business news in context, analysis with attitude

There are a number of stories this morning about how Netflix, the online DVD rental company with some 1.1 million subscribers and first quarter revenue this year that was up 82 percent to $56 million, has been granted a patent for many of its business processes. This patent, according to The New York Times, for example, "could alter the nature of the competition" between Netflix and both Wal-Mart and Blockbuster, both of which have developed businesses that imitate the Netflix approach.

But Business 2.0 also has a fascinating piece that details how Netflix has become successful not just by renting blockbuster films - it might buy as many as 60,000 copies of "My Big Fat Greek Wedding" to rent - but by creating an environment in which smaller, more niche films can be discovered by an audience and thrive.

A key part of this process, according to the article, is the system that the company has set up for tracking what films are rented by specific people and then recommending other, similar films to those same people - some of them well-know, but often independent films that are less known and that did not find an audience in theatres. And critical to this recommendation system is the ability of people to rate the films they've rented from Netflix…which creates a kind of elliptical system in which people are feeding themselves the titles of new movies to rent.
KC's View:
This is something that many food retailers just don't latch onto - the ability to use the consumer's preferences and habits to expand their shopping lists and the size of their average transactions. It can be done through tracking and software, it can be done through sampling and asking questions and listening - really listening - to the answers.

We've had the opportunity several times over the past year to write columns for the IGA Grocergram in which we spend time shopping with consumers at various stores, wandering the aisles as they express their preferences, likes and dislikes. It is a fascinating experience, not least because people really view the store in which they shop as "their store." The last time we went, we spent a half hour with a woman who gave us a long and involved explanation for the way in which she'd like to see her store reorganized - and it made a lot of sense. (We can't explain it - the article hasn't come out yet, and it wouldn't be fair to the Grocergram publisher and readers.) but the Grocergram is doing what retailers should be spending a lot more of their time doing - gauging consumer tastes and preferences.

We recently rented a DVD from Netflix called "This Is Our Father," starring James Caan and Aidan Quinn, a terrific movie about a man seeking his family history in Ireland. It never made much money in theatres, and we only remembered it in passing…but it was one of our favorite movies of the past year once we saw it.

How many products are on grocery shelves like that? Products that are not enormous hits supported by big marketing budgets, but gems waiting to be discovered and savored…gems that can create a differential advantage for the supermarket that decided to pay attention to them?