This week in my marketing strategies class we’ve been exploring Wal-Mart and its dominance in the retail grocery market (did you know that Wal-Mart is the largest grocery chain in the world? Even bigger than Kroger, Safeway and Ahold, all of whom are quite substantial. And six years ago Wal-Mart wasn’t even selling groceries. Amazing). Today Wal-Mart announced that its mail-order DVD rental program has gone live after an eight-month test period. This will undoubtedly prove a substantial threat to NetFlix, the company with which I currently have a DVD rental subscription.
Wal-Mart’s going to have three different subscription services, which is cool: $15.54/monthly to have two DVDs out at a time (I have that with NetFlix now for $14.95/month, but it’s no longer available for new members), $18.76 for three at a time (NetFlix is $20/month for that) and $21.94 for four DVDs out at any given time. No late fees, and two day turnaround for 90% of the United States.
And it’s interesting to note that while NetFlix offers a “two week free trial”, Wal-Mart’s offering one month free…
I hope that it’s only braggadocio when NetFlix spokeswoman Lynn Brinton blithly says: “Wal-Mart [and Blockbuster] will end up in a battle for the No. 2 spot” and that “Until Wal-Mart hits 100,000 they won’t be a threat.”
Lynn, here’s a free clue: Wal-Mart is instantly a threat in any market segment they touch. You’ve a serious threat on your hands, even with your million members, and you better be paying exceptionally close attention to every step that Wal-Mart makes in this segment, because they can crush NetFlix like a bug if they really want to…
It’s too bad, because NetFlix paved the way and they’re a beautiful example of a net-based business that just couldn’t exist offline, but… the world of business is nothing if not competitive and aggressive, and there are precious few segments where a company with the heft and leverage of Wal-Mart can’t just waltz in and overnight become a major player.
Dave,
thanks for great comment.
I think Fortune has been so right with its
“One Nation under Wal-Mart.” Actually, Wal-Mart is “changing the rules for corporate America.”
referecne= “http://www.fortune.com/ fortune/mostadmired/articles/0,15114,423053,00.html”
Yeah, its a shame for Netflix. They conceived the mail-order-rental idea, implemented it and proved that it was a winner. Now Wal-mart knows that this is a winning market. They have the power to manipulate this sector and take it over. I am a current member of the Netflix service and I plan to stay with them as long as possible, but if Wal-mart starts to exceed in the customer convenience area, I may have to switch. I am also part of Wal-mart’s loyal customer base.
If anyone is interested, here is how big Wal-mart is: http://www.tradermike.net/2003/04/walmart_is_huge_.html
I’m backing the underdog for now, Wal-mart has enough! (more than enough!!!)
Online DVD Rental Slugfest
Wal-Mart is stepping up their assault on NefFlix. They’ve lowered their prices, and are expanding their service. I think they have a much better chance of being successful in this space than Blockbuster because they don’t have the same cannibalization…
Wal-mart is quite a phenomenon. I wonder if the states will ever deem regulatory action necessary…
And the latest news update to make this more complex:
LOS GATOS, Calif., June 24 /PRNewswire-FirstCall/ —
Netflix (Nasdaq: NFLX), the world’s largest online subscription rental service, announced today that the U.S. Patent & Trademark Office issued to Netflix U.S. Pat. No. 6584450 that covers the company’s subscription rental service and several extensions.
“Our team has focused their efforts on innovation to better serve our customers and on enhancing our intellectual property. We’re gratified that the Patent Office has recognized what a leap forward the Netflix subscription service is,” said David Hyman, Netflix General Counsel. “However, we know that great companies are built by providing an outstanding consumer experience, and that is our primary focus.”
A complete copy of the patent can be viewed at
http://www.patentlogistics.com/patents/US65/US6584450.pdf