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Netflix, Inc. Message Board

  • playmeortrademe2win playmeortrademe2win Jul 22, 2002 3:47 PM Flag

    Ideas for improving NFLX's model 1of 2

    I am both a Netflix fan and a Netflix investor. Below are some ideas for process improving the current NetFlix distribution process. These ideas may have already been discussed within Netflix or on boards such as this one. But just in case they haven�t, here are some suggestions.
    � Supplement the current distribution center(s) with �forward mailing�. Here is how it will work:
    When a customer is getting ready to return the DVD, give them an incentive to forward the DVDs to the next customer whose DVDs is in the wish list queue for the same DVD using NetFlix�s enhanced website, which allows the customer electronically check-in all of his DVD(s) that he intended to return. The system would provide him with the new address(es) to forward the envelope. The system then ask him to printout the new addressee label(s) a standard 8.5x11 paper and he would cut to shape and insert it into a new Netflix re-useable/re-sealable envelope with a see-thru (this will come in handy later) sleeve that holds the label and is about the size of a business card (i.e. reusable explained: UPS style except that one of the 4 sides is open for inserting the new addressee label; re-sealable explained: inter-office envelope mail style with either thread-and-button sealing or re-adhensivable sealing). Here are some FAQs about the above method:
    � How will this improve the process, and more importantly, the bottom line?
    Plenty. It will do at least 3 things.
    One, it will shorten the delivery time a lot. Instead of taking the current route of current_customer-to-Netflix-to-new_customer, it will do current_customer-to-new_customer method. The system can further enhance the customer-to-customer stream by intelligently data mine for the queue to do a zipcode-to-zipcode zone delivery with a logistical check to avoid a Coast�to-Coast delivery, a time consuming process, whenever possible.
    The second thing is a shipping cost reduction by 50% or more. Assuming the average NetFlix customer views 1 video a week. The cost of roundtrip mailing of its DVD is $1, or $4 per customer per month. According to Netflix�s website, it handles 80,000 DVD shipments per day. That�s a potential annual savings of $29,200,000 (80,000 x 365 days x $1) on mailing costs alone.
    Last, but not least, the labor costs savings will be reduced since the customers helped doing the status updates and envelope stuffings.

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    • Sounds very interesting. It's like a per-to-per system with NFLX following up all the logistics.

      The Napster of DVD rentals: you look for a movie on a central NFLX database, the database tells you who has the movie, the subscriber sends you the movie directly to you.

    • I would prefer not to have someone? have my mailing adress. I don't think this is possible due to customer privacy concerns.

      • 2 Replies to mortgage1dude
      • Here are the follow-ups with the concern on privacy and other issues on the proposal.

        * Privacy - I should emphasizes that this process is optional and is incentive-driven, one don't have to participate. In addition, if one decided to do so, NetFlix can easily accommodates that thru:
        1. Using Alias. Instead of display of Mr. John Doe, 1 Main Street, Anytown, ST 12345. It would only displays, "Current Resident" or alias of the same address.
        2. If using a printer for the label, the system can generate a bar-code only address (assuming a deal is in in-place with the USPS to do so).
        3. Assuming only item #1 is do-able, with the rewards incentive, that's a fair exchange for volunteering. If #2 above is workable, the issue will almost be moot.

        One would be surprise how much (or little) privacy one already been "violated" whether the user know about it or not. Some examples, on eBay, say you won a bid, you do not have a choice whether the seller can leave you a feedback (along with the item number and description of the item you bidded and/or won). In fact, it even included your bidding/purchasing history. Same thing applies when you sell on eBay or when you review books/videos/etc. on Amazon and other sites like Yahoo! (On this Yahoo! board, one already given out some of demographic data on the Yahoo! profile (gender/age/town). Granted, those eBay do not display your mailing address to the world, but you still need to supply the seller/buyer your mailing address for payment/shipment. NFLX's proposed process improvement would almost be the same, a peer-to-peer address exposure. And the other guys do not even give you financial incentives for doing do, unlike NFLX's royalty rewards model.

        * Message 822's "left it in the car and forgot????" issue.
        The problem exists regardless you forwarding to the next subscriber or back to Netflix, it's a customer procedure issue; not a Netflix process weakness. Sorry no one can't help an absent-minded person here.

        * Message 827's "how is NetFlix to know whether or not one of their customers actually sent the item."
        Almost the same issue as Message 822 above. This issue remains whether they sent the DVDs back to Netflix or another customer, the only difference is the address.

        * Message 823's "There is no need to be creative."
        If you're a NFLX stakeholder, there are 29,200,000 reasons to be creative. BBI, MOVI, and HLYW will be glad to take advantage of that when they get their e-Commerce acts together. Again at an annual savings of over $29M (80,000 x 365 days x $1) on mailing costs alone, it's something Mr. Hastings love to have in the balance sheet.

      • Someone? stole the other "d" out of my address!

        Sorry for the typo.

    • Interesting idea. If I may play devil's advocate for a second, while your modification will definitely save the company money, the problem with this type of business model is that NetFlix will lose control of their inventory.

      For example, how is NetFlix to know whether or not one of their customers actually sent the item.

      That, to me, is the main drawback to the modification that you proffered.

      • 2 Replies to hokie1
      • Just like video stores, Netflix could sell used DVDs to existing customers who want a copy of their own. They could intentionally overorder new releases to improve their availability and then, when demand drops off, set up a page on their site where customers could order the extras for keeps and Netflix just tacks the purchase price on that months' fee.

        Second, the HUGE adult market is as yet untapped.

        Third, promos and coupons for theater releases. Let's say Insomnia and Spiderman were to be released on the same weekend and the Insomnia studio is worried about getting buried. They could pay Netflix to promo the movie and print a $2 off coupon for Insomnia on the inside tear off cover of the mailer. The possibilities are endless. Toy discounts (Lord of the Rings or Harry Potter), fast food tie ins (extra free MIB II figure with purchase) etc.

      • "For example, how is NetFlix to know whether or not one of their customers actually sent the item."

        The same system uses to know whether the seller sent the item to the buyer: e-mail confirmation. After you've confirm sending the item to the buyer, charges buyer's credit card.

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