Family Video handles some purchasing and accounting operations at its Glenview, Ill., headquarters.

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At a time when many brick-and-mortar video stores are struggling – thanks to the popularity of services such as Netflix – Family Video says it continues to grow, to the tune of more than one new store opening every week.

The company essentially started the video rental industry, according to Bob Kording, executive vice president of operations.

It began as an offshoot of MidStates Appliance, an electronic distributor. In the late 1970s, the VCR hit the market and was, at the time, a big-ticket item. The videos, too, were quite expensive, and many of the movies available were older films that had little commercial appeal.

“They weren’t releasing new stuff like they do now,” Kording explains. “We were good enough salespeople to sell the movies to the wholesale customers, but the consumers didn’t want to buy it. They might be paying $100 for a copy of ‘Patton.’ You could buy a new Ford Pinto for $2,000, so you could buy 20 movies or a car.”

When its customers’ bills came due, many of them wanted to send the movies back because they wouldn’t sell.

The company obliged, wanting to maintain their relationships, but was left with a warehouse full of opened movies and nothing to do with them.

“When you’re in the wholesale business, you don’t make much money on any one transaction, so you have to keep turning cash,” Kording says.

“Suddenly, we had a huge chunk of our operating capital sitting in a room. We couldn’t sell them because they were too high priced, but people wanted to see them. They wouldn’t pay $100, but they would pay $5, so we started renting them.”

Kording says, to his knowledge, there was only one other video rental store at the time, located in New York, but the owner was duplicating the movies illegally and was shut down by the federal government. One of MidState’s dealers suggested renting the movies, and it jumped on the idea.
The first store was located in the company’s wholesale warehouse in Springfield, Ill., and it soon opened two others at its warehouses in Peoria, Ill., and Chicago.

“Our next focus was to use this new business as a tool to sell more movies to our TV and appliance dealers,” he says. “We went out and sold the concept of a movie rental store to a guy we were selling TV recorders to with significant success. Suddenly, there were video rental stores popping up all around.”

Branching Out
Family Video now has nearly 580 stories in many parts of the country, with locations from South Carolina to Minnesota and from New York to Dallas. It opens an average of more than one store each week, all of which are company owned.

Most of the real estate is company owned, as well. In recent years, the company has branched out into Nebraska, Minnesota, Tennessee and South Carolina, and extended its reach in New York, Texas and Kansas.

Kording says Netflix may have taken some growth off the top for the company, but it’s been countered by a decrease in business at its brick-and-mortar competitors. The company’s private structure and focus on customer service has allowed it to remain a successful enterprise, he says.

“A lot of our customers use us and Netflix,” he says. “We haven’t seen the impact. It might be masked by the fact other publicly traded brick-and-mortar business is down.

“But we’re private and the only person we have to answer to is the customer – not a Wall Street banker, analyst or the FCC. Our sole focus is the customer experience in the store, and I think that’s made us stronger.

“I think the No. 1 difference is the quality of our staff,” he adds. “Netflix is a nice business spread out over the whole country. Ours is still a local hometown video store. In the long term, there is room for both.”

Family Video now employs approximately 6,000 people.

Big Operation
The company considers its Springfield location its “legacy headquarters,” where it no longer operates a video store, but operates a manufacturing facility where it makes all of its own store fixtures as well as processing, shipping, purchasing, accounting and computer support departments.

It also handles some purchasing and accounting operations at its Glenview, Ill., headquarters, as well as merchandising, management and e-commerce.

Going Online
The company operates an online store where it sells new and used movies. “We sell every movie that’s available in a new state, and a lot of previously viewed titles for half the cost of a new product,” Kording says.

Its online store launched four years ago and has more than doubled in size every year since then.
“We just launched the previously viewed selection this summer and it’s been phenomenal,” he says. “Consumers like to find a deal, and that’s a great deal. It gives us reach beyond brick and mortar.”