Customers have flocked to Netflix in part because of the firm's staggering selection. A traditional video store (and Blockbuster has some 7,800 of them) stocks roughly 3,000 DVD titles on its shelves. For comparison, Netflix is able to offer its customers a selection of over 100,000 DVDs, and rising! At traditional brick and mortar retailers, shelf space is the biggest constraint limiting a firm's ability to offer customers what they want when they want it. Just which films, documentaries, concerts, cartoons, TV shows, and other fare make it inside the four walls of a Blockbuster store is dictated by what the average consumer is most likely to be interested in. To put it simply, Blockbuster stocks blockbusters. Finding the right product mix and store size can be tricky. Offer too many titles in a bigger storefront and there may not be enough paying customers to justify stocking less popular titles (remember, it's not just the cost of the DVD – firms also pay for the real-estate of a larger store, the workers, the energy to power the facility, etc.). You get the picture – there's a breakeven point that is arrived at by considering the geographic constraint of the number of customers that can reach a location, factored in with store size, store inventory, the payback from that inventory, and the cost to own and operate the store. Anyone who has visited a Netflix Italy VPN android video store only to find a title out-of-stock has run up against the limits of the physical store model.Netflix Case www.gallaugher.com p. 4But many online businesses are able to run around these limits of geography and shelf space. Internet firms that ship products can get away with having just a few highly-automated warehouses, each stocking just about all the products in a particular category. And for firms that distribute products digitally (think songs on iTunes), the efficiencies are even greater because there's no warehouse or physical product at all (more on that later).
Tuesday, 20 March 2012
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