Now that the two 400-pound gorillas of the video rental market, Blockbuster Entertainment Corp. and Erol's Inc., have agreed to become one 800-pound ape, what hope is left for the Mom and Pop neighborhood stores to peel whatever bit of market share they can from the top banana?
Barry Baitch, owner of the five-store Barry's Video chain in Baltimore, has felt the sting of competition in the land of the giants. He's had to close three stores in the last year and a half, he said, because of the competition with Erol's and Blockbuster, which announced a merger Monday. "It's unbelievably competitive. Blockbuster by itself was an unbelievable competitor."
Mr. Baitch's response has been to look for ways to consolidate small stores that are in one area. "One of the only things that you can do . . . is close smaller stores and open larger ones." He said his stores' average inventory has grown from 2,000 or 3,000 tapes a few years ago to a goal of about 7,000, compared with Blockbuster's 10,000.
Kidder Peabody & Co. Inc. analyst Gary A. Jacobson wrote recently that "consumers are becoming more demanding of their video stores. They want to rent what they want, when they want it -- and Mom and Pop stores cannot compete against Blockbuster's depth and breadth of product."
But some analysts and store owners said the Mom and Pop store's worst strategy is to copy the Blockbuster formula in hopes of repeatingthe Fort Lauderdale, Fla., chain's success.
"Being the biggest store or being huge is not the only criterion to success," said John Story, president of the American Video Association, a trade group and buying cooperative for independent video stores.
Daniel Dunham bought the Belvedere Video store in Belvedere Square in September, even though there was a Blockbuster across the street and an Erol's a short distance up the road. He said sales were up 30 percent in October, after a weak September, and likely will rise 20 percent this month.
"There's a lot of people that won't go to the big conglomerates," he said. For one thing, Belvedere charges $1.50 for one weeknight, compared with Blockbuster's $3 rental fee for three nights. Belvedere's price rises to $2 on the weekends. Erol's charges $2.69 for two nights.
Mr. Baitch said the independent store can compete by knowing its clientele. "I know Baltimore," he said. "I know what the people want, I know the appropriate titles to buy."
Belvedere's biggest attraction, Mr. Dunham said, is expertise and service. He said his employees watch nearly all new movies that come in, they take reservations for films in advance, and they try to get to know the customers.
Still, the merger of the two leaders in Baltimore is cause for concern, Mr. Dunham admitted. "In the back of my mind, it does scare me a bit."
Maybe more than it should, some analysts said. An independent store located near an Erol's or a Blockbuster won't have to worry about the other chain showing up with a new store. And Blockbuster is likely to close some Erol's stores that are too close to existing Blockbusters.
Nationwide, spending on video rentals is increasing by only 5 percent to 8 percent a year, according to Bart Story, director of marketing for Video Store magazine, a trade monthly. Rental revenues rose to$6.1 billion last year from $5.2 billion in 1988, Mr. Story said, but are expected to increase to only $6.6 billion through this year, and $7.0 billion next year.
"You're taking the same piece of pie and you're splitting it even more," Mr. Baitch said.
Paul's Video in Glen Burnie has responded by lowering prices to $1 per night, said store manager Michelle Desautels. But the two-store company can't sustain the promotion, and prices will have to return to $2.25 a night, she said.
"I don't think we're going to get wiped out," Ms. Desautels said. "I feel that we'll get our clientele back. We treat our customers like family and Blockbuster doesn't."