A Brave New World of Retail

November 12, 2015

Nate Rempe is the Senior Vice President and Chief Technology Officer with Nebraska Book Company. Nate and his team of dedicated technologists are setting a precedent for innovation in the college retail industry. With more than 1,000 back office, point-of-sale, e-commerce sites and mobile applications deployed, Nebraska Book Company’s software and technology services teams continue to create compelling solutions to help independent college stores be successful, both online and on campus.

In this series, Nate provides a unique perspective on the dramatic changes that have and continue to take place in college retail and provides tips and tools to help college stores.

Data from a study commissioned by Nebraska Book Company twice a year since 2005 shows that 42 percent of all college students buy their textbooks exclusively online. While that is up from 13 percent in 2006, college stores have fought diligently over the past five years to flatten out that trend.

But, flat isn’t good enough. There’s a huge opportunity for independent bookstores to win back market share by taking advantage of students’ shift in preference by tying the online and offline shopping experience together in unique ways (can shoppers easily buy online and pick up in store?), harnessing the power of textbook rental (are you renting every book?) to draw students back into the store, and diversifying revenue across a wider breadth of product lines (are you selling bottled water and iPhone charging cables?).

The growth of online textbook sales has paralleled my tenure since I started at Nebraska Book Company in 2005. Ten years ago, Amazon had just started to come on strong in the textbook third-party business marketplace. Students had books, other students needed the same books, they weren’t in the same geographic area, and Amazon harnessed its reach and its brand to bring the students together and complete a transaction.

This really impacted the college retail industry because it gave students alternatives to shopping at brick and mortar stores. Sure, students shared textbooks with each other in the past—they’d post on a board in the student union that they had a specific biology book and maybe they’d get a call or an e-mail about it but there really wasn’t a systematic way for a student in Virginia to find a student in Michigan to buy or sell a book.

At the same time, digital textbooks were coming onto the scene and our company was starting to invest in systems that helped bookstores sell digital content. So to me, 2005 represented a turning point of increasing college retail complexity and, thus, a new requirement of sophistication that bookstores would have to establish and maintain in order to compete in the market.

In 2005, many of the books available for sale on Amazon’s third-party marketplace came from students listing those books themselves. Now the books mostly come from wholesalers and bookstores; ironically, a good portion of the available inventory of Amazon is listed by the people who don’t necessarily want Amazon to exist. Nebraska Book Company began selling excess, low demand inventory into the Amazon marketplace back in 2006.

(Today we have a partnership with Monsoon Commerce for software that integrates automatically to our proprietary college bookstore back office system, WinPRISM, allowing stores to essentially flip a switch and to sell their inventory across a number of third-party marketplaces. Learn more here: http://prn.to/1jksnau).

However, today stores need to consider the true cost of this transaction, given that between 15 and 20 percent of the top-line revenue goes directly to Amazon. Plus, stores don’t keep the customer. It’s not a great way to ensure long-term success. Instead, it should be considered a last resort option—an answer to the question: “What can I do to get some amount of return on this book when my traditional or standard customer base isn’t interested in buying it?” A tougher question for stores to find an answer to, however, is how to reach customers who are used to shopping on sites like Amazon for books.

In the latest NBC-commissioned study in spring of 2015, 38 percent of all new textbooks were purchased online, while 54 percent of used textbooks were purchased online; 36 percent of students say they use an aggregator site like Campusbooks.com when they buy books online.

Fast-forward to today, when nearly every college store is still in the infancy stage in terms of not just having a website, but also understanding how to drive that part of their business to be successful. Maybe in 2005 you could argue that you could put up a website and people would come to it. But today, simply having a website and having items on it is not even close to good enough.

To have a successful ecommerce business, you must market it; merchandise it; competitively price; drive affiliate partnerships; and offer breadth in selection (virtual inventory), overnight shipping, and around the clock guest service. Your site is benchmarked against the best because every student is shopping with the best; and if you’re not in the ballpark, you’re not even considered.

Here’s the problem, which isn’t the bookstore’s fault: Even if stores were able to spend the necessary time and money on their site to make it competitive, most lack the unique skills or expertise to do it. It’s a very sophisticated segment of retail that is constantly evolving. It requires an in-depth understanding of relationships, technology, the dynamic of traffic movement and SEO (search engine optimization), pay-per-click, affiliate, and an understanding of conversion rate, merchandising, product information management, and much more.

Ecommerce and the execution of the same is much too complex to think that the only component that matters is how much time and money is spent on it.

Here’s the irony—in almost every case in which a non-leased college bookstore purchases a version of an ecommerce platform solution, all they receive is a platform and a few tools. The store’s existing team is then expected to somehow use the platform to create a site that competes with huge conglomerates like Amazon. It’s a completely ridiculous notion.

We set up an office in Chicago, Illinois specifically to drive a centralized “managed ecommerce” experience across hundreds of stores that can go head-to-head with sites like Amazon. We compile and package talent, best practices, technology, tools, affiliates, pay-per-click options, merchandising, and web analytics to provide a service that is truly competitive. And, we don’t say to you, “Hey, here’s a platform, a few check boxes, and drag-and-drop some clip art. Good luck!”

Instead we say, “You focus on the operations of the store by buying the right books and getting them on the shelf, making sure you can get them out of the back of the store, and we’ll optimize and manage your site – pumping demand into your store for those books from the web.” In the end, that’s really all stores want. Stores say they want a website, but what they really want is online market share.

The most relevant data about this topic from the NBC-commissioned study showed that students who buy books both online and in stores spend more money ($317) than those who buy in stores exclusively ($277) or online exclusively ($213).

We used to do what our competitors are doing–handing stores a platform along with training documents or a training course and say, “call us if it’s broken or when you need help.” Ultimately, stores spend way too much time trying to manage the software and figuring out how to use the toolsets without ever achieving the outcomes they desire. Going forward, our mission is to manage the software on behalf of the store as a part of our service delivery. We want to free the store to repurpose that time to serving their customer.

Think of it this way—what is the purpose of the independent college store? If I can buy every book I need on Amazon, why is there a bookstore? That question poses a real problem that is not going away. A bookstore needs to define its identity and it can’t include only selling textbooks, because that’s not a sustainable value proposition.

For example, how effective do stores market to faculty? How much time is spent across college store leadership on faculty relationship management? Do most faculty think of the college store as indispensable? If not, what would happen if they did?

When it comes to textbooks, faculty members represent the most powerful marketing word-of-mouth influence that exists. If the faculty feels like the bookstore delivers a value proposition that helps them succeed in the academic mission, then he or she will encourage students to source materials from the store. Most software providers to the industry are not spending enough time and energy enabling the relationship between the stores and faculty and creating value in the bookstore for faculty. That’s where a competitive advantage exists that Amazon does not and may never have.

There’s a process every professor goes through prior to the start of the semester called the adoptions process or the requisitions process. One of the most important value propositions that the bookstore brings to the table is helping the faculty select the best possible materials for their course. Period.

Course materials don’t only include textbooks—they might include a course pack or online tools, for example. A bookstore being the subject matter expert about all forms of course materials and all learning materials is incredibly important as part of its identity and value proposition.

The more connected stores are with the faculty, the quicker the faculty can provide the bookstore the course materials they’re using. The bookstore can increase profits because now it knows earlier than anyone else what books will be needed and they can source those books used and get a larger volume of more affordable product on the shelf for their students. This enriches the faculty experience, the student experience, and the bookstore experience. Everyone wins.

But if you’re talking about stores’ success in the next five years, it’s all about competencies: build relationships with the faculty, help them be successful, and help students find the books they need. Stay connected to the campus community. Focus on service and work with partners like NBC that help you drive efficiency in your operation, because every dollar spent being inefficient is a dollar that could be spent servicing or helping the faculty or students.

We are a managed service company now, not just a technology company; not just a textbook company. Underneath our managed services offering, we do have products. But we don’t sell those products—we look at a store’s challenges and we compare it against the new technology we have or are building, combined with our best practices and our talent, and we form a custom solution to help the store fill in their gaps.

There’s a trend in the marketplace to outsource the management of college bookstores. The challenges of operating a college store, both online and offline, are forcing campus administrations to make uncomfortable choices. However, according to a 2013 profile of higher education Chief Business Officers (CBO), the vast majority of CBOs nationwide have no retail experience.

They see a bookstore declining, the challenging market, and the success of Amazon and say, “I don’t know what the heck to do with this store.” The easy answer for them, at this point at least, is to outsource it. But the true cost to do so is huge.

Leasing the store negates the faculty relationships, impacts the employment of students, the synergies of the brand and the school in both the store and the community, and the academic roles that the bookstore plays. All those instrumental components take a backseat to dollars and cents when a campus outsources its store. When the bookstore gets outsourced, there is one reason why and one reason only: the hope of turning a larger profit.

Money may help keep the lights on, but the real value of a collegiate bookstore lies in the blend of academic goals and financial goals. Nebraska Book Company’s Managed Services offering is a new concept that stands between the independent store and the trend to go lease—and will help keep the lights on too.

We sold our retail stores to focus our entire business on stopping the trend of college retail outsourcing, which, we believe, will inevitably kill the college bookstore. The only way our industry will remain viable is to focus on its reason for existence: to make the college experience even better.

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