Online rentals with home delivery is now a billion dollar industry in North America, and merchandize rented via this channel now extends beyond movies and music – to books, and even high-priced designer bags and accessories.
A Canadian company that’s made incredible strides in this area – in a remarkably short time period – is Zip.ca, a four-year-old Ottawa firm that’s been dubbed the Canadian counterpart of online video rental behemoth Netflix Inc.
Zip.ca’s inventory exceeds 72,000 individual titles and 250,000 discs — which it rents out to more than 35,000 members countrywide.
A few months ago, the company – with distribution centres in Ottawa, Calgary, Vancouver and Toronto – shipped its 10 millionth DVD.
“Our main attractions are choice and convenience,” said Rob Begg, vice-president of marketing at Zip.ca.
He said there’s no way a neighborhood video store or even a big movie rental chain, such as Blockbuster Inc., could compete with Zip.ca’s inventory of movies. And from the convenience standpoint, he said, as Zip.ca lists almost every movie genre on its Web site, customers can easily browse through what’s available.
Begg didn’t talk about his company’s revenues, but the success of Zip.ca’s American counterpart – Netflix – might shed some light on the market’s potential.
In 2000, Netflix offered Dallas, Texas-based Blockbuster Inc. executives a majority stake in the company for US$50 million. Blockbuster declined.
As of May this year, Netflix is reported to be worth more than $1.9 billion, while Blockbuster is valued at $345 million!
Technology is not the only factor that drives the explosive success of online rental behemoths such as Zip.ca nd Netflix – but it certainly plays a crucial role.
For instance, Zip.ca’s ordering system is powered by a “recommendation algorithm” that helps customers decide which movie to watch.
“Based on a member’s profile and a list of previously rented titles, the system provides the customer a list of other movies that might appeal to his or her tastes,” said online marketing expert Michael O’Connor Clarke.
This is a very powerful marketing tool as it personalizes the movie selection experience for the customer, while giving the company an up-sell opportunity, said Clarke, who is vice-president at Ottawa-based PR firm Thornley Fallis Communications Inc.
Years ago, Clarke and his wife gave up on a big brand movie rental store as store clerks were very impersonal. The couple switched to a smaller store where the clerk was always ready to offer them his take on the movies and recommend titles he thought would appeal to them.
“The algorithm is the virtual equivalent of the clerk you can trust,” said Clarke.
He said the system employs a collaborative filter technique, which identifies probable choices based on your previous decisions.
South of the border, star-struck fashionistas aching to tote designer purses they espied on the latest Sex in the City episode can dream of being Sara Jessica Parker for a week or month.
The company that can transform this dream into a brief – or not so brief – reality is Bag, Borrow or Steal, a Seattle-based online firm that rents out designer bags, jewelry, sunglasses and other accessories from labels such as Prada, Chanel, Louis Vuitton, Burberry and Coach.
You might say it’s the Zip.ca of handbags.
The company’s proposition is very simple. For a monthly fee of about US$5 to $10 a month, you get to rent designer handbags and accessories at prices ranging from $15 a week for a current Coach number, to $150 a week or more for pricier items — such as a vintage Hermes bag.
When you tire of them, simply send them back and get a new one. If you find you’ve fallen in love with a particular item, you could offer to buy it.
But wait, wouldn’t $150 a week eventually add up to about $1,800 in 12 months. That should be a big enough sum to buy a decent designer bag you can actually own.
But that logic doesn’t deter many happy Bag, Borrow or Steal customers — as these esctatic customer testimonials reveal:
“Oh man I’m living large! Everyone is blown away by my handbags. I get compliments everyday…THANK YOU! I can finally afford to be as stylish as I want!” – Avanya
“…You guys make me look so good. Everywhere I go, from places like the gym, the mall and even work, I hear tons of compliments …” –Thanh
Although he himself is not sold on the idea, O’Connor Clarke concedes that Bag, Borrow or Steal appears to have struck a chord with people who love bags and accessories and want to have a new one each time.
On the face of it, he said, the company isn’t offering the type of product that lends itself to the online rental retail model.
Bags and accessories, the marketing expert explained, do not have the long shelf life enjoyed by DVDs and books – the rental merchandize offered by a Zip.ca or an Amazon.ca.
Bags also lack a standardized shape or dimension — so shipping and handling are more of a challenge.
Finally, while businesses can easily shrug off the loss, theft or breakage of a DVD – something similar happening to a Fendi purse, or a pair of Prada shades can’t be shrugged off.
Experts such as Clarke say companies considering an online rental retail model can heighten their chances of success if they ensure they are properly equipped with:
Near unlimited inventory: Online rental retail’s biggest advantage over other models is access to huge inventory and choices. A bricks-and-mortar store can’t hope to maintain as exhaustive an inventory as the likes of Amazon.ca and Zip.ca
Good recommendation software: The ability to recommend to clients other products that might appeal to them based on their user profile is great for building customer loyalty and up-sell opportunities.
Great distribution network: Reliability and safety is a must if you want to protect your product and reputation. Delayed or damaged packages are a definite turn off.
Long shelf life: Since you’ll be stocking items in large numbers, and will be renting rather than selling them off, your products need to be sturdy enough to withstand constant shipping and compelling enough to weather fashion trends.
As Clarke puts it: “It can be a very profitable model, but it’s only viable for certain products.”