Eager to avoid the fate which befell its US counterpart, Blockbuster UK has unveiled a somewhat surprising business restructuring strategy that will see the movie and video game rental chain start selling in-demand consumer electronic items including HDTVs on high street stores.
Last month, Blockbuster USA filed for bankruptcy under the Chapter 11 code amid spiralling debt and dwindling revenue due to intense competition from rivals boasting more efficient business models such as internet DVD rental company Netflix or self-service DVD kiosk firm Redbox. Fortunately Blockbuster UK remains unaffected by the bankruptcy proceedings across the pond, because UK stores are part of the European network which is a distinct business entity independent from the US operation.
Seeking to reassure the UK public on the health of the company’s finances, Blockbuster’s UK and European commercial director Gerry Butler claimed that the UK business currently holds net assets in excess of £50 million, and is still growing on a year-on-year basis – for example, its core business of movie and game rental was up by 6% thanks to the rising popularity of Blu-ray films. He went on to stress that Blockbuster UK is a sound, cash-generating business that is not laden with debt.
Still, Blockbuster UK clearly thinks that something needs to be done to prevent the business from going down the same route as its American brethren. As part of a 5-year business plan, Blockbuster UK intends to relocate most of its stores to prime High Street locations, and start stocking popular electronic goods such as flat-screen televisions, mobile phones and iPods. 35 Blockbuster stores across the country are now selling TV sets as part of a trial run.
Mr Butler is convinced that evolving from a DVD/game rental service to an electronic hardware outlet will help the company prosper in the future, but all signs indicate otherwise. By adopting this strategy, Blockbuster UK is effectively going head-to-head with more established and experienced high street retailers like Comet and Currys, and to a lesser extent supermarkets like Tesco and department stores like John Lewis. And when the razor-thin margins in the consumer electronics retail industry, not to mention the huge overheads of high street stores are taken into account, it is very difficult to see Blockbuster UK going places with this business restructuring plan.