HOW TO SET UP AND OPERATE
YOUR OWN VIDEOTAPE
RENTAL STORE
One of the newest and most profitable retail business opportunities available today is
the Videotape Store. Profits from rental of videotapes have doubled in a number of the
past several years, and industry experts claim this trend will continue through the end of
the century.
Not long ago videotape recorders (now widely referred to as VCRs) 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 predict that within a
few years there will be as many recorders in use as television sets. Just as an automobile
requires gasoline, all these videocassette recorders are in need of tapes. This is where
you come into the picture.
Generally speaking, the average Videotape Store can be set up with an investment or
line of credit in the neighborhood of $75,000. Utilizing good management techniques and
taking advantage of natural promotional opportunities, such a store will gross $250,000
annually. Some stores are realizing a net profit of 35 to 45 percent with these income
figures.
The secret to achieving and maintaining high 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 newest tapes available, special workshops,
special preview screenings, and even outings.
Consider the potential: 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 overtime. More and more people are
switching from costly evenings out to the comforts of home 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 bluecollar 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
that you move quickly to fulfill those wants.
In selecting a location, look for a storefront in an area surrounded by stores in which
the typical VCR owner is likely to shop. Locate your store in a high traffic strip mall in
an above average neighbor, or in a stand alone location alongside such a mall. 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 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. A
solidtopped sales and display counter across the front, separating the customers from
the sales area works best. Glass counters with shelves may be set alongside this main
counter for the display of feature merchandise, and can be purchased by contacting the
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.
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 adjacent counters so that your customers can sit and browse through your
catalogs. You might want a coffee table, free coffee, and catalogs on everything from VCRs
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 longterm customer loyalty
faster than by any drumbeating promotions.
People today like to serve themselves, but they also like to have a sales assistant
close at at hand should the need arise. Make your merchandise, both tapes for sale and
rental, easily accessible to the customer. Shelves holding sale merchandise should be kept
near the counter, within eyesight of the sales staff, both making the clerk available for
questions and enabling you to keep an eye on the merchandise. Tapes available for rental
should be placed on shelves no higher than five feet in height. Line all the available
wall space with shelves, and place several rows of lower, doublesided shelves across
the center of the store, no more than four feet in height. These rows of lower shelves
should be broken occasionally by aisles to provide access from one side to the other.
These shelves can be purchased locally, or built by a local handyman and either painted or
stained. It's important, however, that they be strong, because the weight of the
videotapes can amount to 50 to 100 pounds per shelf, depending on the length of the shelf.
The tapes you purchase for rental will arrive in cardboard sleeves with the description
and a miniature version of the movie poster printed on the outside. Immediately remove the
tape from the sleeve and place an identification number (either a specially printed
adhesive sticker or a number written in indelible marker) on the tape. The identification
number should match the number in your master file identifying the tape, its supplier,
cost, date of purchase, etc. This number will also be used to log the rental of the tape
to a customer.
Place your rental tapes in strong, vinyl tape boxes with the description and
miniposter from the cardboard sleeve cut out and attached to the inside of the new
box. Arrange the tapes on your shelves by topics such as Comedy, ScienceFiction,
Children, Musicals, Westerns, Horror, Drama, SpecialInterest, Travel, Sports, etc.
The tapes should be displayed with the miniposter facing out towards the customer.
These posters are designed to catch the attention of the customer, calling them to
consider renting the tape. Take full advantage of the advertising the posters allow. With
rental tapes, it's important that you allow your customers to browse through your
inventory just as they do with books on the shelves at the public library. Let them read
the description of the film that appeared on the reverse of the original packaging. Unless
the film is a recent release that was popular in the theatres, this will often convince
the customer to rent the tape and judge its value for himself.
You can locate your manager's desk and files behind your main counter. Leave some space
partitioned off in the back of the store or will be quite adequate for storage, packaging
and/or whatever minor repairs might be necessary. 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 instore decorating as well as merchandising ideas
to move your product. 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
postersheets relating to the movies you have available. These are actually called
"onesheets" and you can get them free or for a very small charge from your
videotape distributors. 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 will sell more tapes for you. Remember,
you want 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 theaterstyle 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 player. 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.
Keep one of your newest releases playing at all times. This will draw customers toward
renting the newest features you have available.
A good computer system and printer is a must. This will be your key to maintaining
accurate records of your rentals, sales, and to the makeup of new pages for your
catalogs and the preparation of your newsletter. Be sure to organize yourself with a bank
in order to handle the major charge cards. Simple advertising of the fact that you accept
credit card purchases can add from 10% to 50% to your volume. You will need a small
electronic cash register to record your sales (if your computer software does not track
this for you), and a small terminal connected to your phone lines to get instant approval
of your customers' credit card transactions. A simple cash drawer, mounted under the main
counter will suffice for the storage of your cash sales.
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. A business major at a local college is
often a fine choice.
In addition to yourself and a manager or manager trainee, you'll need one or more
parttime sales people to help out during your busy times. A manager trainee will
expect to earn from $15,000 to $21,000 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. Make sure you subscribe to trade papers and magazines like Variety, Video News,
etc. Read all the 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 the preferences of the individual customer.
As videotape rental outlets increase in number, the industry as a whole is becoming
more competitive. To beat the competition, the enterprising entrepreneur will develop a
list of loyal customers and pamper them with the benefits of an exclusive club membership.
Wordofmouth advertising from this select group will follow as a matter of
course. The basic benefits to the members will not only include first rights to rent or
buy new tapes, but will also offer nice discounts on all rentals or purchases. Generally,
club member discounts range from 30 to 50 percent compared to prices charged to
nonmembers.
Because of the intense competition in the video field, membership fees for your
exclusive club should be kept low. Firsttime membership fees range from $10 to $20
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. For those
persons simply wanting to rent tapes, a simple form must be filled out once, asking for
such information as name, address, telephone number (home and office) and securing their
rental with a major credit card. The credit card will not be charged without the
customer's consent unless for some reason a videotape is rented and never returned.
Each member of your exclusive club should get a current catalog of all the videotapes
available, a numbered membership card, a listing of club benefits, and perhaps a special
VCR accessory or a number of free rentals. 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 to publish a set
of rules 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 or 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 twothirds 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 drawing the traffic into your store that you want and
need. In these ads you should stress the moneysaving features, special membership
benefits, and advantages of belonging to your videotape club.
A relatively low cost idea for the ongoing 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 then be called elite, because your 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 result.
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 "trafficstopping" and creative with your storefront and outside
signs as your local zoning laws will allow you. Sandwich boards plastered with movie
"billboard" poster signs, bikiniclad girls "picketing" in front
of your store (you might want to check this out with local regulations), and simulated
movie production scenes are all attentiongrabbing ideas that will cause people to
notice your store, stop, come inside, and find what's going on and 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 television and VCR equipment
dealers in your area. They can hand out advertising circulars to new cassette recorder
owners inviting them to join your club, in exchange for which you will send new equipment
customers to them or display some of their merchandise in your store.
Store hours for most video stores are 10:00 a.m. to 10:00 p.m., Sunday through
Thursday, often open until midnight on Fridays and Saturdays. 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 walkin buyers. You may want to make "special
order services" available, and 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 another film.
In other words, try never to let a customer leave your store without a tape in hand
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 at any point in time.
Various computer programs exist to keep track of your rentals, sales, overdue tapes, and
enrollment of new members. Each time a tape is rented, a rental agreement should be filled
out, and the rental fee collected in advance. Such agreements are easily generated by the
computer software that will track your rentals, indexed by the customers phone number or
membership card number. Usually, tapes are rented from 2:00 p.m. one day through 7:00 p.m.
the next day. If a film is not returned by 7:30 on the date due, an additional day's
rental is added to the customer's file automatically by your computer program. Outright
theft is very rare, but when a customer does lose or steal a tape, the retail price is
charged to the customer's credit card number that was given at the time he applied for
rental privileges. Also, flag the customer's file.
By and large, revenue from tape rental will be your biggest source of income. This
money will be from club members and nonmembers, 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 walkin
customers, as well as to your club members who want to buy tapes of certain favorite
movies. The sale of blank tapes, cleaning supplies, 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 familytype 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 500 titles in stock, a large number of comedy and action
films and an average of three copies of the more popular titles title. How many copies of
each title you stock should be determined by the demand in your area for each movie. You
may find it necessary to stock ten to fifteen copies of a recent release. After demand has
slowed in several months time, you can sell these already viewed copies for $10 to $15
dollars apiece, recouping a large portion of your initial investment. Keep your systems
simple, and make it easy for your customers to shop in your store. Rent your tapes for $1
to $2 a day, or $3 for three days (out on Monday, back by Wednesday evening). Many stores
offer special rental prices on the slow days of the week, Tuesday and Wednesday. You may
want to consider a "TwoForthePriceofOne" special on
these days.
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 elsewhere via regular reading of all the trade publications.
Whether or not to sell VCRs to your customers is a personal decision, but if you do so
it will add to your income. Work with the area distributors. They will supply you with
literally tons of sales materials and display models. You can keep a few in stock, or when
a customer wants to buy one through you, you simply "special order" it for him.
We recommend that you stock a few models, however, to take advantage of "impulse
buyers."
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 hotselling 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. Franchise stores may also have an
advertising advantage in multistore markets. The cost of an ad can be split by all
the franchise stores benefitting from the advertising.
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 one of the biggest growth industries into which the beginning
entrepreneur can launch himself today. 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 action on your part. Get with it, and
the best of luck to you!
