January 7, 2011, 12:44 PM

An online marketplace uses its inventory to combat a new competitor

ValoreBooks lets wholesalers automate purchases of used book inventory.

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Bobby Brannigan admits he wasn’t convinced that college students would rent textbooks in large numbers, because they wind up paying more than if they buy a book and then sell it back. But when a new, well-funded competitor, Chegg, upended the online textbook market two years ago with its rental service, Brannigan knew his online service, ValoreBooks.com, had to react.

His first response was to approach Chegg about a partnership. But that didn’t work out. (Chegg did not immediately respond to a request for comment.)

So Brannigan, founder and CEO of ValoreBooks’ parent College Marketplace Inc., found another way to compete. He realized that college students are very sensitive to price and that online services—whether offering books for purchase or rental—need lots of inexpensive inventory. He had already established relationships with 14,000 booksellers that sell on ValoreBooks.com, and came up with a way to leverage their inventory to create a new line of business by letting major wholesalers that sell to college bookstores buy inventory in an automated way from ValoreBooks.com.

ValoreBooks made available to those wholesalers in October an application programming interface, or API, that enables them to submit orders for books they need, indicating quantity and the price they want to pay. “They can request this many books at this price or less, upload the request and we generate a file of all the books available for purchase at the price they want,” Brannigan says. He says ValoreBooks’ sellers own 6.5 billion units of some 9 million individual titles.

Many retailers and wholesalers now search the Amazon.com marketplace looking for books to buy, but ValoreBooks has created an automated option with its Bulk Order API, says Jonathan Han, chief operating officer of ValoreBooks. “Instead of checking each day for pricing and availability, you can just say, ‘Here’s what I need this semester, the quantities I need and the price I’m willing to pay.’ If the system sees a match, it automatically buys the books and ships it to them,” Han says.

Han says the system lets book wholesalers acquire inventory more cheaply, which is crucial when trying to win the business of cost-conscious college students. “Winners and losers are determined by who has the cheapest inventory at the greatest quantity,” Han says. “It’s all about the best supply of used books.”

He expects that 20% of the company’s sales this year will come from this new business of selling books in bulk to wholesalers. ValoreBooks generated $22 million in revenue in 2010, $18 million from online sales at ValoreBooks.com, Han says. He projects revenue this year of $30-35 million.

Brannigan contends that the broad reach of the 14,000 sellers at ValoreBooks means they acquire books at 25% lower cost on average than major competitors like Chegg. That allows ValoreBooks to offer to match a lower rental price a customer finds, and to offer free shipping on rental books and to accept returns within 30 days, Brannigan says.

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