FC NOW: The Fast Company Weblog
May 19, 2005
DVD Rental Wars: Netflix 1, Wal-Mart 0
Just a year ago, many were calling Netflix as good as dead after the gazillion-dollar gorilla Wal-Mart stomped in on their turf. (Just a taste of the David and Goliath thing going on here: Netflix's 2004 revenues, at $506 million, is what Wal-Mart makes in less than a day.) But today, Netflix looks quite alive and kicking. This morning, Wal-Mart announced it would shutter its online DVD rental business and direct customers to Netflix. In return, Netflix will remind its customers that they can buy DVDs on Wal-Mart's web site.
Netflix still has a hill to climb--it expects to lose $5 million to $15 million this year. But news like this gives renewed hope that innovative upstarts with a breakthrough idea and a customer-centric model can win out over mass and price. At the very least, it's inspiration to us all. Let's hear it for the little guy.
Posted by Jena McGregor at May 19, 2005 11:34 AM | Category: ideas |
2 Comments
ADVERTISEMENT
FC NOW MENU
NEWSLETTERS
FC NOW CATEGORIES
FC READS
Could Netflix be the turning point in public sympathy? Are we getting fed up with giants stomping on the little guy? Maybe the little guys are finding ways of competing that the giants are getting too giant to afford. Or maybe those giantly paid CEOs aren't worth the cash and treasures that they've sold dopey Boards of Directors. Or is the cheap-seeking public changing its tune? The only way to save the middle-class business community and middle-class economy is for buyers to change the landscape of business. Only the customers can do it.
I agree with Jack's point that customers are changing their tune - I did consider changing to Blockbuster's rental service and even looked at WalMart's version. However price isn't everything - service, quality, customer support (and one day rentals arrivals) are the things I value in NetFlix. I'm not willing to risk compromising those traits just to save three dollars per month. From a business standpoint, is it always smart business to attact customers who only buy on price alone? The old adage of "We lose a little on each sale, but we make it up on volume!" is not a long term profitable strategy!