Used Book Store Business Plan

Our market is facing a decline in growth over the past two years. This is attributed to the overall weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail sales grew by 4.3%. Management believes that the economic slump 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, management believes this may be a good time to get into the industry and gain market share.

Used bookstores serve the entire purchasing population of its geographical area but focuses on the customer who desire to purchase books/music at a discount price and, with regards to books, often do not see a long-term attachment to the product.

Our main competitors are: Barnes & Noble (which holds approximately 22% nationwide market share), Borders (which holds approximately 15%), and other local new and used bookstores.

4.1 Market Segmentation

The company anticipates serving the needs of all the potential customers within a ten to fifteen mile radius in which the approximate population is 150,000 (based on census information). The majority of the residents in this area are Caucasian (78.8%) Black (13.6%) and Hispanic (9%) with occupations classified as professional, homemaker, or retired. The majority of household incomes range from $50,000 – $100,000 (50.3%). The median income in this area is $68,096, compared to the whole Cleveland area which is $34,248. The typical “head of household” age is 25 – 34 (22.4%) or age 34 – 44 (23.1%) with a median age of 44.4 years old and an average age of 32 years old.

Target market segments
Used bookstores serve the entire purchasing population of its geographical area but focuses on customers who desire to purchase books/music at discount prices because they are seen either as near commodity items or, in the case of books, are not considered to be a long-term investment (i.e. they will trade them back). Because of this relatively low value placed upon our merchandise by potential customers, Flyleaf Books can still flourish in an upscale environment like Brecksville. This is especially true with people seeking to cut costs with the bad economy. Even though we service the entire book reading population in Brecksville and the surrounding area, we can divide our customers based on purchasing habits.

• Casual Shoppers: These are customers who go to the bookstore with no set idea of what they want to purchase. They seek to spend a fair amount of time browsing the store and often are considered impulse buyers. Often they leave the store with small purchases or without buying anything. These customers are attracted to bookstores with low prices and large inventory.
• “Hard to Find” Shoppers: These are customers with very specific needs. They are looking for a difficult to obtain item, usually a book that is out of print. If we can satisfy this customer, then we are able to build significant customer loyalty. These clients are generally price insensitive and are also drawn to stores that have large inventory.
• Specific Category Shoppers: These customers are those types that generally buy books or music of one category, such as fiction or romance. These customers generally have a good idea of what they want to purchase and have the greatest buyback/trade potential. These customers represent the highest volume purchaser, often leaving the store having spent $30-$50.

The following table and pie graph show how our market segments are broken up into size and relative percentages. We use the city of Brecksville census information to determine growth figures.

4.2 Industry Analysis

Our market is facing a decline in growth over the past two years. This is attributed to the overall weak economy. Book store industry sales rose only 3.6% for 2002 whereas overall U.S. retail sales grew by 4.3%. However, management believes that this may be an advantage to the used bookstore industry. According to interviews made by Mr. Vinck with bookstore owners and managers, the used book industry has typically done better than other retailers during economic downturns. As customers cut back on purchasing, used bookstores will look more attractive to purchase books. Therefore, management believes this may be a good time to get into the industry and gain market share. As the weak economy continues, we expect growth to be initially quite high but overall volume sales to be low, and then seeing this taper off to industry norms.

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

Where independent booksellers can still create a viable position for themselves is within the used books segment. This segment generally does not attract big companies since the “superstore” concept is much more difficult to replicate in a market with such low profit margins. Dominant selection, both in used and new books is the key to bringing in new customers and the only way to do that is to operate at a low-price leader. These two factors tend to favor the local independent bookseller in the used book market segment as long as they can acquire a sufficiently large enough facility to house an attractive inventory and LOCALLY compete with the national chains.

4.2.1 Competition and Buying Patterns

Our main competitors are: Barnes & Noble (which holds approximately 22% nationwide market share), Borders (which holds approximately 15%), and other local new and used bookstores. The used bookstore that most closely rivals our own is Greenbaum Books which is located approximately 13 miles away in Ashbury. It is estimated that they hold 9% of the local market share.

Management feels it must be clearly stated that we do not intend to directly compete with the Barnes & Noble/Borders superstores. Superstores are large and carry approximately 150,000 titles per location. Over the years, these large companies has successfully leveraged their resources to engineer customer experience to a degree that consistently differentiates otherwise commodity-like products and services. This differentiation provides these companies strategic competitive advantage. Resources such as distribution technology, strategic alliances, process research and development, and brand name combine into value-added services that provide the customer with proximity, dominant selection, discounts, and store ambiance. This is simply beyond our capacity and we will be fulfilling a sufficiently different need for our customers. However, we believe that we can successfully duplicate the differentiated experience for our customer without the overall costs.