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One of the newest, and most
profitable retail business opportunities available today is
the Videotape Store. Profits from rental of videotapes movies
have doubled each year over the past several years, and
industry experts claim this is only beginning.
Not long ago videotape recorders (now widely referred to as
video cassette recorders) were being bought at a rate of one
million units per year. Five years later, the rate had climbed
to 12 million recorders per year, and sales are still
growing. Analysts say that within a few years there will be
as many recorders in use as television sets. It follows that
all these videocassette recorders are in need of tapes, just
as an automobile requires gasoline.
Generally speaking, the average Videotape Store can be set up
with an investment or line of credit in the neighborhood of
$50,000 per year. Some stores are realizing a net profit of
35 to 40 percent with these income figures.
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 tape
rentals and purchase; a regular catalog or newsletter that
tells your members about the new tapes available; special
workshops; get-togethers, and even outings.
Think about the potentials: Videocassette recorders are now
within the price range of just about everyone in the country;
new technology, better performance and greater development of
the market will reduce the cost further. More and more people
are switching from costly evenings out to the comforts of
home videotape entertainment; market surveys profile the
typical VCR owner as between 25 and 50 years of age with an
income of $20,000 or more.
That typical customer will provide about 70% of your
income, with the remaining from blue-collar workers, college
students, and singles of both sexes. It's important that you
be a "in tuned" with what the VCR owners in your
area want, and fulfill those wants.
In selecting a location, look for a storefront in an area
surrounded by stores the typical VCR owner is likely to stop
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 on a corner, affording visibility of
your shop ideally be four lanes with no median dividers, but
with a posted speed limit of 35 MPH or less. And by all
means, 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 of your telephone and business
directories 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 customers can sit and
browse through your catalogs. You might want a coffee table,
free coffee, and catalogs on everything from VCR'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 ling-term customer
loyalty faster than any drum-beating promotions.
The best idea for the display seems to be 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 be
strong, because the weight of the videotapes can amount to 50
to 100 pounds per shelf, depending on the length of the
shelf.
Arrange the videotapes 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 allow the customers
to browse through your inventory, as they do with books on
the shelves at the public library. In other words, your
inventory of tapes 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 tapes 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 tapes 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 store manager's desk and files in
front of inventory shelves. Space partitioned off in 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 reception or customer
area; and 20% for the storage/work area. Check out a
successful store. 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 utilize your store-in 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 set designers for the
local Little Theater 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. Keep this in
mind, and decorate your store to make them feel as if they're
a part of the Hollywood scene. You can even be flamboyant
with the use of poster-sheets relating to the movies you have
available. These are actually called "one-sheets"
and you can get them free or for a very small charge from
your local theaters. If you run into any problems, simply
write to the studios, get the names of the movies'
distributors, and ask them for the ones you need. Colorful
"billboard" posters, along light colored walls,
floor covering, and inventory storage shelves, will
definitely help to create a "Hollywood Mood," and
on the bottom line, sell more tapes for you. remember, you're
wanting to create a mood conductive to persuading your
customers to rent or buy your product.
Your display equipment tape rental store owners have even
gone so far as putting in a miniature movie marquee that
lights up; spotlights and theater style track lightening
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 videotape recorder. It's generally
best to go with VHS system, because over the long haul,
you'll find most of your customers preferring this system
because it has a longer playing time than the Beta system
equipment. You'll need this minimum equipment] in order to
test your tapes and give the customers an instant preview of
the movies they are interested in renting or buying.
You should also plan to get a good typewriter that will
accommodate several different styles and size of type. This
will be your key to the make-up of new pages for your
catalogs and the preparation of your newsletter.
Be sure to organize yourself with a bank in order to
handle at least the major charge cards. Simple advertising of
the fact that you accept credit card purchases will almost
double your volume. Since most of your transactions will be
by charge card or check, you won't need a fancy cash
register. A simple metal cash box, available at most office
supply outlets, will work very well for the first few months,
and you can evaluate any needed charge later.
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 a 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 promotions and selling.
In addition to yourself and a manager trainee, you'll need a
part-time sales person to help out during your busy times. A
manager trainee is paid about $14,000 per year, with
commissions on gross sales once he becomes your manager in
fact. You should expect to pay your sales people a bit above
the prevailing minimum wage, with an opportunity for them to
increase their earnings via commissions on all sales over a
certain dollar amount each month.
It will be on your benefit if you and your employees keep
yourselves up to date on the industry by reading everything
possible relating to videotapes, movies and the associated
equipment. This means advertising; brochures, newsletter,
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 preferences of the individual customer.
As videotape 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 tapes, plus nice discounts on all rentals or
purchases. Generally, club members 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 as much. Basically, club
membership fees are predicted 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 catalog of tapes available,
a numbered membership card, a listing of club benefits, and
perhaps a special VCR accessory or free rental. You can
expand your market to statewide, nationwide or even worldwide
proportions simply by placing display ads in publications
serving the markets you want to reach. When operating by mail
you'll need a set of rules (you might call it a contract)
setting forth your policies. You'll also want to factor
shipping costs and any insurance charges into your "by
mail" rates.
By all means have a sign made up for your show window
inviting people to join your club. Display a similar sign on
the customer counter, just to remind them. Have some flyers
or circulars made up reiterating the invitation to join your
club. Keep a stack of these handy on the customer, and make
sure everyone who comes into your store gets one, perhaps by
putting it into each bag/package that leaves the store.
Regardless of the popularity of videotapes, the local demand,
and whatever competition you have, you'll have to promote
your store's special features and advertise skillfully. Plan
to spend at least two thirds of your initial 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 on
Thursdays, Fridays and Saturdays will go a long way toward
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 videotape club.
A relatively low cost idea for the on-going promotion of your
club might be to have a freelance designer develop a special
logo for you. Make patches out of this logo and have one of
the advertising cap makers supply you with sports caps
personalized with your videotape club's logo. Your club
membership might be called elite, because your club members
will be the only ones able to get the caps. The people they
associated with will ask about them, and the growth of your
club will be assured. Another promotional idea is simply to
place a TV in your show window, running continuous showings
of the video movies most in demand in your area.
The general idea is to be as "traffic-stopping" and
creative as your local zoning laws will allow you to be with
your storefront and outside signs. Sandwich boards plastered
with movie "billboard" poster signs; bikini-clad
girls "picketing" in front of your store (you might
want to check this out with your local regulations);
simulated movie production scenes, are all attention-grabbing
ideas that will cause people to notice your store, stop, come
inside, and find out what's going on---what you have
available. Mission accomplished!
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 get.
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 VCR equipment dealers if they will hand out
advertising circulars to new cassette recorders owners to
join your club, in exchange for which you will send new
equipment customers to them.
Store hours for most video stores are 9:00 a.m. to 7:00
p.m. Monday thru 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 to those who want to rent tapes, and selling
tapes 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
judgment 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 two or three names
deep. Whenever you have to put a customer's name on a waiting
list, you should always try to interest him another film. In
other words, try never to let a customer leave your store
without a tape in hand--a good one, even if it's not the one
he originally sought.
Keeping track of your inventory on a daily basis will be
necessary in order to know what people are buying or renting,
and which of your tapes are NOT moving. Ideally, your should
want to have 50 to 60 percent of your inventory rented out.
Each time a tape 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 tape is to be returned. Using this system,
you look at the rental agreements filed under any given date,
and know immediately which tapes are due for return. This
facilities dealing fairly with your waiting list, by the way.
Usually, tapes are rented from 2:00 p.m. one day thru 2:00
p.m. the next day. If a film is not returned by 2:30 on the
date due, you should have one of your sales people start
calling on those customers who are overdue, theoretically to
remind him that the tape is due, but in such a manner that he
can rent the tape for another day if he wants (unless, with
the most popular films, you put a time limit on rental time).
Sometimes even the best customer will forget that a tape
is due. Probably the best way to handle this is not to make a
big deal of it, and if he gets in 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 tape, bill his charge card number, and flag the
rental agreement in his file. On 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 the tape.
Another thing: Don't rent out more than one tape at a time
until you get to know the customer.
Your business income will be derived from several different
sources. Stores operating rental clubs generally average
about two new members per day. At $75 per member, this could
amount to $3,000 per month. (again, research the
"going" fees in your area.)
By and large, revenue from tape 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 average anywhere from $3,000
to $15,000 per month.
You can probably count on another $1,000 per month in tape
sales to walk-in customers, as well as to your club members
who want to buy tapes of certain favorite movies. The sale of
blank tapes, editing machines, enhancers, stabilizers 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 your customers'
preferences. In other words, if your store caters mostly to
families with children, then you would stock up heavily on
family-type films. Checking out several successful videotape
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 realize you've got a "loser" in stock,
you can either mark a the price down and offer it on sale, or
treat it as a "freebie" for joining the rental
club. You'll avoid getting stuck will real disasters by
keeping yourself abreast of what's happening elsewhere via
regular reading of all the trade publications.
Whether or not to sell VCR's to your customers is a personal
decision, but if you do so, it will add to your income. Work
with the area distributors. This will supply you with
literally 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 tapes at say, $3 for one
day, $5 for two days, or $15 for a full week.
About the only licenses you'll need will be a local business
license plus whatever state or city sales tax permits are
required in your area. Check with your city and county clerks
for information in these areas.
You'll need standard business insurance. And because
videotapes are hot-selling items on the black market, you
should back up your inventory with a good security protection
system.
There are a number of companies selling franchised Videotape
Stores. It really isn't necessary for you to spend the extra
money for a franchised operation. The main value of a
franchise program is in the assistance they provide in
getting better prices on the tapes you want to inventory.
However, you can contact the suppliers directly and negotiate
your own deals if you want to take the time to do it.
The video market is beginning to really boom. If you're
imaginative, organized 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!
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