Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
The college student is one of the savviest and most sought after consumers on the Internet. And every year, regardless of trends, there is one thing they all buy: textbooks, almost $3 billion worth annually.
Once the province of college and off-campus bookstores, the market faces competition from online sellers, some run by entrepreneurs who only recently waited in line for textbooks themselves.
Two new companies, VarsityBooks.com and BigWords.com, are challenging the industry on price, discounting books up to 40%, the same way Amazon.com took on the consumer book market. They’re betting college students, who spend an average of $300 per semester on textbooks and most of whom are surfing the Web anyway, will shop for books online to save time and money.
Traditional bookstores have been quick to counterattack with Internet strategies of their own. Several hundred bookstores have signed with CollegeStudent.com to put their wares online, and two large chains are promoting transaction-ready Web sites. The benefit to buying online from college bookstores, they say, is that purchases can be picked up and easily returned or exchanged at the campus shop. Some are offering discounts as well.
“Bricks-and-mortar stores are facing price challenges for the first time,” says Eric J. Kuhn, the 28-year-old chief executive and co-founder of VarsityBooks.com. “We’re at the forefront of the inevitable.”
That may be so, but traditional stores still enjoy a distinct advantage over their virtual rivals. Returning a book on campus is easier than trooping down to the post office and mailing back packages to a virtual retailer.
“Having a location where students can return books is more palatable and less logistically difficult for students,” says Ken Cassar, an analyst with Jupiter Communications in New York.
Typically, college students flood into bookstores at the start of each semester. Teachers submit book lists, and the stores have required textbooks on hand. Students fight crowds, but they can often find every book they need. They also can thumb through and select used textbooks to save money. At the end of the semester, they sell books back to the stores.
Online players are attempting to crack the college bookstore monopoly by replicating or improving the book buying experience in different ways.
Students logging onto VarsityBooks.com, launched in December 1997, find book lists from 57 colleges, a number that will triple in coming semesters, Kuhn says. Students can search more than 400,000 discounted titles from Baker & Taylor, a leading book distributor. Even if they can’t find everything they need, they may save money on books they do purchase. Students from more than 1,000 colleges have bought books from the site.
Varsity Books.com does not offer used textbooks, and it won’t buy back books. Students can return books unused, but the company will pay return shipping only if it made a mistake. Shipping costs $4.95 regardless of the number of books. It promises delivery in under five days.
BigWords.com, co-founded by 23-year-old Matt Johnson, is trying a different approach, offering 3 million titles and free delivery. The company sells discounted new and near-perfect used textbooks and plans to rent books. Students will pay a fee plus a security deposit. When the semester is over, they return the books.
Johnson dropped out of school to start the company, bringing in investors after the site was up. “We see ourselves as agents of change,” says Dick Hackenberg, vice president of marketing.
BigWords.com accepts returns, but if it is the student’s fault, the student pays a $5 restocking fee. There is no initial shipping charge.
Traditional bookstores are playing up the issues of returns and shipping charges. “It’s a great risk to buy a book from a company that has to ship it to you,” says Scott Deaton, vice president of marketing at efollett.com. “You don’t know when it is going to come, and if it’s the wrong book, you can’t just walk to a campus store and return it.”
The alternative is to have campus stores launch their own Web sites to sell books, Deaton says. Efollett.com, the online subsidiary of textbook giant Follett Corp., has built an online presence as a portal to Web sites for Follett’s 600 college bookstores.
Similarly, members of the National Association of College Stores are creating an online presence as an extension of their stores. The association, with 3,000 members, has partnered with CollegeStudent.com, a developer of online communities and campus guides, to launch CollegeStore.com to sell new and used textbooks online.
In many cases, students can view class book lists online, reserve or buy books, then have them delivered or pick them up at the store. Returns and exchanges can be made at the store. Other course materials and merchandise such as sweatshirts and notebooks will be available online. Some 300 sites are to be on CollegeStore.com by April, and more than 1,000 by fall.
Barnes&Noble College Bookstores, a private corporation with more than 300 campus bookstores and owned in part by Barnes & Noble, recently set up online. It has a Web site with an enviable address: textbooks.com.
Many online players are investing big marketing dollars to entice college students to their Web sites. Efollett.com debuted aggressively, advertising during the televised Fiesta Bowl in January. CollegeStudent.com plans to spend $8 million this year in online, print, radio and outdoor advertising. And VarsityBooks.com in December announced a multi-million dollar marketing campaign. It also signed a joint marketing agreement with International Thomson Publishing, a major educational publisher.
Some traditional stores, however, aren’t worried about competition. The University of California Santa Barbara bookstore has had a Web site for years. While more than 50% of students last fall checked book lists and reserved books at the site, they simply don’t want to purchase books online.