Wal-Mart increases its investment to support online DVD rentals
In an effort to increase its share of the market for online rental of DVD movies, Wal-Mart Stores Inc.`s WalMart.com has increased its number of distribution points from one to six.
Although Wal-Mart doesn`t report sales or transactions directly related to DVD rentals, the online service it launched last fall is doing well enough to support more infrastructure, a spokeswoman says. "It`s going very well," she says.
The additional distribution points enable Wal-Mart to provide 2-day delivery times to 97% of the U.S. population, the company says.
The expanded delivery service is needed to help Wal-Mart compete against Netflix Inc.`s Netflix.com, which says it`s capable of providing overnight delivery to half the U.S. population through a network of 20 distribution centers. Netflix plans to have 25 distribution centers by year-end.
Analysts say Wal-Mart has gotten off to a slow start in online DVD rentals compared to the growth of Netflix, which is projecting $265 million in revenue from online DVD rentals 2003--giving it about 2.5% of the $10 billion overall DVD rental market in stores as well as online, Netflix CEO Reed Hastings says.
Hastings says he welcomes the competition from Wal-Mart, adding that the world`s biggest retailer is helping to spread the word about the still relatively new concept of renting DVDs online. “Our biggest challenge is getting people to try us, because consumers are so used to driving to the video store,” he says. “So when Wal-Mart talks to their customers about DVD rentals, it helps us. Wal-Mart has helped grow the market faster.”
Indeed, Reed notes that, since Wal-Mart entered the market last fall, Netflix twice increased its revenue guidance for 2003, to $265 million from $230 million.
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