How Small Video Stores Compete and Succeed in a Crowded Market

There's been a lot of coverage lately of the battle between Blockbuster and Netflix. With these two behemoths competing for the DVD-by-mail market, and Hollywood Video (now owned by Movie Gallery) offering rack upon rack of new releases at its stores, it can sometimes feel like there is little room for smaller firms to compete. Today, however, reports that independent video stores are doing surprisingly well.

As the big companies close stores in an effort to make their enterprises lean and competitive, small movie shops are moving in to fill the gaps. They're offering older movies, foreign films and art house titles to attract movie connoisseurs and impulse buyers -- those who don't want to wait two or three days to receive a film in the mail. And they're succeeding. Marty Graham, president of the pay-per-transaction division at Rentrak comments, "We've seen some of the more aggressive independents looking to expand their businesses.... A minority are opening additional stores as the major chains pull out of a particular market."

According to Forbes, the success of these small shops offers some lessons to companies wishing to compete in markets dominated by established competitors.

  1. Carve out a niche. If you don't have the muscle to go head to head in a given product line, try another.
  2. Customer service matters. Wu [proprietor of an independent video shop], a movie buff, says he can take a chance on stocking unusual titles because his customers value his recommendations.
  3. Offer complementary products. To boost sales, some small retailers have branched into pizza, phone retailing and even fake tanning.
  4. Craft flexible payment schemes. When Blockbuster did away with late fees two years ago, Alan Milligan, owner of Memphis-based Marquee Movies, responded by letting his customers prepay for rentals and rack up points, similar to a credit card rewards program.
So before you rule out entering a market which seems crowded with established firms, consider if your company could succeed by filling a niche with creativity and quality customer service.