Block-busted

The speed at which word-of-mouth communication spreads was demonstrated Tuesday when customers learned that Blockbuster was closing it doors and all their DVDs were being sold for $2 or less. We didn’t get the word until later in the day, and by that time the store had already been picked over by hundreds of people looking for a bargain.

We had to stand in shifts and wait for several hours before our small box of DVDs could be scanned. Many individuals in front of us had several big boxes loaded with hundreds of movies, and by the time we exited the doors after 1:00 a.m., the store was pretty much gutted. It was learned that whatever wasn’t sold on Tuesday would be boxed up and shipped to the Blockbuster in Guam.

This isn’t just another incident in our deteriorating economic landscape. One person standing in line said that four Blockbuster stores in Hawaii are closing their doors, and a search on the Internet revealed four Blockbusters in Albuquerque, New Mexico closed, as well as in Alamogordo and Sante Fe. Stores in Bozeman, Montana, Santa Maria, California, and Rexburg, Idaho also followed suit. Blockbuster once ruled the video rental business. Just five years ago its stock traded for more than $20, whereas now it is struggling to trade at $2. The company appears to be going through a shakedown due to a number of factors, but they all result in lower profit margins. Blockbuster isn’t the only company having difficulty in video rental. The number of both large chain video rental stores and independently owned stores has dwindled for years.

The Saipan store was being subsidized and not making enough money for quite awhile. While other Blockbuster locations rent their movies for $4 or $5, the Saipan store couldn’t compete with the other local outlets and had to drop its fee to $2.99, which meant that their contribution to overhead was too slim to make it worthwhile for the corporation to keep the doors open. The employees were surprised to learn when they showed up to work on Tuesday that the store would be closing. Those who checked out videos would not need to return them, but also individuals that had recently renewed their video Rewards card would be out of luck. The owner of Hollywood Video was allowed to take the first pick, and then the customers scavenged the remaining DVDs.

I remember living in California in the early 1980s when video rental stores were still new. They actually started in the late 70s, when VHS, the BETA format, and the large videodisc were battling for supremacy. By the mid-1980s, VHS players and recorders were a must-have item for people, and entrepreneurs capitalized on the trend. At that time, the stores were at the beginning of the product life cycle curve and they rode the wave for a couple of decades, making some adjustments when DVDs became the new thing.

Big chains, like Blockbuster, dominated the industry in the 1990s, and they made it more difficult for the smaller stores with less of a selection, to stay in business. With the emergence of movie downloading, video streaming, video-on-demand, mail-order rental, and renting on the Web, even the big chains are being shackled and going through contortions to keep up with the rapidly changing video business. Certainly, pirated DVDs that are so prevalent at many establishments on Saipan also contributed to the demise of our Blockbuster.

There are several lessons that one can learn from this situation. The first is that change is continuous, and in order to stay in business, one must stay ahead of the curve. One way to do that is to diversify or offer unique products or services that keep your customer base active. Blockbuster stores in other areas are pushing movie memorabilia in their stores to keep sales up. Even though small, independent businesses are at a disadvantage to the larger retailers, they also have the ability to adapt to change faster and easier than their much bigger competitors.

In addition, a smaller company can easily keep an open ear to the needs of their customers, and make adjustments that cater to those needs. Consumers have more options available to them today, and you must constantly stay on top of those options and have a plan to counter its impact on your business. Service never goes out of style, and the better you serve your customers, the more likely they will stay loyal to your company.

The Blockbuster on Saipan did everything it could to stay in business, but fell victim to the changes being made in the industry and the high operating costs. Nevertheless, its customers who liked the friendly employees, wide selection, and generous rental policy will sorely miss Blockbuster.