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How To Set Up Your Own Video Rental Store
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 the
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 sales rate had climbed to 12 million recorders per year, and sales are
still increasing. 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. Utilizing good management
techniques, and taking advantage of natural promotional opportunities, such a store will
gross $250,000 per year. Some stores are realizing a net profit of 35 to 45 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
purchases; 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 even further. More and more people
are switching from costly evenings out to the comforts of home and 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 30% coming from blue-collar workers, college students, and singles of both
sexes. It's important that you be "in tune" 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 shop 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 from several directions. The
street fronting your store should ideally be four lanes with no median dividers, but with
a posted speed limit of 35 M.P.H. 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 your 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 long-term customer loyalty
faster than by any drum-beating promotions.
The best idea for the display seems to be on wooden shelves lining the
walls of the sales area behind the customer counter. These shelves can be built by a local
handy man and either painted or stained. It's important, however, that they be strong, be
cause 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 not allow your 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 out side printed message, should be
kept behind your counters, in an area accessible only to your people.
You can locate your manager's desk and files in front of the inventory
shelves. Space partitioned off in the 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 the reception or customer area; and 20% for
storage/work area. Check out a 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 in-store 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 the 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 for the ones you need. Colorful "billboard"
posters, along with light colored walls, floor covering, and inventory storage shelves,
will definitely help create a "Hollywood Mood," and on the bottom line, sell
more tapes for you. Remember, you're wanting to create a mood conducive to persuading your
customers to rent or buy your products.
Some of the imaginative tape rental store owners have even gone so far
as putting in a miniature movie marquee that lights up; spotlights and theater-style track
lighting 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 a 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 your 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 sizes 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 sales 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 change 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 an electronics wizard, because there will 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 or 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 to 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, newsletters, 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 be come 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 member
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 predicated 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 counter, 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 news papers.
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 free-lance 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 then be called
elite, be cause you club members will be the only ones able to get the caps. The people
they associate with will ask about them and 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 local
regulations); simulated movie production scenes, are all attention-grabbing ideas that
will cause people to notice your store, stop, come inside, and find 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. 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 recorder
owners to join your club, in exchange for which you will send new equipment customers to
them.
Store hours for most video stores are 9:30 a.m. to 7:00 p.m., Monday
through 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 of
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 three names deep. Whenever you
have to put a customer's name on a waiting list, you should always try to interest him in
an other 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 the people are buying or renting, and which of your tapes are not
moving. Ideally, you would 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 re turn. This facilitates dealing fairly with your waiting list,
by the way.
Usually, tapes are rented from 2:00 p.m. one day through 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
salespeople 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 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 out of it, and if he gets
it 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 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 all
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"
membership 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 movies in any one category will depend mostly 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 the price down and offer it on sale, or treat it as a -freebie' for joining
the rental club. You'll avoid getting stuck with real disasters by keeping yourself
abreast of what's happening else where 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. The 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 insurance 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.
An alternative to the franchise operation is the "affiliate"
program offered by Video Station, Inc., 12021 Wilshire Blvd, West Los Angeles, CA 90025.
Founded by industry pioneer George Atkinson, the videotape stores belonging to this group
retain their independence and pay no royalties. Yet, because they are a large group
affiliated with one buying association, they can procure inventory purchases at tremendous
savings for members.
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 our
part. Get with it, and the best of luck to you!
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