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Lessons We Can Learn From the Failure of Blockbuster

As I’m sure you’ve heard, Blockbuster Video has gone out of business.

DISH Network, which owns Blockbuster, officially announced last week that they would be closing all 300 U.S. Stores. There was a time when local video stores were the dominant retail outlets to rent movies from. Then along came the mega-video stores like Hollywood Video and Blockbuster, which slowly but surely forced many mom and pop video stores to close their doors.

Then Netflix, RedBox and streaming videos came along. These services had less overhead, were less expensive for consumers and more convenient. Not considering Blockbuster’s subscription program that was similar to Netflix, a rental of a new release cost approximately $5 while the same movie rented from RedBox cost $.99. That’s a significant difference for a consumer and, with over 42,000 kiosks nationwide there were many locations for consumers to patronize.

 

There are some parallels that have been appearing in the automotive service industry. Last week, I wrote an article that illustrated a new app named OpenBay with which consumers have the ability to solicit bids from repair shops. If you search “OpenBay car repair” on Google, the search engine returns over 25,000 results including articles from prominent sources. Another service operating in the San Francisco Bay area, Drop and Go Auto, has been getting rave reviews and seeing a lot of buzz from prominent social media personalities including Jeremiah Owyang who has spoken at automotive conferences and has over 140,000 Twitter followers and similar audiences wherever he is present online. Drop and Go Auto offers door-to-door bumper-to-bumper auto repair for all makes and models, and is endorsed by AAA.

 

While recent auto sales have been increasing, Automotive News recently reported that the North American Auto industry would see a supply chain bottleneck within 5 years due to a lack of tooling capacity. Not only does this effect manufacturers ability to make vehicles, it also effects suppliers ability to make parts. Assuming this prediction comes true, this will affect both the sales and fixed ops departments of dealerships.

 

The combination of these trends and predictions make several key issues stand out to me:

 

  1. Customer experience – Ensuring that you provide your customers with an excellent service experience is more important than ever. Services are popping up everywhere that offer convenience and pricing transparency. If you don’t build a loyal base of customers by focusing on retention, you’re at risk of losing business to independent repair shops.
     
  2. Convenience – With services and independents continuously shifting more towards consumer convenience, dealerships will need to as well. Convenience doesn’t mean that you need to give rental cars to everyone. I’m referring to having processes and technology in place to ensure an efficient and transparent service experience. Consumers have said that they’re willing to pay more for quality service, but another major consideration for them is convenience. Through effective communication, thorough explanations of recommended service, and through building trust with your customers, you will be able to provide that quality service. This will also make it more convenient for consumers.

 

Video rental stores aren’t going out of business because people don’t want to rent movies. There is still a huge demand for entertainment. What’s happened is that companies have found less expensive ways to deliver this content to consumers, which has led to lower pricing and greater convenience. If the consumer begins to believe that the quality of service at a dealership is the same as that of an independent, pricing will begin to dictate consumer choices when it comes to deciding where to take their vehicle for service. Your fixed ops revenue is your bread and butter. Start making changes and plan how you’re going to protect it. Because there are plenty of challenges coming that seek to take it away.

Views: 806

Tags: and, auto, automotive, blockbuster, convenience, customer, drop, experience, go, jeremiah, More…loyalty, news, owyang, redbox, retention

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Comment by Alexander Lau on November 18, 2013 at 6:45am

@Richard. Ohhhh yeah, you introduced me to it.

:-)

Comment by David Ruggles on November 16, 2013 at 11:43am

Consumers believe that independents can do things as well as new car stores for the more typical repair and maintenance items.  And sky high "door rates" make consumers take gambles for repairs that should be coming to franchise dealers.  Resentment and suspicion by consumers toward auto repair providers is immense. 

Blockbuster?  Yea, failure to adapt, although my ROKU system still allows me to stream from Blockbuster. 

Car Dealers?  They live in a world where the Internet is providing margin compression while the CFPB works on the F&I side of things.  In the meantime, OEMs are working to do the best they can to raise a dealer's overhead through "image enhancement programs."  How does a dealer adapt to that.  The world believes it has the right to know a dealer's cost information.  There are vendors the dealer pays that fuel the consumer's belief that they have the right to that information.  After all, isn't "transparency" what everyone wants?  How does full transparency benefit a dealer?


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Comment by Richard Holland on November 15, 2013 at 1:19pm

Thanks for the comments, Alexander and Ralph. 

@Alexander - I have seen OpenBay. It's mentioned in this article and I wrote a blog article about it last week.

Comment by Alexander Lau on November 15, 2013 at 12:56pm

Agreed on the "what have you done for me lately" concept, but the company DID employ tons of people for many years and broke boundaries and sales records in terms of their business model. They just didn't adapt when adaption was required (yes, stupid).

Would you say that about a successful car dealership that had a run of 30+ years? Maybe they just ran out of steam because of a few adaption mistakes a long the way? Were they "failures?" This is all very subjective if you were to ask me.

I bet this ain't going to help Obama's unemployment numbers. LOL!

Comment by Ralph Paglia on November 15, 2013 at 12:51pm

Alexander, the fact that the parent company has decided to close Blockbuster's doors, shut down the company, lay off thousands of workers and cease operations makes this transition a form of "Failure"... I once ran a wholesale produce company that had been in business since 1914, and during an 18 month period when I sold off the company's assets as the court appointed trustee within a Chapter 13 Debtor in Possession Liquidation, laid off 150 workers and ceased operations, just about everyone in the community referred to the "transition" as the failure of the business... Despite over 80 years of success and innovation. It kind of reminds me of the car business and last month's results... You are only as good as your last month's production!

Comment by Alexander Lau on November 15, 2013 at 12:36pm

I see your point, but in eye's of whom is it a failure? Not the guy that set it up and sold it for millions and the stock holders who raked in cash for 20 years. No offense, but the last time I checked they had changed their business model to fit right in with the rest of the on-demand crew @ http://www.blockbuster.com. Drop 'N Go is awesome, have you seen OpenBay, supported by Google Ventures?

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