For a chain store like Blockbuster, which mainly operates video tape rentals, the most expensive part of the cost is the warehousing and logistics related costs of the video tapes. The purchase price of a box of video tapes for rental may only cost US$15, but its warehousing and logistics costs during the operating cycle are as high as about US$50 to US$60.
In order to speed up the turnover of video tapes among users as much as possible, thereby reducing the purchase quantity of video tapes and the pressure on warehousing and logistics, and at the same time, in order to obtain more revenue, Blockbuster launched a late payment fee system.
The video tapes rented by users usually have a usage period of 7 days. If the usage period exceeds 7 days, late fees will be paid on a daily basis.
In the original timeline, Netflix repeatedly attacked Blockbuster for the video chain's late fee system, which consumers hated, and even fabricated the story of a founder who paid $40 for a box of "Apollo 13." The story of how Netflix was created out of late fees.
In fact, the story was so complete that Blockbuster almost sued Netflix over it. For Netflix, this works very well.
Because late payment fees are indeed a weakness of Blockbuster.
After taking stock and taking control of Blockbuster, Simon reminded Nancy Brill and Blockbuster's management of the late fee issue.
However, in the early stages of Blockbuster's development, late payment fees did play a very effective role, so this system has always been implemented.
However, as the competition in the North American videotape industry becomes more and more fierce, Blockbuster's late payment system becomes increasingly outdated.
"In the past few months, I have conducted various experiments on canceling late fees in three cities on the east and west coasts. The results show that after the cancellation of late fees, the frequency of users renting video tapes increased significantly, and the chain store's revenue not only did not decrease, but increased. of."
The Blockbuster executives on the stage were still introducing Blockbuster Online. Off the stage, Nancy Brill whispered about it to Simon.
Blockbuster's second quarter financial report has not yet been released, but Simon knows that in the first quarter of 1992, of Blockbuster's overall revenue of US$730 million, US$61 million in revenue came from late payment fees. Revenue accounts for 8% of total revenue.
In my memory, Blockbuster's late payment fee income exceeded 10% of the total revenue. Such a "rich" income was almost equal to Blockbuster's annual net profit. Therefore, until Blockbuster Before its bankruptcy, the video chain giant had failed to completely eliminate late fees.
Even people who don’t understand how to run a company can probably understand that a company that relies on fines to support its revenue is definitely abnormal.
Of course Blockbuster understands this, but the company in its original timeline was too big to lose, and at the same time it lacked a strong shareholder, which ultimately led to hesitation on many strategies that should be changed. Not only did it fail to give up completely from the beginning to the end The late payment fee system is actually full of negative effects on enterprises. Under the general trend of physical leasing turning to online leasing, Blockbuster reversed course and completely cut off the online leasing business that it had already established, which ultimately led to The world's largest video chain disappeared into thin air.
Simon thought about this and asked Nancy: "Have you discussed this at the Blockbuster board of directors?"
Nancy nodded and said: "Many people have concerns, and there is also the issue of joining chain stores. Self-operated stores are nothing. Joining chain stores may be even more unwilling to give up late fees. We cannot expect these franchisees to have a long-term future." vision."
Among Blockbuster's more than 4,300 chain stores, about 20% are franchise chains.
This ratio is also much lower than the Blockbuster in Simon's memory.
After completely taking control of Blockbuster, with the support of Simon, a very important move made by the management was to gradually cancel the franchise system and only develop self-operated stores. This is why Blockbuster's current number of stores is far lower due to the original timeline.
However, Blockbuster cannot immediately cancel the franchise qualifications of chain stores that have already joined.
Moreover, these franchise chain stores have much higher operating freedom than self-operated stores.
For example, regarding late payment fees, Blockbuster Corporation has made a decision to cancel late payment fees, and these franchise stores do not have to absolutely comply.
"If you can guarantee that your experimental data is OK, then just implement it," Simon thought for a moment and said, "I will help you with the board of directors and shareholders, but you need to solve it yourself for the franchise stores. However, I suggest that you’d better not just do it all at once, but carefully consider a reasonable plan.”
Nancy nodded and said: "I plan to use this opportunity to further expand Blockbuster's membership system. In addition, I hope to distinguish Blockbuster's franchise stores from self-operated stores, such as conspicuous display in franchise stores. Add a 'franchise' label to the location to distinguish it from self-operated stores. After all, this time Blockbuster Online, franchise stores will not participate either."
Blockbuster's online program is gradually integrating with Blockbuster's physical stores. If franchise stores are also brought into this system, there will inevitably be problems with profit distribution.
"So, if you do this, how do you deal with the dissatisfaction of franchise stores?"
"I plan to give them a higher degree of operating freedom while appropriately reducing franchise fees."
Simon smiled and said: "You would rather divest these stores directly, right?"
There was a hint of helplessness on Nancy's delicate face: "Yeah, but it's a pity that it's too difficult."
Stripping off franchise stores is like canceling late payment fees, which is equivalent to giving up a large amount of market share and the company's receivables, which will definitely have a serious impact on Blockbuster's stock price.
The two of them had been whispering throughout the press conference about Blockbuster's cancellation of late fees. At the reception until the end of the press conference, Nancy had been following Simon, chatting about various issues.
Nancy's 'entanglement' inevitably made the female assistant who came with Simon feel some kind of instinctive vigilance. Even Nancy could see that look of wanting to follow Simon step by step but worrying about being rejected.
In the end, Simon simply sent his female assistant to chat with Claire, the C girl, who also came here today, and then looked at Nancy with a joking expression: "Is this fun?"
Nancy raised her face, with a bit of a mischievous smile on her lips: "It's very interesting."
"Be careful if Jenny wears small shoes for you in the future. You know, men's ears are very soft. If she badmouths you a few more times in front of me, you might lose your job."
Nancy said: "Are you the kind of person who is easily influenced by women?"
Simon nodded seriously and said, "Yes, the more beautiful the woman, the less able I am to control her."
Nancy choked, then rolled her eyes and said, "So, I'm pretty sure Jenny wouldn't do that."
"Why?"
"Since you know that you are easily influenced by women, you will definitely not choose to be around a woman who likes to influence and manipulate you."
Simon thought for a moment, picked up the cup and took a sip of red wine, and said, "It seems to make sense."
Nancy took another step forward, as if planning to continue her attack: "So, I guess, you are actually wary of women?"
Simon lowered his head and looked at the small female executive in front of him. He ignored her argument just now and said, "You have broken through the comfortable distance between me and others."
"Are you feeling sick?"
"No," Simon's tone turned dangerous, and he said faintly, "You gave me the desire to hunt."
Nancy and Simon looked at each other, but for less than a second, they finally moved back slightly.
The housekeeper happened to come over to say hello, which broke the embarrassment that had just brewed.
"What are you talking about?"
“The Blockbuster late fee thing.”
Simon said, not shying away from admiring Alice's smart and elegant appearance in a white professional suit.
After the last night, although they met several times, the two never found an opportunity to be intimate again.
On the one hand, Simon is indeed a relatively restrained person. On the other hand, there are not many women around him, but he can basically keep an eye on Simon. For example, when I came to San Francisco, the female assistant would not give Simon any chance to eat. If Janet was in Los Angeles, Simon would rarely stay up late at night.
Simon's eyes fell on him, and Alice inexplicably recalled the night when the man's big hands caressed him roughly, and she couldn't help but feel a little uncomfortable, so she had to turn her attention to Nancy and said: "Speaking of which, Nan Xi, have you considered what I told you?"
Nancy looked between Simon and Alice, nodded, and said: "I have considered it, but although I think it is feasible, if we really do this, we will face a class action lawsuit from shareholders. ”
Simon stood nearby, listening to what the two women said, and asked, "Is there anything I don't know?"
Nancy glanced at Simon and said, "Alice hopes that Blockbuster Online will cancel the video sales business."
Simon understood immediately.
Amazon's online mall has developed rapidly in the past six months, so in addition to books, it is also an example to increase product categories. In addition to books, the most suitable online sales types at this stage include videotapes.
The housekeeper probably hoped that Blockbuster Online would cancel the video sales business to avoid competing with Amazon's planned online store business. Of course, there should be a corresponding exchange of interests, and Amazon cannot simply let Blockbuster cancel this part of the business.
Although the Blockbuster chain focuses on video rentals, it has also been involved in the video retail business.
Simon looked at Nancy and asked, "What do you think?"
"I think this is a good suggestion," Nancy said truthfully: "By canceling online retail, Blockbuster and Amazon can cooperate in promoting each other's user base, and Blockbuster can also reduce a large part of the retail business expenses. . In fact, Simon, I even wanted to eliminate the retail business of the brick-and-mortar chain so that Blockbuster could focus more on leasing. But that just didn’t work.”
Late fees may only account for 8% of Blockbuster's revenue, but video tape retail revenue accounts for more than 20% of Blockbuster's total revenue. It is indeed impossible to cut it.
As for Blockbuster Online, the site has just opened and the future of online retail is technically uncertain, so cancellation doesn't seem to matter.
However, if this is really done, other shareholders of Blockbuster will definitely be dissatisfied. It is unjustifiable to harm the interests of Blockbuster shareholders for the benefit of another company in the Westeros system. Therefore, other Blockbuster shareholders are likely to file a class action lawsuit in due course.
The key to running a company, especially a listed company like this, is that you often cannot make the most correct decisions.
Ultimately, it was because Simon failed to buy Blockbuster outright.
If 100% shareholding is achieved, then of course the boss can do whatever he wants.
Nancy quickly added: "However, in addition to canceling late fees, I have also recently been considering cutting off some of Blockbuster's side businesses such as movie peripheral sales."
Simon smiled and said: "This part of the business was proposed by you yourself."
"Yes," Nancy did not deny, saying: "However, after recalculating the cost and return ratio of this part of the business in recent quarters, I think it is best to cut it off and return to the core video tape retail. This way It can save a lot of human resources and make it easier for Blockbuster to manage and further expand."
After Nancy finished speaking, she glanced at Simon with interest, and there was even a hint of "please beg me" in her eyes. Blockbuster's retail peripheral products mainly sell film and television peripheral products related to Daenerys Entertainment.
Simon wanted to pinch Nancy's delicate little face: Oh, hey, do you remember who is your boss
Of course it is impossible to do this at a cocktail party in full view of everyone.
But Nancy realized something and instinctively shrank her neck, then looked over not to be outdone, as if she was confident that she could squeeze her if she could.
Of course, Simon would not really do such an abrupt thing, and said: "As long as you think it is appropriate to make a decision, you can make it. However, Nancy, you need to bear the consequences of the matter. Also, don't forget, You are more of a group president in charge of consumer products business at Daenerys Entertainment."
Nancy paused for a moment, then completely gave up on some of her little thoughts, and said solemnly: "I will consider this matter very seriously."
The small female executive also suddenly understood.
The sales of peripheral products may not be too high for Blockbuster, and the ratio of investment to return may not be too high, and it will also increase the chain store's labor, procurement and logistics costs. However, this can significantly increase Daenerys Entertainment's peripheral product revenue.
Blockbuster's profit margin on peripheral product sales may be very low, but the revenue Daenerys Entertainment can earn is very high.
Nancy has been so focused on Blockbuster in recent months that she has inevitably neglected her own duties. In fact, she just mentioned this matter, which was just an immature idea after analyzing Blockbuster's financial reports in recent quarters.
If she thought about it carefully, she would definitely not propose it rashly.
Women are always prone to anger. A little embarrassed, Nancy felt that it must be the guy in front of her who made her have some confrontational emotions.
Yes, that's definitely the case.
He was obviously right.