Haven't found the Essay You Want?
For Only $12.90/page

Retail Book Industry in Nz Essay

The aim of this report is to analyse and outline the business perspectives for opening a new independent book store in the Auckland region. The report analyses the current book retail industry and specifically discusses a new book shop’s viability highlighting the internal and external risks and opportunities as well as strengths and shortcomings. To assess the book retail competitive environment elements of SWOT and Porters’ Five Forces analysis tools were utilised (Needle, 2000).

The major strengths of a new book shop which could be turned into a competitive advantage are the independency and local governance, relationship with publishers and closeness to customers. The major threats to and weaknesses of the new venture are attributable to low bargaining power with publishers (Needle, 2000), to lack of resources, and high market competition.

The report’s conclusion is that anyone intending to enter the book retail market by opening a new store is advised to be mindful of the industry’s risks and challenges in order to mitigate those on the one hand, and to fully capitalise on the opportunities offered by the industry by turning its strengths to a competitive advantage, on the other hand. Table of Contents Executive Summary2 Table of Contents3 1. Introduction4 2. Discussion5 2. 1 Competitive Environment5 2. 1. 1 Whitcoulls Group5 2. 1. 2 Paper Plus6 2. 1. 3 Dymocks8 2. 1. 4 Independent Booksellers9 2.

2 Risk Assessment11 2. 2. 1 Low Bargaining Power with Publishers11 2. 2. 2 Lack of Resources12 2. 2. 3 Market Competition13 2. 3 Opportunities14 2. 3. 1 Independency and local governance14 2. 3. 2 Closeness to Publishers and Customers15 3. Conclusion17 References18 1. Introduction The given report is commissioned by Susan and Michael Clarke to be completed by 27 August 2009. The report’s main objective is to provide an independent analysis of the book retail industry including potential risks and opportunities of opening a new independent book store in the Auckland area.

In order to assess the current business environment, the market competitiveness in which a new proposed book store would be operating is analysed including such main industry players as Whitcoulls, Dymocks and Paper Plus on the one hand, and a number of independent book stores on the other hand. Elements of the Porter’s Five Forces’ (Needle, 2000) were incorporated to analyse the competitive environment of the book retail industry. The findings from the analysis of the competitive environment were then utilised to identify and analyse strengths and weaknesses of as well as

opportunities and threats for the proposed new independent book store (Samson & Daft, 2005). 2. Discussion Bookselling is a big industry in New Zealand. According to (“Booksellers ready”, 2008), starting from 2007 the annual books spending in New Zealand has not gone below $1 billion. Books have always been perceived as a lucrative retail business due to high margins[1] and book value that has not changed much over time (“Big boys’ books”, 2009). 2. 1 Competitive Environment There are two main groups operating in the New Zealand book retail market being chain retailers and independent stores.

Historically, the book retail market has always been dominated by a few book retail chains occupying almost 90% of the book retail market, leaving the local independent book stores with no more than 10% of market share (“Whitcoulls, Paper Plus proceeding”, 2007). The main book retail chains operating in New Zealand are Whitcoulls, Paper Plus and Dymocks. 2. 1. 1 Whitcoulls Group The A&R Whitcoulls Group (Whitcoulls Group) is the largest retail chain in New Zealand presented by the Whitcoulls, Borders and Bennetts Tertiary stores (“Whitcoulls finally picks”, 2007).

The group is also internationally operating in Australia and Singapore with more than 130 Angus & Robertson and Borders stores (“Big boys’ books”, 2009). After acquiring the Australasian and New Zealand businesses of the second-largest United States bookstore chain Borders[2] (“Whitcoulls’ Borders bid cleared”, 2009) in 2008 the Whitcoulls Group obtained access to a high demographic serious books market niche (“Whitcoulls widens”, 2008). As a result, the Whitcoulls Group operates 90 stores across New Zealand (“Whitcoulls finally picks”, 2007) accounting for up to 45% of the book retail market (“Whitcoulls widens”, 2008).

Further to the existing dominance in all the CBD areas, Whitcoulls is planning to expand into small-town areas starting from Te Awamutu, Richmond and Ashburton (“Booksellers ready”, 2008). The recent recession prompted the group to seek cost cuts by merging its Australasian retail operations’ support offices into one division located in Australia (“How the book trade”, 2009). The group is also looking into opening the online selling operations in August (“Booksellers ready”, 2008).

2. 1. 2 Paper Plus The Paper Plus chain being fully New Zealand-owned is the second-largest book retailer in New Zealand (“New look”, 2008). The company operates as a franchise system and has been around for more than 25 years (“New look”, 2008). Historically Paper Plus has been a strong player in a stationary business[3] whereas its role in bookselling was not taken seriously by the industry[4]. This is one of the reasons why Paper Plus is currently outperformed by Whitcoulls when it comes to bookselling (“New look”, 2008).

However, Paper Plus has recently become an aggressive player in the book retail market announcing an ambitious goal to become number one book retailer in New Zealand[5]. Paper Plus has recently refitted all their 105 stores as booklovers’ destinations (“Big boys’ books”, 2009) aimed at improving store layout and putting more emphasis on books (“New look”, 2008). In the meantime, the television and radio celebrity Kerre Woodham was signed up as a frontwoman to do book reviews by hosting the “books and bubbles” events (“New look”, 2008).

The company’s marketing position is further strengthened by participating in the Fly Buys programme and the agreement with New Zealand Post to host Post Shop and Kiwibank services in Paper Plus stores (“New look”, 2008). As a result, the company manages to gain a competitive edge by not only targeting the niche of traditional booklovers but also those people who do not have a clear intention to buy books but visit the shops for Post Shop or Kiwibank services. On the management side, Paper Plus has promoted a strong support policy to its franchise stores including effective training by the local support office[6].

In the meantime, Paper Plus has been focusing on the relationship with local publishers as well as has considerably increased spending on advertising raising customer awareness about its products[7]. This all has enabled the company to enter the recession with a very strong financial and marketing position. 2. 1. 3 Dymocks Dymocks is Australian-owned and has been around for over 130 years opening its first store in Auckland in 1994 (www. dymocks. co. nz). Dymocks operates as a franchise system running more than 80 stores in Oceania including six New Zealand stores located in the North Island (www. dymocks.

co. nz). Dymocks has been operating with the “love of books” concept having a reputation as a serious bookseller only without expending their product range to stationary, music and movies (“How the book trade”, 2009). The company offers their customers more of a contemporary bookbuying experience through the “Booklover” Rewards Programme (“How the book trade”, 2009). The company focuses on the New Zealand books being historically in the top 10 sellers. Dymocks have been experiencing a sustainable growth opening four new stores over two last years with further plans to expand into the South Island (www.

dymocks. co. nz). However, the recession has almost reversed this growth as Dymocks had to close three stores in two months: two in Auckland and one in Wellington[8]. The main causes for these closures were very high rents, bad locations, no street frontage or through traffic and high competition from Borders (“How the book trade”, 2009). In addition to this Dymocks had to resort to centralise administration in Australia by closing its New Zealand support office.

As such, out of the three main book retail chains, Dymocks has been weakened by the recession the most and is more concerned with a struggle to retain its existing six stores. 2. 1. 4 Independent Booksellers In contrast to the recession-linked problems faced by the book chains the independent booksellers[9] do not seem to suffer any recession at all (“How the book trade”, 2009). Despite some loss of customers choosing to go to library instead of buying books, the recent recession helped books products gain a momentum in the gift market[10].

The books’ popularity and affordability merits attribute to the people’s preference of a good book or dictionary gift over a $300 vase or duvet blanket (“Booksellers ready”, 2008). According to an industry expert[11] it is because the book chains have not been putting sufficient effort and resources into the customer relationship side, while independent stores have managed to develop a very loyal customer base by their excellent customer service, professionalism and personal approach (“How the book trade”, 2009).

As such, the independent book stores see the recession times as a good opportunity to pull new customers from the book chains which due to their large size and lack of knowledgeable staff cannot compete with independent stores on the professional advice, recommendation and customer service sides (“Boutique booksellers”, 2009). The competitiveness of the book retail market is further strained by online booksellers, which have experienced a considerable growth over the last few years in some cases almost doubling their sales each year[12].

Taking into consideration the competitive environment analysis above, the book retail market can be defined as highly competitive. Whitcoulls, Paper Plus and Dymocks were found to be the main competitors due to their market dominance on the one hand, and high bargaining power with book publishers on the other hand (Needle, 2000). 2. 2 Risk Assessment Taking into consideration the above analysis of the book retail industry’s competitive environment the following could be identified as risks and threats for a new independent book store.

2. 2. 1 Low Bargaining Power with Publishers Upstream of the value chain (Samson & Daft, 2005) a new independent shop would have a challenge to sign book publishers and authors in to obtain the rights to sell their books. The authors and publishers would likely be inclined to work with big retail chains or strong independent stores as being representative of better channels for promoting and distributing the books. Bookshops would usually compete over the right to sell quality books in order to win the customers’ preference and loyalty.

The industry experience shows that it is not the large stock but rather a good book range and quality that enable a shop to be preferred by customers over its competitors (“Boutique booksellers”, 2009). Therefore, bearing in mind the tight economic conditions and high market competitiveness, a new independent shop would have a risk of not being able to obtain a competitive book range due to insufficient bargaining power with publishers (Needle, 2000). 2. 2. 2 Lack of Resources Opening a new store would require significant spending starting from hiring or buying the store to paying professional staff competitive wages.

The Dymocks example with closing two Auckland stores (one of which after only a few months after opening) showed how much a store location mistake can cost to a shop regardless of its reputation, product range and popularity (Refer 2. 1). Thus, a company wishing to enter a book market would face not only the challenge of funding to open a new store but also to be able match the location trade advantages with costs. The downstream of the value chain (Samson & Daft, 2005) such as advertising and promotion as well as customer relations would also require significant funding.

The Paper Plus and independent book stores examples show that investing in advertising and building customer relationships are one of the most effective and powerful means to sustain and further gain market share in the current competitive environment (Refer 2. 1). The independent stores’ achievement of being able to build loyal customer base is due to having professional sales people on floor capable of providing good service along with knowledgeable advice to the customers (Refer 2. 1).

Therefore, the lack of resources both material and human would be a weakness of a new shop when entering the book retail market populated with rich chain retailers and professional independent stores. 2. 2. 3 Market Competition New Zealand has a very high number of book shops per capita in comparison to other countries (“Booksellers ready”, 2008). Thus, a new book store would be entering the market which according to some industry experts is already overpopulated[13] with such strong players as Whitcoulls, Paper Plus, Dymocks not mentioning about independent stores and online sellers experiencing a significant growth in recession (Refer 2.1).

Whitcoulls has considerably improved its marketing position through acquiring the Borders operations whereas Paper Plus, being strengthened by combining its services with Post Office and Kiwi Bank, has put a comprehensive action plan in place to fight for number one bookseller in New Zealand. In the meantime, the independent shops are gaining a recession momentum to strengthen their current position by capitalising on the inability of big chains to provide competitive books range, on the one hand, and appropriate level of customer service and support, on the other hand.

Taking into consideration the above facts, the book market could be classified as mature where there is no unoccupied market niche (Samson & Daft, 2005) left for a new book store to capitalise on. As a result, for a new store to become successful it will literally mean fighting for other shops’ customers. The implication for a new book store is that it will be very hard to compete with the current industry players that have a very high customer loyalty and market reputation for providing exceptional customer service on the one hand and significant resources, aggressive advertising and market dominance, on the other hand.

2. 3 Opportunities This section discusses the main strengths of and opportunities for a new book store in the current business environment. 2. 3. 1 Independency and local governance The centralisation of the stores support and governance is a common move for many in pursuit of cutting costs. However, experience shows that under the current level of competition store problems are timelier and more effectively resolved if there is local governance in place (“How the book trade”, 2009).

The main competitors of the proposed book store are strategically and operationally managed from overseas[14] making these shops quite inflexible and not quick enough to react to market changes as someone in Australia decides how many copies of a particular New Zealand book the stores should stock. In the meantime, the independent book stores have not felt the recession and are thereby able to respond quicker and serve customers’ needs better by preferring to have better books range over larger stock of out of date books (“Boutique booksellers”, 2009).

Therefore, the independency of a new shop would put the company in a better position in regards to timely reacting to industry changes and thereby avoiding unnecessary losses usually resulted from poor decisions made. 2. 3. 2 Closeness to Publishers and Customers Independent governance makes a proposed new book store closer to local publishers and customers. The New Zealand Book Publishers Association consisting of 95 local publishers is not satisfied with the current “super market” store running model used by the chains[15].

The main disadvantages are: the decreased books range printed as bulk purchases are made at cost of the books diversity[16], the chains often abuse their bargaining power with publishers[17] and the central display system with ineffective books categorisation[18] (“Big boys’ books”, 2009). As such, the New Zealand publishers are naturally more inclined to work with small independent stores who will have less bargaining power but more flexibility of buying and distributing books.

On the other side of the value chain, a new store would have an opportunity to capitalise on the chains’ clumsiness and lack of personal touch when dealing with customers. The main lesson learnt from chains’ struggle in the current recession is that customer satisfaction and loyalty could on its own determine the book retailer’s commercial future. Independent stores, in turn, have put a particular emphasis in implementing effective customer loyalty programs and achieving loyal customer base.

Therefore, despite the high market competition, there is a good opportunity for a new book store to win the book chains’ customers by offering better books range, more professional service and personal approach. 3. Conclusion Taking into account the above analysis, the opening of a new independent book store can be classified as a “Question” according to the BCG strategic tool (Samson & Daft, 2005).

On the one hand, the independence, local governance, good relationships with publishers and closeness to customers could enable a new book store to become a successful venture, thereby shifting to the “Star” BCG section distinguished by quick growth and expansion.

On the other hand, if the new venture has not managed to establish a strong market presence by providing sufficient funding, professional staff and developing effective strategic relationships with publishers, entering the current highly competitive book retail market could result in a commercial failure. The book retail market can be classified as very mature and highly competitive.

As such, it would be quite challenging for a new independent book store with limited resources, on the one hand, and the low bargaining power with the publishers, on the other hand, to compete with the book retail chains as well as with a number of other well established independent bookshops and online booksellers in the Auckland region. In the meantime, the fact that a new book store is going to be independent and locally run provides a competitive advantage of knowing its publishers and customers better and, thereby reacting to industry changes quicker and more effectively.

The final success of the new proposed book store would be mostly dependent on its ability to cope with high market competitiveness and mitigating its weaknesses on the one hand and capitalising on its strengths and opportunities currently present in the book industry. References Needle, D. (2000). Business in context: An introduction to business and its environment (3ed. ). London: Thomson Learning. Samson, D and Daft, R. (2005). Management, 2nd Pacific rim edition.

Australia: Thomson Learning. Big boys’ books. (2009, January 1), The Press, Retrieved August 15, 2009 from www. stuff. co.nz/the-press/lifestyle/150420/Big-boys-books#share Booksellers ready to write new chapter. (2008, July 14), The New Zealand Herald, Retrieved August 15, 2009 from www. nzherald. co. nz/business/news/article. cfm? c_id=3&objectid=10521367 Boutique booksellers boom.

(2009, August 13), The Dominion Post, Retrieved August 15, 2009 from www. stuff. co. nz/dominion-post/wellington/2743304/ Dymocks’ official website. www. dymocks. co. nz. How the book trade is turning a page. (2009, June 13), The New Zealand Herald, Retrieved August 15, 2009 from www. nzherald. co. nz. ezproxy. auckland. ac. nz/business/news/article. cfm?cid=3&objectid=10578175&pnum=2 New look for ‘friendly’ book chain.

(2008, June 21), The Dominion Post, Retrieved August 15, 2009 from www. stuff. co. nz/business/497996 Whitcoulls’ Borders bid cleared. (2009, January 1), NZPA, Retrieved August 15, 2009 from www. stuff. co. nz/business/130168 Whitcoulls finally picks up NZ Borders stores. (2007, June 07).

The New Zealand Herald, Retrieved August 15, 2009 from www. nzherald. co. nz/business/news/article. cfm? c_id=3&objectid=10514932 Whitcoulls, Paper Plus proceeding by the book in Borders’ buy-out. (2007, November 22), The New Zealand Herald, Retrieved August 15, 2009 from www.nzherald. co. nz/shopping/news/article. cfm? c_id=318&objectid=10477609 Whitcoulls widens its Borders in $137m deal. (2008, July 7), The Dominion Post, Retrieved August 15, 2009 from www. stuff. co. nz/business/477324 ———————– [1]

According to industry experts books margins vary from 40% to 50% out of total price (“Whitcoulls, Paper Plus proceeding”, 2007). [2]The group A&R Whitcoulls group acquired 30 Borders stores as well as exclusive rights to the Borders trademark in New Zealand, Australia and Singapore worth $NZD137 million (“Whitcoulls finally picks”, 2007).

The New Zealand Borders operation acquired included five stores: three in Auckland and one in each Christchurch and Wellington (“Big boys’ books”, 2009). [3] The recent achievement of Paper Plus is being recognised as the top seller of greeting cards (“New look”, 2008). [4] Historically only six out of 105 Paper Plus stores were positioned as serious booksellers (“New look”, 2008). [5] The company’s growth strategy is supported by the strong financial position improved from the loss of $401,000 in 2007 to profit of $748,000 in 2008 (“New look”, 2008).

[6] Paper Plus has purchased a new 500 square metre store in Auckland’s Sylvia Park to be used for training the franchisees how to implement an effective store layout and design to boost books sales (“New look”, 2008). [7] Whitcoulls admitted in the past that their loss of market share was directly caused by Paper Plus increasing its advertising spending (“Big boys’ books”, 2009). [8] The Auckland Smales Farm franchise store and the company-owned Queen Street store went into liquidation in May and June 2009 and Wellington Lambton Quay shop closed in May 2009 (“How the book trade”, 20).

[9] The most popular independent book stores include Unity Books (Auckland and Wellington), Scorpio (Christchurch) in Christchurch, Vic Books (Wellington), Dear Reader (Auckland), The Booklover (Auckland) and of Cambridge’s Wrights Bookshop (Auckland) (“Big boys’ books”, 2009). [10] According to the owners of ‘The Children’s Bookshop’, a book shop in Kilbirnie, last year the store has experienced a 12% increase in revenue mainly driven by the parents preferring books for gift for their children (“Boutique booksellers”, 2009).

[11] Tom Beran owning independent stores in Grey Lynn (Dear Reader) and Takapuna (The Booklover) (“How the book trade”, 2009). [12] For example, the New Zealand online seller www. fishpond. co. nz starting in 2004 expanded to Australia in 2006 and in 2007 was recognised in the Deloitte/Unlimited Fast 50 list noting the fastest-growing companies (“How the book trade”, 2009). [13] According to Dymocks CEO, Don Grover the New Zealand bookselling market is already over-supplied (“Booksellers ready”, 2008).

[14] Among the book retail chains occupying 90% of the market only Paper Plus is locally supported, whereas Whitcoulls and Dymocks are both owned and governed by Australian companies (“Big boys’ books”, 2009). [15] That was evidently expressed in the open opposition from the Book Publishers Association of Whitcoulls’ bid to purchase Borders’ stores as they know that it will result in a decrease of the books range bought by the chain (“Big boys’ books”, 2009). [16] For example, a book offered by a small publisher could be of a particular interest to smaller towns’ readers.

However, a local chain store is unable to make a purchasing decision instead having to sell the books decided in the support office across the Tasman (“Big boys’ books”, 2009). [17] For example, Whitcoulls is viewed by the industry as a tough negotiator with inflexible buying policies demanding from publishers at least 50% discount (“Big boys’ books”, 2009). [18] Compared to chain stores that cannot add or change the central display system, the independent stores have much more flexibility in deciding how their stock should be grouped and displayed on the floor (“Big boys’ books”, 2009).

Essay Topics:

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email. Please, specify your valid email address

We can't stand spam as much as you do No, thanks. I prefer suffering on my own