How to Start a Video Store

In the digital era of entertainment distribution, a video rental store seems like a primitive concept. However, through the use of timely business strategies and market knowledge, it is still possible to turn a profit in the nearly three-decade-old concept of "tape-lending." The one question that needs to be asked prior to opening this type of business is "What makes my store different from the major competitors?" If your store can stand out from the major competitors with a fresh twist on an old business idea, opening a video store might be right for you.

Things You'll Need

• Brick-and-mortar store
• Licensing (sales tax and business)
• Finance capital
• Fixtures and shelves
• Amray cases
• Whole distributors
• Computers
• Bar code scanners
• Internet connectivity
• POS (Point of Sale) software
• Label and receipt printers
• Security system
• Concession products
• Rental/new/previously viewed inventory
• Marketing/advertising budget
• Studio promotional material

Instructions

Location, Location, Location

1. Find a desirable location that yields high traffic from pedestrians and drivers. High school and college students enjoy movies. Commuters who don't want to get out after their drive home are often your most valuable customers.

2. Look for nearby restaurants. The concept of "dinner and a movie" is an attractive proposition.

3. A location near schools, shopping centers and restaurants in a residential neighborhood is always the best.

License to Drive Your Business' Profits

1. Making your business profitable depends on the amount of capital available at start-up. A DVD rental store requires approximately $50,000 in capital to sustain the slow periods of the first-year growth.

2. Business permits and licenses must be obtained from the appropriate state agencies.

3. Any retail business requires a reseller permit for sales tax exemption on goods that are being purchased for resale, which does include rental.

Setup Wholesale Distributors and Store Design

1. Contacting wholesale distributors is one of the best ways to determine other available vendors. The best practice is to consult the company handling your media distribution, as it is often able to point you toward other vendors.

2. Order store shelving, counters, fixtures and promotional material for the initial infrastructure development.

3. Order computer systems, printers, bar code scanners, lockable Amrays (cases), POS software and networking services to assist in full automation of your daily operations and inventory management. In finding the right POS, consider your store's needs and the applicability of the software (i.e. reports, inventory, label management, operating system, printer compatibility).

4. Install a security system. You can install magnetic sensors at the entry and exit doors that are designed to alert you to the theft of your locked product; however, a simple video surveillance system, consisting of both real and fake cameras, is the best deterrent to theft.

5. Order concession products. Consumable goods are often impulse purchases and offer some of the highest profit margins.

Stock It Up

1. Start stocking all those new fixtures. It's always best to keep rental and retail products separated.

2. Create a nice display area for concession products near the checkout area. Concession products are impulse buys, not reasons for the main visit.

3. Determine the overall store layout for film rental categories. Remember, the focus of any video store should be on the revenue generators; therefore, the more floor space that is dedicated to new releases and video games, the higher the chance for profit.

Marketing and Advertising

1. Advertising is your key to getting people in the door. Just because you build it, does not always mean they will come. Therefore, work with local businesses that compliment your rental store, and devise co-marketing techniques.

2. Spend some money in advertising. Radio is not worth it because it is a hit-or-miss style of advertising. Guerrilla marketing and direct mail are the best methods to promote a video store.

3. Your best advertising investment is your current customer base. Offer a referral program to get their friends and family to switch over to your store.

Keep Inventory Fresh

1. Order plenty of inventory to meet new-release demand, but remember that after the first three weeks, titles should be pulled from rental and sold as previously viewed. This is the magic number for profitability of used products. Also, 90 percent of all rental profit comes from new releases, thus generating a higher return on investment (ROI).

2. View purchase and rental trends on weekly to determine the amount of concession products to order. There is nothing worse than the customer biting into stale candy when he gets home to watch his movie.

3. Pay attention to pricing trends, coupons and weekly specials from your competitors. The rule should be, if they are doing it, you should honor it. Remember, they might not honor your specials in return, thereby giving you an advantage over the corporate competitor.

Tips & Warnings

• Always offer weekly rental incentives to get customers to come in during the week. This is an industry that specializes in weekend profit and weekday losses. Over 80 percent of your revenue will be generated on Friday and Saturday night. Monday through Thursday specials will help offset the weekday losses.

• Pay attention to the bottom line. You must have enough capital to sustain at least two years of active customer growth. If you do not, it will become more and more difficult to keep the doors open. More inventory drives more customers, but more inventory also requires more money. Think outside of the box. Most media is delivered through electronic means, and the rental disc seems to be going the way of the dinosaurs. As a result, you should look at inventive ways to change the market. At the very least, offer an online component to your store.