The Australian, Entrepreneur
AUSTRALIA is behind the rest of the world with online shopping.
According to online researcher Hitwise, just 6.75 per cent of Australian internet traffic last month was for shopping and classifieds. In the US, 9.54 per cent and Britain 9.61 per cent of traffic was in this category. In the DVD market, 10 per cent of US households have rented online; in Australia it’s under 1 per cent.
The good news is that this means there is vast potential for online DVD rental in Australia where ASX-listed minnow Quickflix is slugging it out with telecoms whale Telstra.
Both services were launched in 2003 at the same time that the Packer-backed Homescreen entered the market. For Stephen Langsford – a former fund manager and dotcom consultant, and the entrepreneur behind Quickflix – it was daunting.
“Here it was three players thrashing it out in the market with a sub-optimal service,” he says. “I think we had to go through that phase and then start to get serious about it.”
Quickflix itself had only one service centre in Perth and a limited range of 3000 DVDs, a number that will be available in vending machines locally soon.
Five years on and Quickflix has out-manoeuvred and outlived many competitors. In December 2005, it listed on the ASX and mopped up Homescreen, while others such as DVD Jam have faded away.
Currently, the market is split 60:40 between Telstra and Quickflix, which claims some 28,000 subscribers. Their business models and technology are similar. Both allow users to save movies to a wishlist for delivery. Both also allow subscribers to share reviews of movies, bringing them into the web 2.0 social networking space.
They deliver content in a convenient format, which right now happens to be as a DVD delivered overnight by Australia Post. While they do take away business from Australia’s shrinking network of DVD rental stores, both are subscription services that are in competition with Foxtel.
Like Amazon, Quickflix is a longtail business with 80 per cent of its DVD catalogue being rented each month. Langsford says the the key to success is offering a vast choice – currently 30,000 DVDs and growing at 500 a month. Within a few years, he expects the library to hit 90,000.
“It’s why ultimately we are not about DVDs. We are about an online movie community in which we are presenting the universe of content,” he says.
Langsford also says that key to success on the internet is not getting too far ahead of consumers in technology. One of the reasons that Reeltime, an online business backed by Sony, failed in January was because it was trying to offer a limited choice of movies as downloads, which were slow.
The story behind Quickflix’s survival is that the team worked harder and smarter than their competitors. “It sounds cliched but just getting very focused on delivery to our subscribers’ expectations and just making the service more and more excellent is the winner,” says Langsford.
“We have to be smarter with our marketing dollars and very focused. We can’t just go and do some bland brand campaign. Ultimately we need to get subscriptions out of it.”
The internet marketing model relies both on and offline on the old-fashioned formula of its message reaching lots of people frequently. Langsford says that based on experience in the US, it takes a subscriber seven contacts with the business before they will act and join.
Offline advertising focuses on non-traditional media such as the back of Virgin Blue seats. And the company has productive marketing partnerships with Optus and retailers Harvey Norman and Big W.
“That all helps the brand,” says Langsford. But ultimately it is marketing through various online affiliate and digital networks that has driven subscribers to the company.
Langsford says much of the business is engaging customers and building its database for the future when inevitably delivery will be online. “There aren’t too many businesses that have that rich personal profilings of consumers that have an engagement on the web,” he says.
In the meantime, Quickflix faces new indirect competitors offering DVD rental from vending machines. These companies include Red Room in NSW and the emerging Glued franchise in Melbourne with a cutting-edge vending machines stocking 3000 titles.
With the DVD rental market in Australia worth about $2 billion a year, Langsford says: “There is plenty of room.”