The main differentiator Blockbuster has from Netflix is that they own those thousands of stores. Around here, you can pass two or three Blockbusters just trying to get to the nearest gas station. However, they haven't really done all that much with the stores to try to leverage them against Netflix. Apparently, that's changing. Blockbuster is now trying to use the stores as distribution centers, realizing that it puts them closer to customers, making it easier (they hope) to get movies to renters-by-mail faster. It's a good idea, in theory, but it will be interesting to see how well it works in practice. The stores really aren't set up to handle that type of thing, and it could be a bit of a logistical mess. Employees in all those stores will have to be trained very differently, and a good system needs to be in place to handle which stores handle which customers, and how things get passed around if one store is out of a certain movie. With more centralized, regional distribution centers, Netflix gets a bit more economies of scale in being able to train employees in one center to specifically handle the role of sending out and receiving DVDs. What would be even more interesting is if they decided to go further into the Kozmo style business of delivering DVDs within an hour, and then letting you send it back in.
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