Monday, September 20, 2010

Why Bricks and Clicks Failed at Blockbuster

I found this article about the demise of Blockbuster to be quite interesting. In particular, note this comment by Michael Pachter, an analyst at Wedbush Morgan Securities, in an excerpt from the article in the New York Times:

I called Mr. Pachter, who is now managing director of equity research at Wedbush Securities. “Blockbuster should have won — and didn’t. I was wrong,” he said. He ticked off the ways that Netflix executed flawlessly and Blockbuster stumbled when it tried to replicate Netflix’s online service.

“I honestly believe most consumers would like a bricks-and-clicks solution,” Mr. Pachter said. “The reality is, they do have it. It’s just two different companies: Netflix and Redbox.” With video-rental vending machines that sit within grocery stores, drugstores and other retail hosts, Redbox uses the bricks of its partners.

Here is a great learning point for strategists. Yes, it is two different companies, and that is NOT surprising. The fact is that executing two fundamentally different business models within the same corporation is VERY difficult. Thus, it should not shock us that we have two "pure plays" who have done better than Blockbuster, which tried to create a hybrid model of bricks and clicks.


Luke Bornheimer said...

Trade-offs, trade-offs, trade-offs...Blockbuster was TERRIBLE at making trade-offs.

Not until Netflix arrived on the scene did anyone realize Blockbuster was SO weak and nimble, but once an innovator surfaced, they had clearly had no back-up, or next-generation, strategy ready to implement.

Let this be a lesson to businesses who disregard innovation because they have a cash-cow with no real competition.

Michael Roberto said...

Is Barnes and Noble headed down the same path as Blockbuster? Will they get that ship turned around, Luke?

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