "A lot of people make the decision to rent the day of. They don't want to be tied down by the mail system."
So far only a handful of people are taking advantage of the online option. Of the $8 billion spent on movie rentals last year in the United States, less than $200 million was spent online, Hargrove said. Wal-Mart, on the other hand, thinks the mail system will convert traditional DVD renters because Wal-Mart and others' online service eliminates the dreaded late fee, one of the biggest complaints among movie renters. U.S. consumers annually pay about $1.2 billion in fees, said Cynthia Lin, a Wal-Mart spokeswoman.
With Wal-Mart's and Netflix service, users keep the movies for as long as they want. Once they return the DVDs in a prepaid postage envelope in the mail, more DVDs are sent.
"That's why consumers will respond to this," Lin said. "They don't have to worry about going out at midnight to make sure a movie is returned."