How To Set Up And Operate Your Own Videotape Rental Store
One of the newest, and most profitable retail business
opportunities available today is the Videotape Store. Profits
from rental of videotapes movies have doubled each year over the
past several years, and industry experts claim this is only
Not long ago videotape recorders (now widely referred to as video
cassette recorders) were being bought at a rate of one million
units per year. Five years later, the rate had climed to 12
million recorders per year, and sales are still growing. Analysts
say that within a few years there will be as many recorders in
use as television sets. It follows that all these videocassette
recorders are in need of tapes, just as an automobile requires
Generally speaking, the average Videotape Store can be set up
with an investment or line of credit in the neighborhood of
$50,000 per year. Some stores are realizing a net profit of 35 to
40 percent with these income figures.
The secret to achieving and maintaining these kinds of profits is
in establishing and properly running a video club that offers
really outstanding benefits to club members. These benefits
should include special discounts on tape rentals and purchase; a
regular catalog or newsletter that tells your members about the
new tapes available; special workshops; get-togethers, and even
Think about the potentials: Videocassette recorders are now
within the price range of just about everyone in the country; new
technology, better performance and greater development of the
market will reduce the cost further. More and more people are
switching from costly evenings out to the comforts of home
videotape entertainment; market surveys profile the typical VCR
owner as between 25 and 50 years of age with an income of $20,000
That typical customer will provide about 70% of your income, with
the remaining from blue-collar workers, college students, and
singles of both sexes. It's important that you be a "in tuned"
with what the VCR owners in your area want, and fulfill those
In selecting a location, look for a storefront in an area
surrounded by stores the typical VCR owner is likely to stop in.
Six hundred to nine hundred square feet should meet your needs at
first, but plan ahead for future expansion. The ideal location
would be on a corner, affording visibility of your shop ideally
be four lanes with no median dividers, but with a posted speed
limit of 35 MPH or less. And by all means, make sure
there'splenty of parking space available.
The layout of your store should be planned with maximum
efficiency in mind. Basically, a glass-topped sales and display
counter across the front, separating the customers from the sales
area, while at the same time conveying a feeling of openness,
works best. Glass counters with shelves may be purchased at
tremendous savings by contacting the rental fixture suppliers and
used equipment dealers in your area. Check the yellow pages of
your telephone and business directories for names and addresses
You should strive to make the customer space ifn front of the
counter comfortable and relaxing. There should be an overall
atmosphere of friendliness. Place a couple of chairs or stools in
front of the counter so that customers can sit and browse through
your catalogs. You might want a coffee table, free coffee, and
catalogs on everything from VCR's to equipment accessories to
special order movies.
One of the important secrets to success will be the way your
store is perceived by the customers. You and your salespeople can
dress casually and project an overall relaxed manner of doing
business; taking care of each customer individually, using their
first names (if appropriate), and relating to what's happening in
their lives. With this approach you will get to know them, and
will establish ling-term customer loyalty faster than any
The best idea for the display seems to be wooden shelves lining
the walls of the sales area behind the customer counter. These
shelves can be built by a local handyman and either painted or
stained. It's important, however, that be strong, because the
weight of the videotapes can amount to 50 to 100 pounds per
shelf, depending on the length of the shelf.
Arrange the videotapes on the shelves, in book fashion. Stand
them upright with the title art on the boxes clearly visible to
the customers. It's important that you allow the customers to
browse through your inventory, as they do with books on the
shelves at the public library. In other words, your inventory of
tapes is money to you and should be seen, but not touched, by
your customers until they either want to rent or buy.
An arragement that works well with many stores is to remove the
tapes from the jackets, and display the empty jackets in the
viewing area for customers. Many of the jackets carry desriptive
sales literature, which entices the prospect to either buy or
rent. The tapes themselves, which do not carry any outside
printed message, should be kept behind your counters, in an area
accessible only to your people.
You can locate your store manager's desk and files in front of
inventory shelves. Space partitioned off in back of the store
wiil be quiteadequate for storage, packaging and/or whatever
minor repairs might be neccessary.
Our suggestion would be to allocate 60% of your store for the
display-sales office area; 20% for reception or customer area;
and 20% for the storage/work area. Check out a successful store.
You should be able to assess the entire arrangement in a few
visits, and pattern yours afterit, or consider improvisations or
changes you would make.
Use your imagination and utilize your store-in decorating as well
as merchadising ideas to move your product. For help in
decorating your store, talk to a few students in the art classes
at your local college, or to set designers for the local Little
Theather grop. Be sure to explain the mood you want to create.
The customers will be coming into your store to rent or buy
movies and associated equipment. Keep this in mind, and decorate
your store to make them feel as if they're a part of the
Hollywood scene. You can even be flamboyant with the use of
poster-sheets relating to the movies you have avialable. These
are actually called "one-sheets" and you can get them free or for
a very small charge from your local theathers. If you run into
any promblems, simply write to the studios, get the names of the
movies' distrubutors, and ask them for the ones you need.
Colorful "billboard" posters, along light colored walls, floor
covering, and inventory storage shelves, will definitely help to
create a "Hollywood Mood," and on the bottom line, sell more
tapes for you. remember, you're wanting to create a mood
conductive to persuading your customers to rent or buy your
Your display equipment tape rental store owners have even gone so
far as putting in a minature movie marquee that lights up;
spotlights and theather syle track lightening overhead. Another
idea might be the use of old film reels, glossy pictures of movie
stars and pictures, newspaper clippings or other memorabilia from
Your display equipment should include one of the better brand
name color TV sets and a videotape recorder. Its's generally best
to go with VHS system, because over the long haul, you'll find
most of your customers preferring this system because it has a
longer playing time than the Beta system equipment. You'll need
this minimum equipment] in order to test your tapes and give the
customers an instant preview of the movies they are interested in
renting or buying.
You should also plan to get a good typewriter that will
accommodate several different styles and size of type. This will
be your key to the make-up of new pages for your catalogs and the
preparation of your newsletter.
Be sure to organize yourself with a bank in order to handle at
least the major charge cards. Simple advertising of the fact that
you accept credit card purchases will almost double your volume.
Since most of your transactions will be by charge card or check,
you won't need a fancy cash register. A simple metal cash box,
available at most office supply outlets, will work very well for
the first few months, and you can evaluate any needed charge
You should either hire a person to be your store manager from the
start, or else select a person you can train to take over your
duties as store manager. The person you select needn't be a
electronics wizard, because there'll really be no need to be an
expert in the technical workings of the equipment. However, he
should have a creative flair for retail management, sales
promotions and selling.
In addition to yourself and a manager trainee, you'll need a
part-time sales person to help out during your busy times. A
manager trainee is paid about $14,000 per year, with commissions
on gross sales once he becomes your manager in fact. You should
expect to pay your sales people a bit above the prevailing
minimum wage, with an opportunity for them to increase their
earnings via commissions on all sales over a certain dollar
amount each month.
It will be on your benefit if you and your employees keep
yourselves up to date on the industry by reading everything
possible relating to videotapes, movies and the associated
equipment. This means advertising; brochures, newsletter, trade
papers and magazines from every available source. Armed with this
wealth of information, you'll be more knowledgeable than 99
percent of your customers, and be able to recommend movies
according to preferences of the individual customer.
As videotape rental outlets increase in number, the industry as a
whole will become more competitive. To beat out the competition,
the enterprising entrepreneur will develop a list of loyal
customers, and pamper them with the benefits of an exclusive club
membership. Word-of-mouth advertising from this select group will
follow as a matter of course.
The basic benefits to the members will be first rights to rent or
buy new tapes, plus nice discounts on all rentals or purchases.
Generally, club members discounts range from 30 to 50 percent
compared to prices charged to non-members.
First-time membership fees range from $50 to $100 the first year,
with renewal costs about half as much. Basically, club membership
fees are predicted upon the benefits available to members, the
need for cash within the business, and the pressure of the
competition. You will also want to research the membership fee
structure of other stores in your area, and be guided by current
Each member should get a current catalog of tapes available, a
numbered membership card, a listing of club benefits, and perhaps
a special VCR accessory or free rental. You can expand your
market to statewide, nationwide or even worldwide proportions
simply by placing display ads in publications serving the markets
you want to reach. When operating by mail you'll need a set of
rules (you might call it a contract) setting forth your policies.
You'll also want to factor shipping costs and any insurance
charges into your "by mail" rates.
By all means have a sign made up for your show window inviting
people to join your club. Display a similar sign on the customer
counter, just to remind them. Have some flyers or circulars made
up reiterating the invitation to join your club. Keep a stack of
these handy on the customer, and make sure everyone who comes
into your store gets one, perhaps by putting it into each
bag/package that leaves the store.
Regardless of the popularity of videotapes, the local demand, and
whatever competition you have, you'll have to promote your
store's special features and advertise skillfully. Plan to spend
at least two thirds of your initial investment money on
advertising during your first six months in business.
Your most effective advertising medium will be your local
newspapers. Regular display ads on the entertainment pages on
Thursdays, Fridays and Saturdays will go a long way toward making
your store known, and creating the traffic into your store that
you want and need. In these ads you should stress the
money-saving features, special membership benefits, and
advantages of belonging to your videotape club.
A relatively low cost idea for the on-going promotion of your
club might be to have a freelance designer develop a special logo
for you. Make patches out of this logo and have one of the
advertising cap makers supply you with sports caps personalized
with your videotape club's logo. Your club membership might be
called elite, because your club members will be the only ones
able to get the caps. The people they associated with will ask
about them, and the growth of your club will be assured. Another
promotional idea is simply to place a TV in your show window,
running continuous showings of the video movies most in demand in
The general idea is to be as "traffic-stopping" and creative as
your local zoning laws will allow you to be with your storefront
and outside signs. Sandwich boards plastered with movie
"billboard" poster signs; bikini-clad girls "picketing" in front
of your store (you might want to check this out with your local
regulations); simulated movie production scenes, are all
attention-grabbing ideas that will cause people to notice your
store, stop, come inside, and find out what's going on---what you
have available. Mission accomplished!
Think of your business as being part of the entertainment field,
which it actually is, and gear your promotions accordingly. Be as
creative and imaginative as you can get. Take advantage of every
promotional opportunity that comes along. Get news releases off
to all facets of the media in your area. Keep sending them in,
and keep dreaming up new angles for staging something the public
will notice. Work with the TV and VCR equipment dealers if they
will hand out advertising circulars to new cassette recorders
owners to join your club, in exchange for which you will send new
equipment customers to them.
Store hours for most video stores are 9:00 a.m. to 7:00 p.m.
Monday thru Saturday. These hours will cover the demands of your
customers, with your busiest days being Thursday, Friday and
Saturday. These are usually the days when people are committing
themselves to entertainment plans for the weekend.
Daily operations usually entail signing up new members, taking
care to those who want to rent tapes, and selling tapes to
walk-in buyers. You may want to make "special order services"
available, perhaps even a reservation list for especially popular
films that may seem to customers to be always out on rental.
Determining how many copies of a film to stock will be a
judgement decision based upon what you know about your customers.
However, we feel it is better to have extra copies in stock than
a waiting list more than two or three names deep. Whenever you
have to put a customer's name on a waiting list, you should
always try to interest him another film. In other words, try
never to let a customer leave your store without a tape in
hand--a good one, even if it's not the one he originally sought.
Keeping track of your inventory on a daily basis will be
necessary in order to know what people are buying or renting, and
which of your tapes are NOT moving. Ideally, your should want to
have 50 to 60 percent of your inventory rented out.
Each time a tape is rented, a rental agreement should be filled
out, and the rental fee collected in advance. You file the rental
agreement in a "one-to thirty-one" file under the date the tape
is to be returned. Using this system, you look at the rental
agreements filed under any given date, and know immediately which
tapes are due for return. This facilities dealing fairly with
your waiting list, by the way.
Usually,tapes are rented from 2:)) p.m. one day thru 2:00 p.m.
the next day. If a film is not returned by 2:30 on the date due,
you should have one of your sales people start calling on those
customers who are overdue, theoretically to remind him that the
tape is due, but in such a manner that he can rent the tape for
another day if he wants (unless, with the most popular films, you
put a time limit on rental time).
Sometimes even the best customer will forget that a tape is due.
Probably the best way to handle this is not to make a big deal of
it, and if he gets in in promptly, don't charge him an extra
day's rent (if he gets it in later in the afternoon). If this is
a good customer, or a potentially regular customer, you want to
Out right theft is very rare, but when a customer does lose or
steal a tape, bill his charge card number, and flag the rental
agreement in his file. On first-time renters, or people who
aren't members of your rental club, always collect a deposit on
the rental, equal to the value of the tape. Another thing: Don't
rent out more than one tape at a time until you get to know the
Your business income will be derived from several different
sources. Stores operating rental clubs generally average about
two new members per day. At $75 per member, this could amount to
$3,000 per month. (again, research the "going" fees in your
By and large, revenue from tape rental will be your biggest
source of income. This money will be from club members and
non-members, but your club members will be the biggest spenders
by far. Rental revenues average anywhere from $3,000 to $15,000
You can probably count on another $1,000 per month in tape sales
to walk-in customers, as well as to your club members who want to
buy tapes of certain favorite movies. The sale of blank tapes,
editing machines, enhancers, stabilizers and other accessories
will pretty much depend on how much you promote them.
Success will come from offering a wide variety of movies for your
customers. How heavy you stock up on your customers'
preferences. In other words, if your store caters mostly to
families with children, then you would stock up heavily on
family-type films. Checking out several successful videotape
stores and seeing their stock will give you an idea, and you will
alter your own stock as requests dictate.
Most stores open with at least 300 titles in stock, with an
average of seven copies of each title. How many copies of each
title you stock should be determined by the demand in your area
for each movie title.
Whenever you realize you've got a "loser" in stock, you can
either mark a the price down and offer it on sale, or treat it as
a "freebie" for joining the rental club. You'll avoid getting
stuck will real disasters by keeping yourself abreast of what's
happening elsewhere via regular reading of all the trade
Whether or not to sell VCR's to your customers is a personal
decision, but if you do so, it will add to your income. Work with
the area distributors. This will supply you with literally tons
of sales materials and a display model. Then when a customer
wants to buy one through you, you simply "special order" it for
Keep your systems simple, and make it easy for your customers to
shop in your store. Rent your tapes at say, $3 for one day, $5
for two days, or $15 for a full week.
About the only licenses you'll need will be a local business
license plus whatever state or city sales tax permits are
required in your area. Check with your city and county clerks for
information in these areas.
You'll need standard business insurance. And because videotapes
are hot-selling items on the black market, you should back up
your inventory with a good security protection system.
There are a number of companies selling franchised Videotape
Stores. It really isn't necessary for you to spend the extra
money for a franchised operation. The main value of a franchise
program is in the assistance they provide in getting better
prices on the tapes you want to inventory. However, you can
contact the suppliers directly and negotiate your own deals if
you want to take the time to do it.
An alternative to the franchise operation is the "affiliate"
program offered by Video Station, Inc. 12021 Willshire Blvd, West
Los Angeles, CA 90025. Founded by industry pioneer George
Atkinson, the videotape stores belonging to this group retain
their independence and pay no royalties. Yet, because they are a
large group affiliated with one buying association, they can
produce inventory purchases at tremendous savings for members.
The video market is beginning to really boom. If you're
imaginative, organized and enjoy individual selling,this could be
the vehicle to make you rich. You've got the plan, and if you've
got the ambition, all that's missing is the action on your part.
Get with it, and the best of luck to you!
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