As Netflix entered as a leading competitor in the DVD by mail market it didn t necessarily have to compete against an easy group of brand names Netflix was a start up dot com corporation going up against some of the nation s most well known brands such as Blockbuster and Wal Mart However Netflix was able to emerge as today s top DVD by mail supplier through various forms of advantageous technology that gave them a competitive advantage over everyone else Because brands are built through customer experience Netflix focuses a lot of attention on pleasing customers and consistently ranks at the top of customer satisfaction surveys One way is by offering much larger selection of movies that also includes back catalog titles not new releases foreign and independent films Whereas a traditional store front can hold roughly 3 000 titles Netflix can stock its warehouses with a continuously growing selection of over 100 000 DVDs This gives them a unique ability referred to as The Long Tail in that they can make money by selling a near limitless selection of less popular movies These not as popular or not new releases are a vital portion of Netflix s income as they account for over two thirds of the DVDs shipped Another key to Netflix competitive advantage is their unique ability to deliver the movies in a timely fashion Netflix has a network of over 50 ultra high tech distribution centers that collectively handle in excess of 1 8 million DVDs a day These distribution centers are purposely located within a close distance of 119 U S Postal Service processing and distribution centers allowing Netflix to service over 97 percent of its customer base within a two day window Finally Netflix is able to utilize a proprietary movie recommendation system one of the industry s most sophisticated technologies called Cinematch Cinematch is a form of collaborative filtering that develops a map of user ratings and steers users towards titles preferred by people with tastes similar to theirs The software coupled with the time Netflix leveraged as the first in the industry has built an enormous data advantage that is valuable results yielding and impossible for rivals to match Recommended titles make up over 60 percent of the content that users rent By utilizing these unique abilities and technologies Netflix has been able to sustain a competitive advantage over other competitors in the market as well as a consistent increase in growth revenue and profit
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