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SPECIAL REPORT: MAKING MONEY ON THE INTERNET

Going Online Puts New Spin on Laserdisc Business

Retailer Ken Crane has increased his sales by $4 million a year by creating a store branch in cyberspace, though his Web site doesn't follow all the rules.

March 31, 1997|JACLYN EASTON | SPECIAL TO THE TIMES

If it weren't for a customer who kept pestering him to put his store online, Ken Crane might have overlooked the chance to increase his sales by more than $4 million.

As the owner of Ken Crane's Laserdiscs in Manhattan Beach, he had never thought of opening a cyberspace branch. Of course this was July 1995, the Jurassic period of online retailing, when the terms "Internet" and "Web" were just seeping into the national consciousness.

"I really didn't understand what it took to get on the Net, and this client said, 'Hey, just give me the information and I'll put you out there,' " says Crane.

Since the site was launched 17 months ago, online sales have been booming, and they now account for more than a quarter of Crane's $16 million a year in sales.

Crane succeeded without adhering to Internet marketing doctrines concerning branding, promotion and a slick Web site design.

A basic tenet among Internet marketers, for example, is that it's good to have reciprocal links with other sites, and that advertising on the Web and participation in topic-specific newsgroups will help drive Web surfers to a particular site.

Crane offers no reciprocal links to other sites, although about 200 sites link to his. He doesn't advertise. He doesn't post in newsgroups, though the alt.video.laserdisc newsgroup ends up shuttling customers his way. And most of his online orders come from the East Coast, primarily New York and Florida--3,000 miles from his Southern California hub, where eight retail outlets make him a known name.

The secret to this unlikely success is disarmingly simple: Crane focuses on the basic consumer mandates of savings, selection and service. He discounts a minimum of 20% on every disc, including new releases. He offers every one of the 9,000 movies currently available on laserdisc, compared with the 2,000 or so offered by even the largest offline retailers such as Tower and Sam Goody.

And he's carried over the strong customer-service ethic of his mail-order business to the online world.

"When you buy one disc online, he doesn't make any money on that order, partially because he offers two-day shipping for free," says Martin W. Greenwald, chairman and CEO of Chatsworth-based Image Entertainment Inc., the world's largest videodisc distributor. "But he knows once they buy, they'll come back again and again. He's like Wal-Mart. He makes money through traffic, not units."

In important respects, Crane's success is analogous to that enjoyed by Amazon.com, the highly successful virtual bookstore. Both offer good prices and an inventory that no competitor can match, and both put an emphasis on service.

"You really have to offer customers value online, especially discounts," says Jeff Bezos, founder of Amazon.com. "There has to be a value proposition for them, otherwise you set yourself up for failure."

Still, Crane's current online success is no guarantee of future success, and there are some outside forces that could curb his Internet disc dynasty.

For starters, Crane cannot legally sell outside the U.S. and Canada because of international distribution laws, and thus he can't really take advantage of the Web's global customer base. Further, Crane expects Blockbuster and other giants to enter the Internet sales business, and they may be able to use their massive buying power to offer better prices.

And the recent launch of DVD, or digital versatile disc, which offers movies on CD-like discs, may take the wind out of the older laserdisc technology--though Crane views this more as an opportunity than a threat. He's currently prepping a new Web site devoted entirely to DVD.

But Ken Crane's, like all online retailers, also faces a competitor that some analysts say it can never beat: the in-store experience. Television director Mike Switzer, a laserdisc buff and Internet surfer, still prefers to shop at Dave's Laser Place in Studio City. He believes the discounts are close enough to the deals he can get at Ken Crane's Web site.

Moreover, he's not willing to forfeit the grazing and impulse buying synonymous with visiting a real-world store.

"'I'm always looking for suggestions," says Switzer. "'I think of buying laserdiscs as more of a shopping experience than a purchasing one."

Jaclyn Easton is the host of the syndicated radio show "Log On U.S.A." She can be reached via e-mail at easton@easton.com

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