Interview with an entrepreneur:
Online movie store - business specifics
The site clogicsecure.com, as part of a joint project of the Community of Information Portals Promoting the Development of Small Businesses, continues a series of interviews with successful entrepreneurs who are ready to share their own experience in creating a business and help newcomers take their first steps in business.
"Payment and delivery remains a pitfall. The buyer is not obliged to pay for the order, and therefore 5% of the orders are returned, which results in losses for storage and two-way shipping."
If you ever thought about the possibility of creating your own online store, you will certainly appreciate the serenity of our today's expert - the founder of the online store www.videoshop.com.ua Alexander.
Alexander, tell us a little about your online store videoshop.com.ua. How long have you been in this business?
The company has been on the market since June 12, 2007, you can say a little longer, but this is the date of the first order.
We are engaged in the sale of films. Initially, it was planned to open a fully licensed store, but due to the complexity of processing the sale of licensed videos (none of the consultants on the design of SPD simply agreed to advise) at that time it was decided to start with a simple record for the order.
Selling licensed videos without permission and selling pirated videos is equally punishable. Further, after the complaints of the copyright holders, the copyright holders themselves proposed to purchase a licensed video at good prices, which we did.
How did you come up with the idea of starting this particular business? How was the idea of this business born?
Initially, after graduating from the university, we were filled with euphoria, like the future of e-commerce and all the major players will appear next year, but buying a store is not a problem, the question was what to sell in it.
The first attempt - computers and accessories failed. Everything is real, but not convenient, it turned out that the online store more often acts as a showcase of a physical store, it may not be profitable to rent a room, but somewhere you need to store a part of the goods that can instantly become outdated or take every item in the warehouse, but for example a courier’s trip to a warehouse behind a train or a mouse will be clearly unprofitable.
In parallel, the video store was tested as one of the options as well as the Open-Source application store. Only one survived.
According to your estimates, what is the minimum amount with which you can start this business today? What does the money go for (main expense items)?
There is no certain amount, you can buy a store script / you can take a free version, you can put it on a paid hosting / or use your home computer as a server, you can buy licensed films or sign an agreement to receive films for sale. I can go on for a long time :).
The most important investment is a head on your shoulders and free time. It will take a lot of time or also a lot of investments.
But the more finance will be invested in the goods, respectively, the greater will be the return. As an everywhere. The money will help to fill the store with a good assortment, you can order a unique and beautiful design, order promotion, hire operators. Probably a unique design is the most important investment here, the store should be unique, memorable.
At the beginning, for a comfortable start, an amount of $ 5, 000 will be enough, including advertising, promotion, design, etc. but as I said above, this is without much savings, and you can do everything gradually.
What difficulties did you encounter in the initial stages of doing business?
- complexity, this is the lack of orders at the initial stage. Any business is unprofitable without a base of regular customers, and they appear only with time. Next, you need to choose a suitable type of advertising - during the search a lot of money was spent in vain.
- The problem of finding a good hosting for the site. Domestic hosters are inadequate in price and support; on foreign ones, sites respond for a long time. We stopped at a foreign one.
How long have you paid back your initial investment?
- Investments are still ongoing, but now just all the profits are spent on development, while we can afford it.
What can you say about profitability in your business?
While online video stores were rare, profitability was excellent, now even large pirate stores close monthly because of unprofitability. And major players are betting on increasing the assortment, adding games and books to films.
If we want to look into the future, we will find a couple of large Western video stores - www.dvd.co.uk, www.play.com - what do we see? These are already online supermarkets with electronics, clothes, etc.
Competition is growing daily, but it makes us constantly improve the quality of the store.
Where do you buy discs? What is the margin for your products?
- For now, I take discs directly from publishers, this gives advantages in price, but we lose in assortment. I won’t say the margin itself, but it allows you to give a 20% discount to the client when you purchase only two licensed films, and the price without a discount looks relatively good.
What is the cost of shipping drives to a customer? How do you deliver? Does it make sense for consumers to order discs through the site or cheaper, faster and easier to buy in the store?
- Delivery is a headache for a store that is not located in the capital. Most customers want to receive an order in an hour. Kievans usually do not even think that a large store can be located outside the capital.
The most common type of delivery is mail, cash on delivery. Customers love to pay upon receipt, believing that it is more reliable. Although the parcel in the mail will not be allowed to open before payment, even if you send a brick, you have to pay to find out what is in the parcel.
Cash on delivery with us costs 15UAH + 5% the post office will take on the cost of the order for insurance. What insurance means is unclear, there were cases when we sent a licensed video, and the wreckage reached the client, as if the tank had passed through them, but what kind of insurance, if the parcel was not lost, was sent again. Now we try to pack more carefully and of course we guarantee delivery of goods to the client.
For Kievans, we use CityExpress courier services, which will deliver goods from hand to hand practically throughout the country.
There is also a good option - Gunsel, deliver quickly and inexpensively.
Although in all cases except cash on delivery, you need to figure out how to pay for the order in advance. Cards have not yet taken root, WebMoney, too.
What drives are in high demand among customers? How do you create an assortment? Are there any features?
Demand is usually seasonal below I will indicate how the video depends on seasonality. Recently, there has been a high demand for TV shows. First of all, those that will never appear in the license. Licensed are best cartoons and documentary videos. But of course, you need to establish an operational supply of new products - if the Avatar came out, it should be on sale the same day.
Do you have problems with regulatory authorities and how do you solve these problems?
There were no problems yet, regulatory authorities have only recently become frequent on the Internet. Over time, there will be nothing to complain about. There’s a FOP just in case, so it’s impossible to say that we don’t pay taxes, in the USA, for example, there’s more time for this than for piracy :). We plan to open a physical store (it is necessary at least for warehouse functions), then we’ll talk about problems.
First of all, we try to advertise a license and also place it on commodity aggregators. In addition, as soon as the licensed version appears, a copy of it goes to the trash.
Does seasonality exist in your business?
- It is generally accepted for DVDs - the seasons are spring, autumn, but practice shows that the best sales are before the New Year, but otherwise they are pretty even, just different products are bought. Spring - girls buy videos with shaping trainings, in September - training videos, cartoons in the winter, May 9, of course, war films, TV shows or documentary chronicles.
What other pitfalls does this type of business have?
Underwater rocks? Payment and delivery remains a pitfall. The buyer is not obligated to pay for the order, because 5% of orders are returned due to which we receive losses for storage and two-way shipping.
The main problems of online stores are well described in the article What should we build a store or about creating a truly profitable online store, where our store was also mentioned for the quality of the product description :).
Which specialists should be paid special attention to. How did you select key employees?
The employees at this stage are students and housewives who can work remotely. The main tasks have not yet been delegated, and in times of crisis more and more tasks are replaced by programs as much as possible. Programs look for descriptions, photographs of products, make connections between similar products, and record orders for online versions.
Previously, all these tasks needed people, but now additional expenses will drive the budget to minus. Currently, the largest expenses are spent on support sites, such as blogs with copyrighted film reviews.
How do you advertise your services? Which advertising media have proven their effectiveness, and which ones did you end up with?
1) We advertise in all search engines in contextual advertising. This is the best option for advertising, but you need to work carefully, at first a lot of money was spent on words like “movie”, “DVD”. People clicked just in case, but didn’t buy anything., for example, I just wanted to read about the film. Now the requests are refined to specific requests “buy Poirot series”, the payback of advertising in this case is much higher.
2) We tried advertising on partner sites of search engines - money wasted.
3) We tried to advertise with large banners in online publications. Advertising didn’t pay off.
4) We are advertised in commodity aggregators, price.ua | metamarket | marketgid and others. - at the first stage they showed good efficiency, but now the effect is reduced.
5) Advertising on forums, now such advertising is paid, but it shows good results.
Is there competition in your business?
The competition is very high and is constantly growing, but studies have shown that it is an order of magnitude less than in the segment of books that we plan to reach in the next half year.
Has the economic crisis affected your business?
- Of course, it was reflected, for the “Internet versions” the carriers went up 2 times, along with the dollar, postal services also 2-3 times, and we can’t raise the price since competition is only growing. Now you need to consider all expenses to the penny, trying to reduce the cost of production. Half of the employees were abandoned, they reduced advertising costs and optimized it to the maximum.