Better world books

ACADEMIC CASE STUDY

27 April 2012

Project Name: Studying Challenges and Issues Customer Name: BWB

INDEX

1. Preamble
2. History of the company
3. Analysis of the current market
4. Analysis of the company
5. Strategy for future market
6. Reference

Issue Date:27 April 2012
Author: Sireesh PALLIKONDA Document Status: Completed
2


Preamble

The Better World Books is for-profit business with a mission to capitalize on the
value of used books to promote and fund nonprofit literacy program. The business
has seen the excellent growth within short period of time.

The study of the Better World Books has been made to understand the business
model and strategize a model for people, technology and operation in a scope to
generate revenue of $70 million in next three years.

The data given from 2003 to 2009 is quite helpful analyzing the company. A concise
online research has been made to understand the future trends of the books
business. The study of the market gives an opportunity to understand the gaps in the
market demands and the consumer perception.

As per the requirements are understood, a business groundwork has been
strategized for the company to with stand the future demands for potential areas of
business. The study of market potential concisely projects the demands of
investment and the operation.

The insights of the study were focused on the changing reading behavior of the
consumer. The current inclination of reading books is shifting form paper based
books to digital books and audio books.

How a company has to change with the market in order to survive and main its
profits and what strategies would help Better World Books to continue its growing
revenue has been briefly discussed in the study.

3


History of the company

Better World Books was established as a for-profit business with a mission to
capitalize on the value of used books to promote and fund nonprofit literacy program.
BWB has its headquarters in Mishawaka, Indiana. It is a brainchild of Xavier
Helgesen, Chriss Fuchs, and Jeff Kurtzman. Under the leadership of David Murphy
(CEO) BWB has seen progressing growth to triple digit revenue of $30 million.
However in the process of evolution BWB has come across many changes.

The company’s main two sources of growing inventory are campus collection
program and the library discards and donation program. Better World Books sold the
collected books through 23 online marketplaces, including Amazon.com, eBay, and
their own online e-commerce site, betterworldbooks.com.

The company has significantly invested in technology and account enterprise
system, which has helped the company to sustain in the long-term. However the
company has changed its warehouse three times since its launch. Moreover the
growth has been significant in growing form $7000 to $30 million.

The company sustained and been successful on the four pillars, the three founders
and the CEO and vice president. The company which was having 15 employees in
2003 has grown to 200 employees by 2009.

Better World Books was well balanced its social concern by donating 10% of
revenue to various global literacy initiatives. However the company’s core strategies
lies in its technology and logistics.

4


Current Market Analysis

We can see that technology has had a very positive effect on reading. We tend to
read what is compressed and concise and which registers in our minds in a few
minutes. Gone are the days where reading was a leisurely habit – today, it’s more on
the go and in an instant. Also, reading has moved away from paper and towards
electronics, which is a very good thing considering that we have to save paper in
order to save the trees and save our environment. So yes, we can say that
technology has changed the reading habit considerably, and it’s not all bad as you
would think. The only drawback is that people’s attention spans have become
shorter and we’re more pressed for time because we have so many things to do at
once. However, we should get over our love affair with its physical ancestor and
realize that, as with newspapers, rotary dial phones and reel-to-reel tape decks, the
world has moved on. Digital rules and e-books now make more sense than papyrus.

Tablets are a new breed of personal computers that aims to directly compete against
netbooks. Tablets are slate-style computers that use a touch interface as the primary
method of input. The iPad is the main tablet on the market today soon to be followed
by many competitors. This is readers of ebook survey which was conducted in USA
with samples of 739.

The sample percentages clearly indicate that eBook reader and cell phones make
the highest percentage. New tablets like the iPad, BlackBerry Playbook, and
Samsung Galaxy Tab are fast and responsive. Tablets are very versatile. They can
be used for web browsing, music/video playback, e-book reading, digital picture
framing, and much more. Tablets are highly portable. Some tablets, like the Galaxy
Tab, can function as a phone if needed.

5


Not everyone was happy. There are still lots of people who believe in the hard paper
books and inadequate access to digital gadgets and technology is compelling them
to stick with hardcopies than eBooks. The best demonstration is In United States’
one public library system for every 34,000 residents, where as in China’s ratio is one
per every 489,000 potential library users a vast gap to close no matter how fast
growth is occurring.

The revenues of paper book market having shrunk by a quarter since peaking in
1996 as consumers spend more time on the Internet and mobile phones. Amazon is
now selling more ebooks than hardbacks. It’s just about to bring out a Kindle that will
sell for about US$130. This is not good news for many publishers and distributors.
Hence most of the countries in Asia and Middle East are not opened to the ebook
business. For example if we look into “Japan's market of e-book content totaled 53
billion yen ($569 million) in 2009”. But they are not yet ready for E-book business.

Books business market is facing a decline in growth over the past two years. This is
attributed to the overall weak economy and technology. Book store industry sales
rose only 3.6% for last year whereas overall U.S. retail sales grew by 4.3%. The
bookstore industry as a whole is going through a large consolidation. Previously, the
market was dominated by local, small stores and regional chains. With the advent of
the "superstore" as created by Barnes & Noble, the largest players in the market

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have been able to gather significant market share and drive many independent
booksellers out of the market.

If we look in to the reading habits most of the adult read books, nearly nine in ten
adults reads books, with women notably more likely than men to do so. Paperback
books are the most popular type of book read, reflecting their greater affordability. E-
books, have a more limited appeal, with 18% claiming to read them, evenly split
between fiction and non-fiction. Both e-books and audiobooks have a young reader
profile, in contrast to the typical book reader, who tends to be older.

12%

88%

Any book readers Any non-readers

7


If we look into the segment of analysis academic and nonfiction books holds more
than 50% share and the children books segment is never encouraged with ebook
readings.

Non-
Academic/ fiction/referenc
professional e
22% 34%
School/ELT
6%

Children's Fiction
14% 24%

Figure UK readers by segment

However, this may be an advantage to the used bookstore industry. As customers
cut back on purchasing, used bookstores will look more attractive to customers who
still wish to purchase books. Therefore, we can anticipate that this may be a good
time gain market share.

8


Company analysis

The growth of the BWB can be analyzed from the following table and the picture.
The glance into the columns of the revenue and employees gives us little idea about
the future challenges.

2003 2004 2005 2006 2007 2008 2009

BWB Launch Library discards Social
and donation capitalist
Establishment of regional
program award
offices

Founders David Murphy Anday
(CEO & warzon
Xavier
President) (CTO)
Helgesen,
Chris Fuchs ,
Jeff Kurtzman

Backed an $20 Revenue of $
investment of 30
$4.05;Revenue
<$1

10-15 160 200 employees
employees employees

40K-50K books
collected/ day

10K books
sold/ Day

3000 - 3500sft 7500sft Paper
product
factory

9


The picture shows the diversification of the business into different areas. Henceforth
we can understand that business is more concentrated on the east side of the
country.

15

20
3
7
16 14
2
5 10 4 21
1
17

9
8
13
8
6 11

1. Launch of BWB in 2003
2&3 Contacting with Midwestern schools (Purdue, Michigan) in 2003
4 Chris Fuchs moved to Washington in 2003
5 Helgesen moved to san Francisco in 2003
6 Kurtzman moved to Texas in 2003
7&8 Hired regional directors in Boston and Atlanta in 2003
9-21 Regional director office have been setup form 2005-2008

Regional director were helpful in established the relations and collecting the books
and helping in logistics. BWB is really dependent on the volunteer student group
such as honors society and service group like circle-K.

BWB has set a threshold of not having inventory more than 20 books, and the
rejected books were either donated to various nonprofits or recycled. BWB paid $.50
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for a qualifying book. Most of the times company paid the students groups out of
cash flows.

BWB started with the library discard and donations programs, technology of the
BWB helped the libraries to understand sales demand and monitor the sales. The
information systems have helped the BWB to monitor the inventory flow control,
pricing. And development enterprise accounting system helped to clear the inventory
quickly and gave estimates of cash flow.

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Strategy

Adult Market

The future of the business is more towards the technology and cash flow than
logistics, we have observed in the market analysis there is shift in the consumer
reading behaviors. Hence, BWB has to look into the segment of eBooks and audio-
books, however the current market for internet book business is only 17% but there
could be significant shift towards the e-reading in the near future. This shift can
reduce the warehouse and inventories expenses for BWB, yet the new expenses will
include author license costs and royalties.

To promote eBooks, a new strategy has to be developed. As BWB is having good
business relations with Amazon and eBay most of the eBooks can still be sold
through them. Having tie-ups with the tablets and ebooks gadgets will promote BWB
in big way. Constant monitoring of the new product releases such apple, sony and
Samsung and integrating the technology where consumers can download the
eBooks from BWB will enhance the chances of increased revenue.

Student Market

Even though this market is seasonal it is sustainable of the hard books because
most of the students prefer to have hard copies for reference. The market of US is
capitalized more towards the east, therefore there are good chance for collecting the
books the in the central and western States. Attaining high visibility in the
international level will increase the multifold as we have seen in the market analysis
there is a huge potential business in China and Japan where people still desire to
adhere for conventional reading. The visibility can be through media billboards and
advertising. Other way of doing it is by holding the social concern, sponsoring
potential candidates in the field of education and sports from poor countries. This will
not only bring the good will, but also visibility.

Understanding why people buy books

People buy books because of two main reasons one is to increase their knowledge
and other is for entertainment, other than this people buy books to gift someone.
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Hence having a tie-up with educational websites will give more chance of visibility to
the people who want to enhance their knowledge. Similarly having a tie up with travel
sites gives a choice to the travelers to buy some books on their vacations to read;
usually people going on vacations would love to have hardcopy of books rather than
eBooks. Online gift sites are another potential area for getting visibility.

In implementing these strategies the company technology has to be further geared
up with the new innovations and the operations team has to look into the coherence
of the sites and the flow the inventory.

If we look into the present statistics, the operations are 50,000 inflows and 10,000
out flow, which determines that the efficiency is 20%. To increase the efficiency BWB
has to look opportunities to capitalize the markets. The increased efficiency will
reduce the problems of the cash flows.

Another policy of having an inventory of only 20 copies of a particular book is kind of
losing business. Better yield management would elevate the price of the books which
are in demand and decrease the inventory costs of the books which are not in much
demand.

Conclusion

Better World Books is operating right now at efficiency of 20% on their sales with
respect to the books they are collecting; this situation may demand huge cash flows
to sustain. The increase in efficiency of the sales can solve the problems of the cash
flows. Right now BWB is selling books with other online market places. More
potential websites, where people are tempted to buy books should be targeted. Such
as travel sites, educational sites and online gift sites. Moreover operating business in
the demand areas such as Asia and Middle East will generate more revenues.
Hence the BWB has to invest more on technology and manpower as they have well
established distribution and operations system.

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Project Name: Strategies and Challenges Customer Name: BWB

Reference

1. http://www.publishingtrends.com/

2. http://ibnlive.in.com/news/japan-book-market-resists-digital-shift/114713-19.html

3. http://adroitalien.hubpages.com/hub/Laptop-vs-Netbook-vs-Tablet-Which-Should-I-
Buy

4. http://www.bplans.com/used_book_store_business_plan/executive_summary_fc.php

5. http://www.thejakartapost.com/news/2010/08/16/personal-technology-digital-books-are-
changing-our-reading-patterns.html

6. http://winningreadings.blogspot.fr/2010/05/has-technology-changed-reading-habits.html

7. http://calimae.tumblr.com/

8. http://www.digitalbookworld.com/2010/crossing-borders-on-demand/

9. http://www.ehow.com/about_6705343_e_book-swot-analysis.html

10. http://wiki.answers.com/Q/What_are_some_reasons_why_people_read

Issue Date: 27th April 2012
14

Better world books

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