Home Entertainment, the operator of Choices Video and DVD stores, has been hit by the rise in the number of fake DVDs flooding into the UK, reporting pre-tax losses of GBP3.1 million. Piracy is not the only problem: unless the company responds to increased competition and improves its brand profile, the prospects look relatively bleak.
Piracy is just one of the many problems that Choices faces. The retailer must also contend with rampant price deflation, the surge in popularity of online DVD rental and increasing competition from non-specialist operators, such as grocers. Choices has been concentrating on reducing its emphasis on rental for almost three years, but at a painfully slow rate. Sell through has increased from 53% of sales in 2003 to around 60% at present, but customer perception remains that it is still a rental-focused business.
A distinct lack of brand awareness is partly to blame. The company is halfway through its plan to unite a plethora of disparate brands under the Choices UK banner. The company launched a 24-hour TV channel ChoicesUK TV in August 2005 on Sky to sell its products and broaden awareness of the brand. While this may help to reinforce the brand among existing customers (many of whom are Sky subscribers), it does little to raise awareness outside of its core customer base which is essential to drive footfall to its stores and traffic to its website. Verdict is skeptical of the benefits of this expensive gamble and it is unlikely to be Choices' salvation.
Choices needs to address its range urgently. It should focus on its core strength of video and games and rationalize non-core categories such as mobile phones, books and CDs, which are offered far more effectively by others. It needs to work harder on communicating the depth of its offer and raise the profile of its brand through a more visible marketing campaign. With a well communicated offer there is potential to capture customers from the likes of Woolworths.
The company has been resting on its laurels for too long. Rival Blockbuster has already taken significant steps to shift its profile to a greater sell through offer, with some success. Unless drastic action is taken to revitalize its offer and raise the profile of its brand, the prospects for Choices look bleak.