Victors in the Video Game : Surviving on a Smile in Retail Darwinism of the Rental Market
Sipping coffee and reading the newspaper, Charles Greely sat patiently in his car waiting for the local video store to open. By his side, five rented videos were ready for return. He planned to rent three more that day.
“You can’t go wrong for a dollar,” said Greely, 28, as he pointed to the huge “All Videos 94 Cents” sign painted on the storefront window. “They got everything I need, and it’s quick and easy.”
Greely has rented movies from Videoland in Tustin for the past two years. He said he is well aware of the nearby Wherehouse, Music Plus, Tower Records and Blockbuster Video stores. He watches their commercials and sees their ads in the newspaper all the time.
Nevertheless, the Santa Ana resident would never think of renting from these mega-chains.
“They’re all the same. They’re not user-friendly,” he said, grinning. “I feel welcome in this store.”
Videoland, opened in 1984, is one of more than 200 independent video rental stores in the county that compete successfully with the chains. In the battle of video rental stores, the losers are most often small, independent operators. But in Videoland’s case, owner Le Huynh, 45, is holding his own. And he plans to open another store in Tustin this year.
“The major reason why we are so successful is because of our price and customer service,” said Huynh, a former computer engineer at Unisys Corp. in Irvine. “Many people come in and tell me they like the store because they know us. They tell me they prefer my store to the chains.”
Huynh said his family operates 15 video stores, two of which he owns: the Tustin store and another in Riverside. The other stores are spread throughout Orange, Los Angeles and Riverside counties. He spends most of his time in the Tustin store, where the customer base is up to 50,000 people, he said. Of those, about 10% are military personnel.
“Our terms are simple. We only take cash. No credit cards. If you’ve got the proper ID, you can rent from me,” he said.
While most independents have misgivings and even fears about competing with majors, Huynh said he would be happy if Blockbuster opened a store across the street.
“It would mean more business for me,” he said. “When people see they can get movies from me for $1, compared to $2.50 or $3 at Blockbuster, they’ll always go for the value.”
Bruce Apar, editor of New York-based Video Business, a 44,000-circulation weekly for video retailers, said he is not surprised by the success Huynh has competing against large chains.
“I think we’re dealing with two myths,” he said, “one being that only Blockbuster is the dominant store, and the other is that these small independents don’t have a chance against the big guys.”
In a world where consumer loyalty is not in the vocabulary, independents have to compete based on prices, convenience, service and selection, Apar said.
Ten years ago, videocassette rentals were primarily the realm of independent stores, much as in the early days of independent record stores. But with the emergence of chain operators--such as Blockbuster, the Wherehouse and Music Plus--the market has changed dramatically, Apar said.
Today, video industry sales have slowed. The video rental business had gotten used to triple-digit growth. Now video rentals are not confined only to the specialized market but can be found in all kinds of venues, such as supermarkets and drugstores, Apar said.
According to industry figures, the U.S. video industry generates up to $11-billion a year. Rentals represent 77% of the market and sales about 9%; the balance is from the sale of blank tapes, hardware and candy.
“Sales is becoming an important factor, as well,” Apar said. “Not too long ago, videos priced at $15 were unheard of. Now, many people are just purchasing the video and not renting it.”
Music Plus has 19 stores in the county, with videos accounting for 25% of company business. Lou Fogelman, president and CEO of the Los Angeles-based company, said when there is a strong independent video retailer in the area, that presence is felt.
“I do believe that a good independent can compete with us or any Blockbuster. There’s more than one way to skin a cat,” Fogelman said.
“If you run your business well, service the customer and have the inventory your customer is looking for, they’ll keep coming back,” he said. “But it’s not a free ride.”
Three years ago, Blockbuster Video was not an issue for Mohsen Neghabat. Today, he bristles at the mention of the video giant.
“When they (Blockbuster) first moved in, they took 50% of my business,” said Neghabat, who manages Video Empire in Irvine.
“It was November of 1990 when Blockbuster opened,” he recalled. “I received no notice that they would be opening their store across the street from mine. I’m sure they were well aware of my store and my customer base.”
Neghabat, who became part-owner of Video Empire with longtime friend Paul Shoaii in 1986, said he thinks that Blockbuster’s opening was part of the company’s overall strategy.
“They have so many locations to pick from, but they chose this spot,” he said. “They want to monopolize the market and set the prices.”
Neghabat reacted with lower prices, specials and giveaways. “To lose that many (customers) was hurting me,” he said. “But slowly I noticed some of those people coming back, upset with the mentality of Blockbuster.”
Neghabat decided not to react to every Blockbuster move. His store returned to its original price structure, cut back on personnel and kept up on video releases, though he did not order as many copies of new releases as in the past.
While Neghabat said he realizes that he will never regain the customer base he once had, he vowed to fight “until one of us gives up.”
The 2,050-store Blockbuster chain, which is based in Fort Lauderdale, Fla., first came to California in 1988 in the San Diego area. It has 23 stores dotting Orange County’s landscape with yellow-and-blue Blockbuster signs.
While it appears that the emergence of these stores was sudden, Blockbuster spokesman Wally Knief denied a hidden company agenda. “We have always said that when we go into a community, we don’t want to put someone out of businesses,” he said. “We advertise 52 weeks out of the year. We have countless promotions and television advertisements. We’re trying to create new interest in the old video industry.”
Knief said the Southland is considered extremely important by Blockbuster, which claims a 13% overall share of the world market for video rentals. In 1991, the company’s revenue was $1.4 billion.
When a nearby independent goes out of business, other factors were probably responsible, he said.
Glen Powers, owner and operator of the Video Station in Laguna Hills, considers himself a video rental pioneer. Powers often uses Darwinian phrases to describe the video rental business.
“No doubt about it, it’s survival of the fittest,” he said, recalling the many friends and associates who have gone under since he started in the business 13 years ago.
“I’ve seen a lot of stores become extinct. But it’s expected,” he said. “And now, with videos available everywhere, the independent has to find new ways to survive.”
For Powers, the key to survival has been extra service. “Many of my customers don’t have a problem with a price,” he said. “If I can get it for them, they want it. If I don’t, they’ll go somewhere else. It’s that simple.”
Although he still gets excited about new releases and the interaction with customers, if he had to do it over again, he would probably have steered clear of this type of business, Powers said.
“I sometimes wish I had sold out four years ago when I had a chance,” he said. “I’m making it, but I’m not getting rich. I’m just surviving. But I’m not extinct yet.”
Who’s Who in the Video Market
Analysts estimate that the prerecorded home video market is an $11-billion industry. The giant in the field is Blockbuster Video, based in Ft. Lauderdale, Fla. A little lower on the video food chain are Huntington Beach-based Vide-O-Lympix and Tustin-based Videoland.
Popular National Chains
Revenue (in millions Stores of dollars) Blockbuster Video 2,050 $1,400.0 Sam Goody 1,050 185.0 The Wherehouse 382 148.0 Tower Video 70 68.0 Music Plus 82 33.0
A Trip to the Video Store
Movie rentals are the prime focus, but they do not account for the total dollars spent. How sales break down:
Category / Percentage
Movie rentals: 71.7%
Hardware and other sales: 9.5%
New-video sales: 6.0%
Game rentals: 5.2%
Used-video sales: 3.2%
Candy, soft drinks, food: 3.0%
Blank-tape sales: 1.4%
Southern California Chains
Revenue (in millions Stores of dollars) 20/20 Video 20 $12.5 Video Super Shop 20 7.3 Mr. Video 8 5.9 Videotheque 3 3.8 Odyssey Video 3 3.5 Video Choice 9 3.2 Video 101 14 3.0 Video Depot 8 2.5 (Palm Desert) Video Depot 8 2.5 (Encinitas) Vide-O-Lympix* 11 2.4 Videoland* 15 2.3 Military Rent-All 19 2.3 Prime Time Video 5 2.3
* Orange County-based
Source: Video Store Magazine
