Online College Bookstore Business Plan

The College Cafe

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Market Analysis Summary

The U.S. college student market is a growing yet under-served niche market.  The U.S. Department of Education expects the U.S. college student market to grow from 15.8 million students in 2003 to 17.2 million in 2008.  According to a Harris Interactive study conducted in the spring of 2002, college students spend an estimated $200 billion dollars per year.  As of 2003, it is estimated that college students were spending $1.4 billion online.

John Geraci, Vice President of Youth Research at Harris Interactive concludes: "The college consumer is easily overlooked since most information sources that marketers rely on for tracking consumer behavior tend to under-represent college students.  However, it is a consumer group that marketers should recognize as offering substantial opportunity.  Connecting with consumers during the college years can pay great dividends, both now and well into the future."

4.1 Market Growth

According to the findings from the 360 Youth/Harris Interactive College Explorer Study estimated the U.S. college market will spend nearly $200 billion dollars a year.

University Bookstores
The National Association of College Stores estimated U.S./Canadian university bookstore sales to be $11.12 billion for the 2001-2002 academic year and online textbooks sales to be an estimated $1.8 billion.  University bookstores sell a variety of items, ranging from textbooks to toothpaste.  The following table display the estimate of average product sales in the entire university bookstore market, from largest to smallest segments[1].

Course materials

70.67%

$7.858 billion

General/trade books

3.40%

$.378 billion

Student supplies

5.49%

$.611 billion

Computer products

7.63%

$.849 billion

Insignia merchandise

7.85%

$.872 billion

Other merchandise

4.96%

$.552 billion

Total

100%

$11.12 billion

Textbooks
The total textbook/course materials market is estimated to be $7.8 billion based on sales data for the 2001-2002 academic year.  The textbook market is made up of three segments - new texts, used texts, and custom-published materials(or course packs).  The percent of total store sales and estimated market size of each segment is provided below. 

New texts

54.71%

$6.1 billion

Used texts

14.86%

$1.6 billion

Course packs

1.10%

$0.1 billion

Total Course Materials

70.67%

$7.8 billion

Online Retail
Jupiter forecasts that online retail spending in the will grow by 28 percent in 2003 to $52 billion.  The research company estimates that by 2007, online retail spending will reach $105 billion and account for five percent of all retail spending.  Jupiter estimates that the online retail will grow at an average annual growth rate of 21 percent between 2002 and 2007. 

[1] National Association of College Stores (2000-2001) 

The follow statistics indicate that college students are receptive to the Internet channel for the products, services and content offered by the College Cafe.  The following U.S. college student statistics were based on a report by the Student Monitor and the Harris Interactive Explorer Study. 

  • 99% of college students use the Internet
  • 93% of college students use the Internet every month
  • 72% of college students access the Internet at least daily
  • 92% of college students own a computer
  • 13% of college students plan on buying a computer in the next year
  • 15% of college students indicated they are the first to buy a new tech gadget or device
  • Students average 9 hours per week online
  • Students average 9 hours per week watching TV
  • Students average 10 hours per week listening to the radio

According to the Harris Interactive Study, college students spend an average of $287 per month on discretionary items (which is defined as spending on anything other than tuition, room/board, rent/mortgage, books/school fees).

Participation/Spending by College Students on Entertainment and Leisure Activities

Spending Category

Projected Yearly Spending (in millions)*

% Students Participating in Past Year

Purchase Videos/DVDs (not including equipment)

$2,754

70%

Purchase Music CDs, Tapes, etc.

$2,746

76%

Purchase Video Games (not including equipment)

$2,284

37%

Vacation Travel

$4,607

61%

Purchase reading material (not for use in school)

$1,009

83%

Going to Movies

$887

91%

Attending Music Concerts

$791

49%

Going to an Amusement Park

$456

41%

Projections based on Spring 2002 360 Youth/Harris Interactive College Explorer Study; this represents a partial list of categories for entertainment and leisure activities.

The National Association of College Stores estimates U.S. college store sales to be $11.12 billion for the 2001-2002 academic year.  College stores sell a variety of items, ranging from textbooks to toothpaste.

4.3 Market Segmentation

The following table illustrates the future growth of rate of college students by age group and sex.

SOURCE: U.S. Department of Commerce, Bureau of the Census, Current Population Reports, Series P-25, Nos. 1092, 1095, and "National Population Estimates," December 2001, and "Annual Projections of the Total Resident Population: 1999 to 2100," January 2000

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
18-24 years of age 1% 28,400,000 28,684,000 28,970,840 29,260,548 29,553,153 1.00%
25-29 years of age 2% 17,900,000 18,258,000 18,623,160 18,995,623 19,375,535 2.00%
Male 2% 6,900,000 7,038,000 7,178,760 7,322,335 7,468,782 2.00%
Female 2% 9,000,000 9,180,000 9,363,600 9,550,872 9,741,889 2.00%
Total 1.55% 62,200,000 63,160,000 64,136,360 65,129,378 66,139,359 1.55%

4.4 Target Market Segment Strategy

The potential market for The College Cafe consists of 15.8 million college students enrolled in over 4,180 institutions.  For the Phase 1 launch of The College Cafe, we plan to focus our marketing effort on a subset market located in the Southeastern U.S.  We plan to expand to new markets with a phased approach focusing on a new region of the country each semester.  The Phase 1 target market segment will consist of the following universities:

University/College

Enrollment

Auburn University

21,505

Clemson University

16,396

East Carolina University

18,271

Emory University

11,300

Florida State University

30,401

Georgia State University

23,000

Georgia Tech

13,800

Miami-Dade Community College

46,834

Mississippi State University

15,628

North Carolina State

28,281

Tulane University

10,921

University of Alabama

18,342

University of Florida

45,114

University of Georgia

31,280

University of Kentucky

23,540

University of Miami

13,651

University of North Carolina

24,368

University of South Carolina

25,447

University of Tennessee

25,401

Total

419,940

Phase 2 will focus on additional colleges and universities located in the southeast with the addition of colleges and universities in the Northeast.

4.5 Competitive Anaylsis

Competitors of The College Cafe includes traditional university bookstores, online textbook retailers, textbook exchange sites, textbook price comparison sites, online auction sites and online content specific sites targeting the college student market.

4.5.1 University Bookstores

The major objective and strategy of university bookstores is to maintain competitive pricing and customer service.  The strengths of the traditional university bookstores are current customer relationships and location to the University.  The major weaknesses of university bookstores are the limited product selection and lack of value added services that can be offered online.

The National Association of College Stores estimates U.S./Canadian university bookstore sales to be $11.12 billion for the 2001-2002 academic year. 

There are approximately 4,840 college bookstores serving 4,182 institutions in the United States and 170 college stores in Canada.  Larger universities will often have several stores to serve students, smaller schools in a local area may be served by a single store, and several schools in an urban community may share multiple retail outlets.  While many college stores share a common mission, they vary widely in size, location, ownership, and customer base.

The majority of stores are owned or operated by the university they serve.  On-campus stores are mostly institutional, but they may also be contract managed, cooperatives, or student associations.  Off-campus stores are typically privately owned.

Sales volume in college stores is determined by many factors, but the major influence on sales seems most closely tied to the size of the institution served.  According to the NACS College Store Industry Financial Report 2003, average sales per college store were $6,320,556 while the median was $3,303,062.  The majority of college stores have less than $1 million in sales each year.

According to the NACS College Store Industry Financial Report 2003, college stores returned a median net income of 7.3% of net sales to their institutions.

NACS Membership by Sales Volume

Sales Volume in $$Member Stores
Under $1 million57.0%
$1 to $3 million27.5 %
$3 to $7 million 9.8%
Over $7 million 5.8%

4.5.2 Online Bookstores & Retail Websites

The major objective and strategy of online competitors is to maintain brand awareness, offer value added services, product selection/availability, order fulfillment and customer service.  The strengths of existing online bookstores and retail sites are current customer relationships and brand awareness.  The major weaknesses of online competitors is barriers to entry, concern about security & fraud, shipping charges, on-time fulfillment and returns processing.

Based on the 2003 College Store Industry Financial Report, total online sales at university bookstores for 2001-2002 are estimated to be $150 million or 1.41% of total college store sales.  With a "click and mortar" strategy, the university bookstore can offer the convenience of web ordering, paired with:

  • Ease of returns
  • The ability to pick up items for immediate use
  • One-stop shopping
  • Accurate information on what textbooks students need for their courses
  • The trust and security of buying from a well-known source with an on-campus location

The following table lists some of the major independent online retailers not associated with a university bookstore:

CompanyBusiness Model
Amazon.comOnline retailer
Barnes & Noble.comOnline retailer
Bigwords.comAllows student to buy and sell textbooks
Collegebooksdirect.comBuys and sells new and used textbooks
Collegeclub.com

Integrated media and ecommerce
Online retail

Ebay.comOnline Auction
Ecampus.comDiscount college textbooks
Merchandise
Limited content
Efollett.comOnline textbook retailer
Network of university bookstore for brick and mortar presences
Half.comOnline Auction
JourneyEd.comOnline student discounts on software
Lazystudents.comOnline retail – various college market merchandise
Online research papers assistance
Studentmarket.comOnline retail – various college market merchandise
TextbooksDirect.comTextbook price comparison engine
Textbooksource.netBuys and sells used textbooks
Offline buy-back
Online sales
TextbooksX.comBuys and sells new and used textbooks
Varsitybooks.comBuys and sells new and used textbooks
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