If you read my column on a regular basis, then you probably know that I’m
a bit of a movie junkie. I love movies, even bad ones. Heck, I’ll watch paint
dry if it’s on a film screen. Nary a week goes by that I don’t visit
my local theatre, and I’ve all but abandoned television programming for DVD
and video.
That’s why I hold a company called NetFlix near and dear to my heart. For
those unfamiliar with NetFlix, it is an online DVD rental service. Instead of
paying a “per movie” cost, NetFlix customers pay a $20 monthly subscription
fee that entitles them to unlimited rentals and no late fees. (Though rentals
are technically “unlimited,” customers are limited to three films checked
out at a given time.) Users order DVDs from the NetFlix web site (www.netflix.com),
which features over 15,000 titles. Customers maintain a list of the movies (called
a rental queue), which they can modify as frequently as they like (I, for example,
currently have 38 titles on my rental queue). DVDs are shipped out to customers
via the United States Postal Service, and after a movie has been viewed, it is
shipped back to NetFlix in a pre-paid pouch. When the company receives the returned
DVD, it sends out the next DVD from the customer’s rental queue. For users
located new one of the 20 NetFlix distribution centers, shipping takes about a
day.
As with any business, there are caveats. If you don’t rent at least five
movies a month, it's probably not worth the subscription fee. On rare occasions,
DVDs arrive damaged or scratched, or don’t arrive at all. (In those instances,
the customer simply notifies NetFlix of the problem and a new disc is immediately
shipped out.) But overall, I’ve found using NetFlix to be a very satisfying
experience. So much so, that I haven’t been to a brick-and-mortar video store
since signing up with NetFlix six months ago.
NetFlix has become incredibly popular in a relatively short amount of time. It
now has 1.3 million subscribers. An even more telling testament to NetFlix’s
success is the fact that both Wal-Mart and Blockbuster have launched their own
imitations of the online subscription service.
The NetFlix story offers a valuable lesson for those of us in the metal finishing
industry. In identifying and developing a niche market (people who generally rent
several movies per month and/or consistently incur late fees), it was able to
capitalize on changing behaviors that traditional video rental stores had taken
for granted, stealing away a lot of customers in the process. And video stores,
in their refusal to adapt to the changing behaviors of their customers, are now
losing a significant chunk of their business to subscription services.
What are some areas that we—as suppliers or finishers—have taken for
granted? Is a potential competitor waiting to swoop down and steal away your business
because you’ve failed to address changes in your customers’ behavior?
What opportunities exist for you to carve out a new niche by exploring different
business models or modifying existing ones? Are there new ways in which you can
use internet technology to change the way you do business?
