Blockbuster Bankruptcy – Inventory

Today’s thought for Blockbuster: reduce the cost of inventory.

A reader sent his thoughts on the demise of Blockbuster, and summed it up as misunderstanding the customer – ironic given Blockbuster’s original business premise as a demographic wonderland. The founder, David Cook, was an expert in databases and strove to populate each store with titles appropriate to the neighborhood – a relatively revolutionary concept in the 80s.

So, what happened?

If you are checking out a DVD  for the evening, do you want to buy a new DVD player? How about another electronic device? No?

Unfortunately, Blockbuster thought that the rental stores would be good places to sell such items. They even considered buying Circuit City to bolster the in-store offerings and to create untold synergies in even more retail locations…. The challenge is that not only do you have to carry that inventory with a wholesale cost, but also, you have to train the staff to at least be able to answer questions about these additional items. Are movie rental clerks more likely to be experts in

A. Movies
B. Electronics
C. The latest movies AND the latest electronics

Do you remember record stores? Is that where you bought your hifi?

Never mind the questionable business idea of putting DVD players in stores, consider the today benefit of getting rid of those items. At the very least Blockbuster can generate a few dollars to keep the lights on for the restructuring team by selling off the electronics. DVDs take up very little room. DVD players take up a substantial amount of space – in warehouses and on the display floor. They also increase the cost of theft. How much does it cost to reprint a DVD? How much are you out when someone walks off with a DVD player?

So today’s action item: Dump the non-DVD physical inventory.