August 17, 2010, 2:57 PM

Scholastic to invest $20 million in web technology

The publisher and retailer of books, magazines and educational materials will expand its consumer offerings.

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Scholastic Inc. plans to invest $20 million in such digital products as e-books, customer reviews and personalized recommendations in its 2011 fiscal year, which began June 1. The investment furthers its stated goal of expanding its reach beyond educators to include parents and children, the company says.

Plans, which call for a rollout of several new products later this year and into 2011, include adding electronic books, or e-books, that will eventually be available for downloading to unspecified e-readers, says Tom Burke, senior vice president of e-commerce. “We’ll start with our online Book Club web site, enabling teachers and parents to download titles to personal computers and laptops, and we will add other devices pretty quickly.” Scholastic will develop e-reader software that will include some features already available via the web, such as helping parents and teachers with book recommendations for children. “When children choose their own books they become more motivated to read,” Burke tells Internet Retailer.

Scholastic, No. 49 in the Internet Retailer Top 500 Guide, also plans to add more features to its Book Club and Scholastic Store web pages, including customer reviews and personalized product recommendations. The new tools are expected to roll out sometime this winter, Burke says. 

Many of the new features and functions will be develop in-house, but commercial technology suppliers also will be involved, Burke says. He declined to name the suppliers.

Scholastic’s $20 million investment will cover these and other e-commerce and web initiatives as the company further develops its business-to-consumer offerings. Pushing sales to the Internet has become a key strategy, especially for the Book Clubs, Burke says. “We’ve been seeing success in the last few years moving teachers and parents online,” he says. “This year, about two-thirds of teachers ordering from us through our book clubs are doing so online,” Burke says. “We also allow parents to go online and make purchases and the books still arrive at the classroom, so the children still have those great moments.” About 1 million teachers order books through Scholastic Book Clubs annually, he says.

The company’s traditional method of matching children and books was based on paper flyers students brought home to parents. After making selections, the order form and payment went to the classroom teacher, who consolidated orders, then mailed them to the publisher. Book Club ordering has steadily moved online in the past few years, with teachers consolidating orders then submitting an electronic order form.

Scholastic has already expanded its web ordering functions to include teacher recommendations based on age and reading level that help parents sort through the myriad book titles available. Classroom order forms usually feature about 100 titles, but thousands more are available online to parents, teachers and students, Burke says.

Expanding access to online book ordering to parents, along with listing books and related games for children, gives Scholastic an opportunity to sell more of its books as well as those of other publishers, Burke says. The company’s overall sales for fiscal 2010, ended May 31, were $1.91 billion, up 3.4% from $1.84 billion in fiscal 2009, according to its 10K report filed recently with the U.S. Securities and Exchange Commission. Net income for fiscal 2010 was $56.1 million, compared with a net loss of $14.3 million in 2008.

Web sales, based on the 2009 calendar year, were $350 million, down by 23.1% from $455 million in calendar 2008. The decline in web sales revenue between 2009 and 2008 reflected the sale of its non-core at-home continuities business, and concentrating on core businesses, the company says.

Scholastic did not break out web sales for fiscal 2010.

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