The Video Vault April 7
BA
452M
Team Name Vision
140105003 Chia-ling, Wu
130305010 Chen, Li
130306002 Qiang, Wang
Instructor:
Maged
Attia
Summary
The owners of the Video Vault, Bill Peaslee and his partner Rob St. Angelo, had
a difficult time deciding on which films to stock and in what quantity, because both of
them deeply knew the fact that successful stocking level was the determining factor of
the success or failure of their business. The stocking criterion was more routine in the
past, since the pricing and the demand were more predictable. Predictable pricing,
somewhat predictable demand, a single format (VHS), and set release windows
factored into a formula that determined their stocking level. However, with the advent
of DVDs, the stocking criterion changed since every aspect of the inventory list had
changed. There were new formats (DVDs), demand and supply patterns had changed,
release windows had also changed and there was the introduction of pricing contracts.
These changes made the stocking process to be a challenging task to the owners. How
many copies of each new release it was prudent to buy in an industry fraught with
much more uncertain demand, lower-priced package deals which encouraged larger
purchases, added complication of DVD and stiff competitive pressure from large
national chain?
Video Vault had 6000 customers, with half that number being active renters. They
rented out, video games, new releases and adult video to their customers.
Video vault had a competitive advantage over its competitor, Blockbuster, as it
conducted its operations in an independent nature and they also offered a personal
touch to customer service. In addition, the location of their store was strategic,
because customers had to pass by their store before heading to Blockbuster which was
a bit far. Moreover, they used to stock both the VHS and DVDs in their stores, as well
as the older classics and the newer releases. Blockbuster mainly stocked with DVDs
and new releases.
The owners of the Video Vault struggle to determine the optimal stocking levels
of home videos. They wondered whether there was a new formula that could help
them or not? Or should they stop analyzing and simply trust their instincts?
Key people
Bill Peaslee Doug : co-founder and co-owner of the Video Vault
Rob St. Angelo: co-founder and co-owner of the Video Vault
Competition
Sole competitor: Blockbuster (national chains)
Problem statement
In an industry fraught with new technology, new pricing paradigms, and stiff
competitive pressure from large national chains, how many copies of each new release
was it prudent to buy?
The introduction of the revenue sharing system and the advent of DVDs changed
the whole landscape of movie-selling. The demand and supply patterns, the pricing,
the stocking, and the release windows seemed to have changed in a not-so-positive
way especially for the small vendors.
Findings
The Video Vault
New released, adult videos, and video games rented for $4 per day, catalogue
titles rented for 3$ per day. The average late fee was $2.75.
Competitive advantages: good location and independent nature, personal touch.
Video Vault integrates DVD in the shelves with the VHS product so they aren’t
as overwhelming to the customer who hasn’t adopted the technology yet.
Video Vault cares about more about what customers want and what the like, so
they focus more on customer’s behavior management.
Video Vault did not use Rentrak, because they found it way too controlling.
Some of our older customers don’t like Blockbuster because all they carry now
are DVDs and they put rows and rows of them in the front of the store.
