Chip Cherry

1
Online Retail Bookselling
Situational Analysis

• Chip Cherry
• Jeff Grivno
• Ellee Hilley
• Jason Hayes
• Thermando Stephens

2
Industry Overview

• Top 5 book online retailers (Amazon, e-Bay,
  BN.com, Wal-Mart, Books-a-Million) grew their
  sales by 48.5 compared to 19 for all other
  e-retailers in 2005.
• 2,295,000,000 books were sold in 2005
• 44 million less books were purchased in 2005
  compared to 2004.
• McGraw Hill published that total books sales will
  again decrease 3-4 in 2006.
• Book revenues increased 2.8 in 2005
• China's e-book sales volume reached 8.05 million
  with 148,000 types published

3
e-Commerce Effect since 2001

• E-books
• E-textbooks
• Content created for Mobile devices
• Lower Margins as a result of competition
• Advantage of proprietary systems are lost as
  these systems become available off the shelf

4
e-Commerce Industry Threats and Opportunities

• Threats
• Box retailer incentives, shop online for research
  and comparison then purchase from local book
  store
• Increased Completion due to the reduction of
  market barriers
• Opportunities
• Web Portal/Purchasing Portal, using existing
  infrastructure to support marketing and sales of
  other non-related lines
• Virtual Web-based Library where customers would
  purchased access to a books text on line for a
  period of time instead of buying the book outright

5
Economic Globalization Industry Threats and
Opportunities

• Threats
• Pricing Pressures
• Transaction Security
• Legislative intervention
• Opportunities
• Comparison Shopping Portals
• Anything, Anytime, Anywhere
• Localized Partnerships

6
Economic Globalization Effects since 2001

• Online Retailing 90 billion in revenues for the
  U.S. retailers in 2004, compared with just 8
  billion in 1998
• Retailers without stores may be "efficiency
  machines" or "niche leaders"
• Internet provides worldwide scalability for low
  margin products
• Global activity locations
• Sourcing and fulfillment processes USA, Europe,
  Japan China
• Development centers Europe India
• Customer Service Operations Europe, Japan
  China
• Partnerships with traditional bookstores and
  retail stores
• Traditional Bookselling
• Traditional bookstores opening international
  stores
• Booksellers turning to publishing
• Publishers re-entering the distribution business
• Reentry of small sellers into the market place

7
The Amazon Model
8
The Amazon Model
9
Company Opportunities and Threats
THREATS
OPPORTUNITIES

• Third Party Relationships
• Entry in Internet Search Market
• Expansion into China
• Expansion in to web-based marketing of other
  retail products
• Service and license their own software suite for
  small book sellers
• Work with suppliers to develop a system of just
  in time supply or have vendors pay for the cost
  of inventory
• Provide a venue for authors to E-publish their
  books through a on-line service they create and
  manage

• Aggressive pricing and marketing from competition
• Seasonality of business
• Internet Regulation
• Required to charge and collect state or federal
  sales tax
• Pressure of free shipping policy on their ability
  to maintain a positive bottom line
• E-books and E-text books sold directly from the
  publishers or authors
• Loss of used book and textbook sales because of
  E-books and E-textbooks

10
Competitors
11
Class Discussion

• What will the effect of e-books have on this
  industry?
• What other competitors may challenge for market
  share?