I remember when Netflix first came out, and I thought it would be the death of Blockbuster. More selection, more convenience, and no overhead associated with running a brick and mortar store. Of course Blockbuster responded by launching the same basic service that Netflix was offering, and the competition had begun.
But then Blockbuster did something that Netflix could not counter. They started allowing you to return your movies in the store. They put them in the mail for you and also allowed you to pick out another movie from the store to rent for free!
Not only is this a great service, but it gets you into their store where they always ask, “Would you like to purchase Coke, candy, or popcorn tonight?”
AHA!!! Blockbuster took what would appear to be a competitive disadvantage–having to operate a brick and mortar store–and turned it into a competitive advantage–an opportunity to sell food and beverages at an extreme markup along with pre-viewed movies, posters, video games, etc.
Blockbuster had the rules changed on them overnight, but they turned the new rules into an advantage. Some creative thinking on their part has put Netflix on the brink of going out of business.
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