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Posted: March 20th, 2017
Video Vault Case
Introduction: The Video Vault was dominant is the location of major route connecting Westborough to the neighbour communities of Hopkinton and Upton with floor space at 750 square feet, the owners were innovative in displaying their roughly 10,000 units (or 8,000 titles) of inventory, 700 of which were in the DVD format. Peaslee and St. Angelo had 6,000 registered customers, with about half that number being active renters.
In order to rent videos at the store, customers provided a credit card number or a $35 deposit, protecting the business against unreturned product or unpaid late fees. New releases, adult videos, and video games rented for $4 per day, catalogue titles rented for $3 per day. The average late fee was $2. 75. Total late fees in 2001 were $6,133. Supply chain performances In revenue sharing contract, the store shares the revenue from the customer with the studio through which it gets its inventory.
The widespread use of revenue sharing fundamentally changed the economics of the industry. Under this, distributors sold the tape to the retailer at a much lower price- from $3 to $8 per tape- in return for a percentage of the rental revenue and a percentage of eventual used-tape sales to consumer. But as the same time there were some disadvantages that were came with revenue sharing contract. Store had to share data with the studio and also had to keep maximum and minimum inventory of inventory as per the contract which diluted the controllability of store owners.
Since they opened their store, Peaslee and St. Angelo had seen the regular distribution channels and pricing change dramatically. In the past, the partners bought roughly 150 to 200 titles per year, one-third from established distributors that bought directly from studios, and the rest from “sideways selling”—a practice of buying product from other video stores, retailers, or individual traders.
The top tier A titles were roughly $70 from distributors and were shipped to stores prior to the video rental release date. Buying product from other avenues resulted in lower prices, but it could take weeks or months after the release date to obtain copies. During 2000 and 2001, however, the Video Vault bought 90% of its product directly from studios, with a few distributors acting as “fulfillment centers,” shipping product from studios without owning it
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