The total number of retailer book stores is more than 10,000 in US and combined more than 17 billion USD is generated annually. Out of these stores 50 largest companies accounting about 75% of sales shares in market. Large chains become the place for the lower prices and broader selection. Independent and smaller bookstores offer the specialized selection among many books. Population demographics and disposable income of customers are influenced by the buying patterns. E-book readers and books sale and purchase over the internet has gained the popularity and faced with the challenges, increases the revenue in the existing industry of book store and retaining the customer base. It is found that industry has faced numerous obstacles in the challenging economy. The big chains shuffled to get back their assets, thousands of booksellers made the efforts to hold back the ambush from the giants of bookstores led by the Borders, Amazon.com and Barnes & Noble.
Background & History
Get your grade
or your money back
using our Essay Writing Service!
Many large chains dominated the retail book store industry, these retail bookstores included the Crown book corporation, Barnes and Noble and Inc. The rest of market shares in the industry were owned by the 10000 independent bookstores. Chain stores were opened during the 1970s and located in shopping malls with 150000 to 20000 most popular titles for the consumers in book industry. Independent book stores retained the most important titles 30000 to 40000 in numbers. Independent stores contained the religion, science, technology, hobbies and children's books mainly. The trend to open the superstores started in 1990s by the chain store operators. These superstores offered discounts on books and provided other amenities like reading rooms and coffee bars. The idea behind opening the superstores was to drive out the independent booksellers in the retailer book industry. It was also noted that during the growth of mall based book stores, the dire predictions were seen. The presence of the superstores increased the shares of book market from 50 to 60 percent.
In the early 1990s another type of bookstores appeared in the book market. These stores were based upon the multimedia and carried the books videotapes, audiotapes and computer programs. These stores contained the different sections of electronic information media and printed works long videocassettes of Shakespeare plays. The WGBH Learning smiths were the leader of this new type of multimedia stores in Massachusetts.
When the deep history of the bookstore is taken into account, it is seen that bookstore appeared in 1640 first time and Boston become the center for the book selling and publishing. Benjamin Harris was the first who published the first newspaper and opened a book store in 1640. Before this other seven booksellers were found in Boston. A fire damaged the bookseller in 1711. After this more booksellers established themselves in Boston. Most of the books were imported from England but bookseller also published themselves. For example first bookstore was opened by the Hezekiah Usher in Boston in 1642. Early bookstores were different from the modern stores. Andrew Bradford offered his customers to merchandise from the feathers to pickled sturgeon. Colonial bookstores contained a variety of books as the shop owner John Mein maintained a published catalogue listed more than 1700 titles in it. The industry of retail bookstore saw the first post-Revolutionary war in 1840s when rotary press was invented by an American Richard Hoe. The industry of bookstores flourished between the beginning of civil war and 1845. In late 1860s most publishers owned their own bookstores and competed the independent stores. The publishers changed the idea and appointed the agents for the pre-publishing orders across the border countries (www.referenceforbusiness.com).
The economic structure of retailer book store industry is not due to an accident. The complexities in this industry have been created due to economic forces and long terms social trends. It determines the competitive principles and strategies used for the market analysis of retailer book industry. Michael Porter's five forces are used to analyze the structure of the retailer book industry. These five forces are given as following
The bargaining power of suppliers,
The bargaining power of buyers,
New Entrants and their threats
Threat of substitutes
The potentials of profits are determined by combing these five forces together; influencing the required investment, costs and prices in book industry. A challenging business has very strong five forces. To determine the retailer book store industry important questions are asked to be answered.
Bargaining power of Suppliers
Always on Time
Marked to Standard
Business needs the inputs like raw material, parts, labor and services. The cost of these inputs directly affects the profitability of company. The weak or strong force of suppliers is exerted by the bargaining power and influences the terms and conditions of the transactions. In presence of strong force the higher level of quality and services are paid while for the weak force one is able to negotiate for the business. There are many factors which affect the bargaining power of suppliers given as following
When inputs are available only from the small number of suppliers of book industry. For examples patent books are available from the particular book stores and these books cannot be found at small bookstores.
In case of unique inputs, the supplier change is difficult because it requires the change of manufacturing process. This increases the cost of products and bargaining power with supplier is lessened.
The input of purchase does not represent the supplier's business. When supplier is independent of the company's purchase so less power of negotiation exists there. For example Amazon.com has strong negotiation power over its suppliers because it constitutes a major portion of its suppliers.
A supplier may affect your business by selling the books directly to customer on their own retail outlets.
When the retailer book store company has less information of prices and demands about its supplier then negotiation power is less.
There is a solution to reduce the bargaining power of the suppliers because every business needs sources which are obtained from the suppliers. The partnership with supplier may distribute the supplier's power. Supplier and buyer of the retailer book industry can get mutual benefits by providing the quick delivery and reducing the inventory cost. Refining the customer's need can enhance the values of goods. Adopting the new technologies may also increase the profits of a retailer book store in industry.
Bargaining power of buyers
The buying power of the customer directly affects the profitability of the company. A value is created between the seller and buyer. Buyers in large number provide more profit to company. When a buyer leaves to buy any more products puts the company in a weak position. Buying power in the retailer book industry is too high and this factor is directly associated with intense rivalry and large number of substitutes. A customer has many options to purchase the books. The desire of the book and amount of buying power are interdependent. When a person needs to read about the travelling for a specific destination; wants a general overview and saves the money. In this situation internet can provide general information about the topic. When consumer wants to have a book for the detailed information, may go to the bookstore to purchase the book. If consumer needs the book urgently and does not wait for the mail reply from an e-commerce bookstore, then goes to mortar and bricks store.
Threat of New Entry
The book retailer industry in US has high barrier to entry. A new comer in this industry needs the capital requirements which are impossible for the new entrants in this industry. The Barnes & Noble's and Borders are linked together in larger chains, other giant non-bookstore retailers. Costco and Wal-Mart are situated on a very prime location with greater advantages. Amazon.com has high advantage between internet bookseller need the less capital amount. Amazon.com is well established bookseller company. Consumers are aware of the names of big players of the retailer booksellers. Therefore it is hard for the new entrants because of large marketing budget and high product awareness. It is noted that book sale on the small chains and independent bookstores is declining since 1990s. So the new entries find it a hard industry.
When the new entrants have great threats for the incumbents? For the new entrants patent regulations are required to do the business in retailer book store industry while existing firms in industry already have the protection from the new entrants. A little brand loyalty is possessed by the customers. The existing firms spend to overcome the advertising and services programs of these new entrants. There are many ways to reduce the threat of new entrants. These ways include as the enhancement in marketing, brand images and making alliances with associated products. Existing firms can demonstrate their abilities and retaliate the potential entrant by the setting the product's price which deter the entry.
This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.Examples of our work
It is estimated in the survey that largest chains contribute more than 50% share in the market. A particular book is same whether it is purchased from the one store or from the other store resulting in low differentiation. A quite diverse competition exists in the entire book retail industry. Consumers purchase the books from a mortar & bricks store, which are big stores; a small independent store or a non-book retailer stores. Consumers have the option to purchase the books from the online book stores. For a consumer book price is more important factor. Locally owned mortar & bricks stores are deeply affected by the state sales taxes on e-commerce and their deficiency. This is increasing the rivalry and this rivalry has become a fierce between the mortars & bricks and internet booksellers. The large chain retailer book stores have established their own websites for the book sales.
Threats of Substitutes
A survey has revealed that most American use to read frequently as they did in past 20 years. Watching TV, renting and going to movies, playing video games, listening tapes and radios, talking on telephones, browsing the internet, exercise And playing sports are the substitutes of books readings. Book clubs are the locations where people celebrate the social events all over the country. Adults and teenagers adopt the ways of competition between the dollars and leisure time. This asks the booksellers to be conscious about the prices of books. The NPD Group Inc. reported that people did not use to read the books as people did in US. However one more thing was noted that older aged groups much used to read the books than the younger ones. American with age between 55-64 read 53 average minutes in a day as compared to younger ones between ages 25 to 29 years old.
Strategic Positions Of the Major Firms in Retailer Book industry
The top competitors in the retailer bookstore industry are given as following.
Barnes & Noble
Market share: Barnes & Noble are competing in the retailer book industry with thousands of titles. Border Groups (BGP) is the second largest bookseller company in US. It runs 511 superstores with 175 Walden books. The market share of the Barnes & Noble is greater than its competing company Borders; because there is slow down in mall based retails in favor of Wal-Mart like big stores. The online stores of Barnes & Noble are well established as compared to Borders. Third largest bookselling company of US is the Books-A-Million (BAMM) which is located in southeastern states of the US. It operates 220 stores in Washington DC and in other 19 states of U.S. Barnes & Noble has introduced large superstores in the U.S and offers discount rates. From the start of the company it has seen many expansions and innovations that are the results of its business strategy.
When the market share of online book industry is taken into account; Amazon.com is largely giving free shipping services with discount in prices of books. Wal-Mart and Target are the retail megastores which sell various items from books to clothes and groceries etc. These megastores are also bookseller and put pressure on traditional retailer bookseller Barnes & Noble to cut down the prices of books. Barnes & Noble suffer from the diminishing margins during the financial year 2010 and fill down its margins from 2-8% to 1.3%. This decline was caused primarily by the higher discounts to customers to fight the online booksellers who offered the low priced books.
Barnes & Noble has given offers to fight the online stores such as EBay and Amazon.com and other large stores offering discounts like Wal-Mart and Costco (COST). The hardcover bestsellers give the offer of 20% on the children's books and 30% on the suggested books. Due to weak economic environment the sale of books at Barnes & Noble fell by 4.5%, but this was offset by an increase of 24% on the online stores due to e-book and e-reader sales.
Alternatives: The increase in the growth of superstores has shaken the smaller markets but independent book sellers are also on the top high to sell their products. New technologies are assisting the booksellers to distribute the number of books to readers. Virtual bookstores are also selling the books online. Yahoo has given search of more than 475 online bookstores which operate on the web. Many other online firms are selling the books. Like other traditional bookstores Amazon.com does not have the bookshelves. The contact can be made through emails or accessing the website [www.amazon.com]. The customers can search the particular book, authors and topic at this website.
Institutions and Libraries: A large number of libraries are present in United States. These libraries place their orders for the books and this source is profitable for the publishers. Mostly readers are now turning their way to these libraries. People get the membership of these libraries and can access their web portals. Other chose to borrow the book from these libraries. It is also seen that more than 50% of books are purchased by the libraries in a year.
Book Clubs and Mail Order: The retailer book industry is witnessing the drop in the email orders of books. This is due to the establishment of discount offering retailers stores. The number of club books is increasing and the specific books are getting popularity at these books clubs.
Book pages (www.bookpage.co.uk) is the largest online bookstore in UK and giving access to more than 1.2 million book in UK.
Tele book: This firm is the largest firm of Germany and provides the online book purchase facility for the customer through the website (www.telebuch.de).
PlanetAll.com: This firm was launched on November 1996. Millions of new members are joining this site every year. The authentic users of this portal (www.PlanetAll.com) have attained the secure and organized information about the friends, relatives, alumni and business associates. The services of this portal are compatible with personal information managers and Microsoft Outlook. The economic wakeup call business enterprise in book industry has come from the Amazon.com online book retail out of the bookstores Borders and Barnes & Noble.
The retailer book industry needs the assistance in transferring the advantages of opportunities offered by the internet. The supply chain processes and workflows in online bookstores continue to test and experiment the digital initiatives. Digital area has two broad categories including as
The marketing and sale of books online; and
The sale, distribution and marketing of digital books and their contents.
Online sales of books are another area where the retailer bookstore can achieve the target sale of their books. The sale of the online books is between the 20 to 30% of total market as revealed in surveys in 2008. The companies in book sales market can sell the books on their own websites and hire the dynamic and experienced people for the purposes of direct marketing.
The recommendation proposed in this document constitutes a way for the retailer bookstore industry with the following lines.
Digital area is embraced by the intelligent like marketing, sales and distribution, new promotions of the digital and physical books.
The entire industry can be improved by the new investment and promotion and developing the skills of the employees.
The educational and government system may advocate for the purchase of the books for the classroom use and school, colleges and universities libraries.
The retailer bookstore industry has many challenges of traditional business like sale through the bricks-and-mortar bookstores. These traditional sales are generating more revenues and ramp up the new business models. When the digital environment is getting development in industry and business opportunities are growing but return on investment is uncertain. To overcome this uncertainty of returns on investment limited resources must be used and little ability to access the private financing and investment. So the recommendation needs a collaborative environment among the booksellers and related stakeholders.
Advertising the online retailer bookstore is another hallmark to achieve the targeted sales of books. It is also evident that sales rate of bookstore is increasing with relative high rate of advertising; because consumers are not fully informed about the quality of their services. If the elements of security, reliability and easier use of websites are ensured then no mean the consumer is agree to show its willingness to pay for the books. For the growth and success development in retailer bookstore industry online stores and other bookseller companies must work according to the following critical success factors
Developing and managing the bookseller stores strategies
Developing the multiple sales networks
Collaborating externally and internal all the companies in retailer bookstore industry
Attaining and retaining the talent for the successful sales of books
These above given factors determine the success of the companies working in the retailer book industry.
Digital strategy is not fully implemented in this industry. It is evident from data that e-bookstore outsourced to Amazon.com, but Borders was stupid to borrow the future of that company which did not want them to have a good future (http://www.usatoday.com). The new paradigm of the bookselling can grow by avoiding the overprinting practices and reducing the costs of shipping and inventories. Without the middle men like printers and distributer a bookseller company can benefit the publisher and consumer both at all. Bookshops must provide a venue to purchase where they can get excitement, passion and sufficient cooperation from the sellers (http://www.utne.com). Business customers need the books and need of books demand is driven by the advertising. The companies in retailer bookstore industry need the effective sales operations. Large companies in this industry use the best paper, ink, press and serve the local as well as international customers. As discussed earlier all this is achieved due to changes in digital technologies (http://www.hoovers.com/company). Publishers have forced to increase the prices of books and book sellers have only option to make profit on cheap books. As discussed earlier in the five forces section of this forces the prices of the books will go up but the competition in retailer book industry will resist increase in books prices very quickly. According to the National Retail-Federation new technology is helping the industry in efficient manners to cut the costs and giving more access to customers in the forms of large databases and using LANs. In future the distribution of books is expected to be done electronically and enabling to reduce the prices due to streamlined supply of products (Millstein, 2001:38).
Value Disciplines of book selling companies like B&N, Borders and Amazon is determined by the purchase of books. As Amazon is the largest buyer of the booksellers Barnes & Noble. B&N is highly undervalued with $1 market capitalization. On the hand Amazon gets the 80% to 90% shares of the eReaders more than 90% of eBooks. It is possible that Both Amazon and B&N will share the scary shares of physically book sales. Both of these can scare the publishers to behave well (http://ireaderreview.com). Barnes & Noble has suffered from the diminishing margins during the financial year 2010 because the competition to offer the lower prices to customer has caused this. Other cause of this fall in negative trends of print industry; but company has mitigated this slower sale of books by putting the large amount of the resources developing into the eBook market.
Future of Book Industry: The drop in sale during the year 2008 in United States does not signify the continuous decline of this book industry. The main players of the retailer book industry are focusing upon the delivery of contents on cheaper fashions to their customers. Barnes and Noble has pointed that their business is in stable form and real estate is their valuable asset. They have focused to create new book selling real estates and told that the eBook market share is greater than the printed book market.
Mcgahan- the radical Change in industry: It is fair obviously that make the intelligent investment in the industry demands to understand the changing scenario. It is because companies do not arrive at the correct calculations. Progressive changes also called as the sustaining technological change as the Wall-Mart is making lot of money from its business. Radical change comes into work when business activities become irrelevant. So the concept of radical change is fully applicable as new approaches have arrived and retailer book industry must be fashioned on these new approaches for the future progress of retailer book industry (http://www.mendeley.com).
In this paper the analysis of retailer book industry in U.S is given with statistics. The business strategies of key players of the book industry are too included in this paper. The book industry in U.S faced the economic slump but recovered soon. External and internal key factors impacting the book industry are analyzed with key examples.