Situational Analysis Online Retail Bookselling Chip Cherry Jeff Grivno Ellee Hilley Jason Hayes Thermando Stephens Industry Overview • Top 5 book online retailers (Amazon, e-Bay, B&N.com, Wal-Mart, Books-a-Million) grew their sales by 48.5% compared to 19% for all other eretailers 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 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” 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 book’s text on line for a period of time instead of buying the book outright Economic Globalization: Industry Threats and Opportunities Threats: • Pricing Pressures • Transaction Security • Legislative intervention Opportunities: • Comparison Shopping Portals • Anything, Anytime, Anywhere • Localized Partnerships 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 The Amazon Model The Amazon Model Company Opportunities and Threats OPPORTUNITIES •Third Party Relationships •Entry in Internet Search Market •Expansion into China THREATS •Aggressive pricing and marketing from competition •Seasonality of business •Internet Regulation •Expansion in to web-based marketing of other retail products •Required to charge and collect state or federal sales tax •Service and license their own software suite for small book sellers •Pressure of free shipping policy on their ability to maintain a positive •Work with suppliers to develop a bottom line system of just in time supply or have vendors pay for the cost of inventory •E-books and E-text books – sold directly from the publishers or authors •Provide a venue for authors to Epublish their books through a on-line •Loss of used book and textbook sales service they create and manage because of E-books and E-textbooks Competitors Class Discussion • What will the effect of e-books have on this industry? • What other competitors may challenge for market share?