Online Retailing Explosion Hits the
Tranquil College Textbook Market

Who are the biggest players on the new online scrimmage to fulfill students' book needs?.

It's midnight. Classes have just begun for the winter semester, and it's time to buy books. The latest Foxy Brown CD is playing in the background. An undergraduate in his dorm boots up his computer and connects to an online retailer. He can find out the price, discount, shipping charges and estimated delivery time for his textbooks within minutes. With a click, the books are in his shopping cart and, after he enters a credit card number, the order is processed. The CD ends, the computer is disconnected and the student g s to sleep. He can expect the books to arrive at his dorm within a few days.

This scenario is occurring across the country as more and more students enjoy the benefits of online retailing.

Amazon.com's meteoric success has shown publishers that consumers like to buy books on line, for the convenience and cost savings. Start-ups like Varsitybooks and BigWords are betting that students, who spend more time online than any other group, will also want to buy textbooks online.

Online Retailers: The Players

It was the launch of Varsitybooks. com -- the first purely online textbook seller -- in August 1998 that set into motion the vast changes shaking college bookselling. Later in the year, BigWords.com launched a similar service. The two companies have had successful startups in large part because of their aggressive marketing and serious efforts to develop relationships with students, professors and publishers.

Early this year the two largest college store management companies responded. In January, Follett launched efollett.com, and thereafter Barnes &Noble College Bookstores began textbooks.com. The entry into the online textbook market of two companies with long experience selling in the college world may challenge Varsitybooks and BigWord's early dominance.

Online retailers have a number of things in common -- large title databases searchable by title, author, subject and ISBN; discounting; and shipment within 24 hours. They offer various buy-back and frequent-buyer programs. With competition heating up, it is not easy to discern the differences among the online retailers.

Varsitybooks.com made headlines when it launched its service in August 1998, featuring booklists from five Washington, D.C., area schools. Now expanded to 45 states, Varsitybooks features booklists from 57 large state universities. Students can select their school, then search for books by professor, course name or discipline. Like the other online retailers, Varsitybooks.com indicates stock status. Unlike the others, however, it ships only books it has in stock and d s not back order. All fulfillment is handled by Baker &Taylor, which picks, packs and ships, giving Varsitybooks the benefit of B&T's database of 400,000 titles and four warehouses across the country. In CEO Eric Kuhn's words, "We are very fortunate to have such a great partner."

Varsitybooks has continued its aggressive push into the college market by recently entering into a co-marketing relationship with International Thomson; IT's sales force gets credit for online sales they help generate during their campus calls (News, Jan. 25).

BigWords.com founder Matthew Johnson believes that his company is offering value to students with its discounts and free shipping. "Our objective is to build a brand with students and treat them with the respect they deserve. We want to establish a community with students and meet all their textbook and studying needs."

Unlike VarsityBooks, BigWords is not relying on wholesalers for fulfillment. The company opened an 180,000-sq.-ft. facility in Illinois and plans to build up a significant inventory over the next six to nine months. The company has EDI links in place and is eager to establish direct relationships with publishers. Johnson believes BigWords brings many benefits to publishers. "We pay right away and we can solve publisher's returns problems for them." BigWords backs its claim with a 98% fill rate for in-print titles and zero returns.

Efollett.com sprung into the college online retailing scene with televised ads during the 1999 Fiesta Bowl and a series of radio spots and print advertisements afterward announcing the new site.

Efollett is a separate division of Follett College Stores, which operates 600 college bookstores under contract across the country. The databases from the contract stores are now available on-line through efollett.com, which, in addition to selling new and used textbooks, plans to sell merchandise such as computers and software at discounts up to 70%. The online orders are fulfilled by the local stores or directly from Follett's warehouses in Valparaiso, Ind., and River Grove, Ill.

James W. Baumann, president of Follett College Stores commented: "The e-commerce site is complementing the business done in our stores." Follett has been selling online since 1995.

Three year ago, B&N College Stores, which manages 365 college and university stores nationwide, began providing individual stores with customized Web sites, which are maintained and hosted centrally. More than 80 stores, including The Harvard Coop, Yale University Bookstore and Penn State University Bookstore, have sites of their own, and 100 more are scheduled to launch in the next five to six months, according to Jade Roth, v-p and general merchandise manager.

Like Follett, B&N sees textbooks. com as a natural complement to its college store business. "We are dedicated to giving students their textbooks the way they want them," said Roth. She sees B&N's guaranteed cash-back guarantee as a great draw for students. An e-mail reminder at the end of the term and postage-paid mailers make it easy for students to sell back books.

Brick-and-Mortar Response

In an effort to ensure that college stores remain competitive, the National Association of College Stores (NACS) is launching CourseWeb.com this month, a site that allows individual NACS stores to sell college textbooks and course materials on the Web. NACS's recent alliance with Collegestudent.com, a developer of localized communities, will further enhance the services it can provide students online, including information on campus life.

The service, according to NACS, is designed primarily for stores that do not have a Web site or whose initial Internet attempts have not had an impact on their business. Aimed at stores with revenues below $3 million, CourseWeb offers an affordable, turnkey solution that requires almost no technical infrastructure at the store. According to Larry Daniels, associate executive director for industry services at NACS, "The service will provide stores a strong Web presence and fresh content all the time." CourseWeb is set to launch at 300 online storefronts by April, with the potential to have more than 1000 signed on by the fall.

The sites are easy to create and maintain because they are built on previously successful templates and updateable by the individual store using standard word processing. The sites will be centrally hosted by Collegestudent.com, which will maintain information on course materials and provide support 24 hours a day, seven days a week. CourseWeb will provide marketing and promotional content with the aim of keeping the site fresh and interesting. And with Collegestudent.com planning to spend $8 million over the next year on online, print, radio and outdoor advertising, CourseWeb is raising the ante for all those who want to capture students' attention in an increasingly crowded arena.

A number of college bookstores are developing Web sites on their own. The University of Virginia Bookstore in Charlotte, for example, has had a Web site for two years. E-commerce on the site, however, is restricted to trade and medical books and to a separate gift site on which clothing, computers and other items are sold, drawing on the store's 75,000-item gift catalogue. Citing his store's superb customer service and special in-store events, such as author readings with Richard Ford and Julian Bond, manager John Kates believes students appreciate the value the store brings to the university. In addition, the University of Virginia Bookstore provides an endowment to the university for scholarships.

"We are confident," said Kates, "that by continuing to be proactive, rather than reactive, we will continue to thrive" as a model for college-run bookstores across the country.

Many college booksellers interviewed for this article say they have not felt the impact of online retailers. Yet Eric Weil, managing partner of Student Monitor LLC, the national market researcher of college student opinions, reports that college stores are concerned about sales erosion, which is ranging from 3%-10%, a percentage that is bound to grow as online retailers proliferate.

The Issues

Varsitybook's vigorous efforts to obtain booklists has raised the issue of public access to course lists -- information that some feel is proprietary -- to a new level. However, according to Marc Fleischaker, NACS's general counsel, availability of booklists has been a contentious issue for several years and one that NACS is investigating.

Varsitybooks maintains that under the Freedom of Information Act, institutions must provide the lists. Whether institutions are required to do so depends on the status of the institution (private institutions are generally exempt) and regulations that vary from state to state. No official position is yet available from NACS, which is completing its research. Spokespeople from various colleges were reluctant to comment on the issue.

There is also general concern among college bookstores that online retailers are pricing books at significantly less than the price at which college stores are purchasing them. NACS is beginning to look into this, and whether publishers are giving online retailers preferential pricing. The "meeting the competition" argument permits special pricing in certain cases, if special conditions are met, such as cost savings to the publisher. This issue brings up the specter of the suits filed successfully by the ABA against six trade publishers regarding discounting to the large chains.

Fast Forward

Jade Roth foresees the "war being fought this fall" as online retailers gear up their advertising and promotional efforts to win the hearts and pocketbooks of students arriving back at school. With competition forcing every retailers' prices down, the companies will now try to distinguish themselves through service.

The question remains whether sales of college textbooks online will continue to rise at the breakneck speed of sales through Amazon.com and barnesandnoble.com. "We're in the early stages of a mass transformation of how students will purchase books," according to Varsitybooks's Eric Kuhn. Comparing the change with the widespread adoption of ATM cards, Kuhn predicts that in three years, one-third of all new books will be purchased on the Internet. The number of players in the field indicates others share Kuhn's optimism about the future of online retailing.

Kranberg is a consultant specializing in business development and the Internet.