CNet Buzz Outloud jumped on the negative bandwagon about the Blockbuster/Circuit City merger in yesterday’s podcast. Rather than a private conversation with my iPod, I figured I’d blog about why I think the merger actually makes sense – at least from a marketing perspective.
It boils down to this:
Blockbuster = store traffic
Circuit City = impulse purchases (when enough foot traffic)
A perfect analogy here is movie theaters and malls. Movie theaters pay much lower rent per square foot than retailers in a mall because they add value to all the other tenants. The retailers that receive the bulk of this value are those that sell impulse purchase items.
Personally I rarely go into an electronics store without making an impulse purchase. Also, every time I go to Blockbuster, I get bored standing around as my kids take a long time picking out a movie. If I could browse a section of electronics (think Sharper Image type stuff) while my kids are browsing movies, I’d likely make some impulse purchases. Of course this requires putting smaller cheaper electronics near the movie rental section to draw you in… Occasionally I’d even wonder over to the bigger ticket items.
Sean, I like most of your opinions as you know. However this one I am going to have to disagree with. Circuit City and Blockbuster are both anchors, put them together and the ship that they are tied to only sinks faster. They both have massive problems in their core businesses that I believe go well beyond foot traffic and impulse buys. So on this one I am going to have to vote no… Jamie
Jamie, I definitely realize I’m in the minority on this opinion. Fact is I don’t know a ton about the financial situation of either company. I just hadn’t heard anyone talk about the potential benefits of the combination. Of course, BlockBuster could achieve some of the same benefits by just adding impulse purchase electronics to their stores – to complement all the impulse snacks they’ve added to checkout over the last few years. They don’t need to buy Circuit City for this. Sean
I do agree on this one. From a marketing perspective it is good sense to display electronics in the blockbuster stores (like iPod accessories and so on). Many accessories have a very high profit margin. But where I am lost is with this merger; what do they need Circuit City for? I am confident Blockbuster can manage a display of electronic accessories themselves. BTW. as this is my first comment I must congratulate you Sean – nice blog you got here.