Netflix streamlines fulfillment to help boost subscriber base
As Netflix faces mounting competition from Wal-Mart and others, it’s banking on cutting-edge service to maintain its growth in the online DVD rental market. So it’s modified its fulfillment process to get subscribers their top choice in movies 95% of the time, CEO Reed Hastings says.
Despite the competition, Netflix’s net income and revenue have continued to grow, as its third-quarter net income rose to $18.9 million on $141.6 million in revenue, up from net income of $3.3 million on $72.2 million in revenue a year ago. Its number of subscribers is now over 2 million, up 73% from a year earlier.
Growth in its market depends on the ease subscribers have of receiving the movies they want through the mail. But to maintain an efficient inventory and fulfillment process, Netflix only promises to ship out whatever is available in its inventory among a subscriber’s top three movie choices. Subscribers can change the order of their choices at any time on Netflix.com, where they can see real-time updates of how long it will take Netflix to deliver any particular movie title.
By analyzing subscriber activity and improving the way it fulfills orders, Netflix now is able to ship the top choice on someone’s list nearly all the time, Hastings says.
“In the past, there were more times when we would have to send the No. 2 or 3 movie,” a spokeswoman says. “Now we’re delivering No. 1 movie on subscribers’ lists 95% of the time.”
“The more subscribers watch their favorite movies, they more they stay as customers and the more they tell their friends,” Hastings says.
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