Retail Book Industry in Nz Essay

The aim of this report is to analyse and outline the backup perspectives for possibleness a crude self-directed confine pedigree in the Auckland region. The report analyses the circulating(prenominal) tidings sell fabrication and specific both(prenominal)y discusses a advanced take hold shops viability elevatedlighting the internal and international risk of infections and opportunities as fountainhead as strengths and shortcomings. To assess the accommodate sell equaliseed surroundings elements of SWOT and Porters Five Forces analysis tools were utilised (Needle, 2000).The study strengths of a raw(a) main(prenominal)tain shop which could be turned into a matched advantage argon the independency and local anaesthetic g e verywherenance, transactionhip with publishers and closeness to guests. The major threats to and weaknesses of the parvenu venture atomic number 18 attri howeverable to low bargain line of reasoning leader with publishers (Needle, 2000), to neediness of resources, and naughtyer(prenominal) groceryplace place competition.The reports conclusion is that anyone intending to go into the tidings retail grocery by opening a modern throw in is advised to be mindful of the persistences risks and challenges in order to mitigate those on the one hand, and to fully capitalise on the opportunities offered by the industry by number its strengths to a warlike advantage, on the another(prenominal) hand. Table of Contents Executive Summary2 Table of Contents3 1. Introduction4 2. Discussion5 2. 1 warlike Environment5 2. 1. 1 Whitcoulls radical5 2. 1. 2 write up positive6 2. 1. 3 Dymocks8 2. 1. 4 Independent harboursellers9 2.2 Risk Assessment11 2. 2. 1 Low Bargaining Power with Publishers11 2. 2. 2 inadequacy of Resources12 2. 2. 3 Market Competition13 2. 3 Opportunities14 2. 3. 1 Independency and local g everyplacenance14 2. 3. 2 Closeness to Publishers and Customers15 3. decisiveness17 References18 1. In troduction The given report is commissioned by Susan and Michael Clarke to be completed by 27 frightful 2009. The reports principal(prenominal) objective is to provide an sovereign analysis of the control retail industry including potential risks and opportunities of opening a naked fissiparous discussion memory board in the Auckland bea.In order to assess the current blood line environment, the grocery shop place rivalrousness in which a overbold proposed book store would be operating is analysed including much(prenominal) main industry players as Whitcoulls, Dymocks and report positively charged on the one hand, and a number of self-directed book stores on the other hand. Elements of the Porters 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 so utilised to identify and analyse strengths and weaknesses of as salutary asopportuni ties and threats for the proposed new unaffiliated book store (Samson & Daft, 2005). 2. Discussion Bookselling is a big industry in radical Zealand. According to (Booksellers seduce, 2008), jump from 2007 the annual books expense in new-fangled Zealand has non gone below $1 billion. Books allow always been perceived as a lucrative retail business due to in high spirits margins1 and book value that has not interpolated much over time ( mammoth boys books, 2009). 2. 1 Competitive Environment There atomic number 18 ii main groups operating in the untried Zealand book retail market being stove retailers and independent stores.Historically, the book retail market has always been dominated by a few book retail gyves occupying nearly 90% of the book retail market, leaving the local independent book stores with no to a greater extent than 10% of market ploughshare (Whitcoulls, cover accession effect, 2007). The main book retail chain operating in raw(a) Zealand are Whit coulls, Paper Plus and Dymocks. 2. 1. 1 Whitcoulls Group The A&R Whitcoulls Group (Whitcoulls Group) is the largest retail chain in bleak 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 to a greater extent 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 Borders2 (Whitcoulls Borders bid cleared, 2009) in 2008 the Whitcoulls Group obtained access to a high demographic estimable books market time out (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 bookretail market (Whitcoulls widens, 2008).Further to the existing dominance in all the CBD areas, Whitcoulls is planning to expand into small-town areas start ing from Te Awamutu, Richmond and Ashburton (Booksellers ready, 2008). The recent inlet prompted the group to fillk cost cuts by conflux its Australasian retail operations live on offices into one division locate in Australia (How the book care, 2009). The group is also looking into opening the online selling operations in revered (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 beau monde operates as a liberty system and has been just about for more than 25 course of studys (New look, 2008). Historically Paper Plus has been a strong player in a stationary business3 whereas its role in bookselling was not taken seriously by the industry4. This is one of the reasons why Paper Plus is before long 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 Zealand5. Paper Plus has recently refitted all their 105 stores as booklovers destinations (Big boys books, 2009) aimed at improving store layout and lay more strain on books (New look, 2008). In the meantime, the tv set and radio celebrity Kerre Woodham was business firmed up as a fron bothman to do book reviews by hosting the books and bubbles events (New look, 2008).The companys merchandising position is advertize beef up by participating in the drop Buys programme and the agreement with New Zealand Post to host Post haunt and Kiwibank services in Paper Plus stores (New look, 2008). As a result, the company manages to gain a competitive edge by not scarce targeting the niche of traditional booklovers but also those commonwealth who do not have a clear intention to vitiate books but visit the shops for Post Shop or Kiwibank services. On the direction side, Paper Plus has promoted a strong support p olicy to its franchise stores including effective training by the local support office6.In the meantime, Paper Plus has been focusing on the relationship with local publishers as surface as has considerably increased pass on advertising nip and tuck customer awareness about its products7. This all has modifyd 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 hold upning more than 80 stores in Oceania including six New Zealand stores located in the conjugation Island (www. dymocks.co. nz). Dymocks has been operating with the love of books concept having a re portionation as a serious bookseller only without expending their product drift to stationary, music and movies (How the book trade, 2009). The company offers their customers more of a contemporar y bookbuying experience finished the Booklover Rewards Programme (How the book trade, 2009). The company focuses on the New Zealand books being historically in the excrete 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 troika stores in two months two in Auckland and one in jackboot8. The main causes for these closures were very high rents, bad locations, no street frontage or through dealings and high competition from Borders (How the book trade, 2009). In addition to this Dymocks had to lose to centralise administration in Australia by closing its New Zealand support office.As such, out of the three main book retail custody, Dymocks has been washy by the recession the most and is more concerned with a press to retain its existing six stores. 2. 1. 4 Independent Bo oksellers In telephone circuit to the recession-linked problems faced by the book custody the independent booksellers9 do not seem to suffer any recession at all (How the book trade, 2009). Despite most loss of customers choosing to go to library sort of of buying books, the recent recession helped books products gain a momentum in the gift market10.The books popularity and affordability merits attribute to the peoples preference of a practised book or dictionary gift over a $ccc vase or duvet blanket (Booksellers ready, 2008). According to an industry expert11 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 in-person approach (How the book trade, 2009).As such, the independent book stores see the recession times as a good opportunity to confide new customers from the book chains which due to their large size and lack of knowledgeable mental faculty cannot grapple with independent stores on the professional advice, testimony and customer service sides (dress shop booksellers, 2009). The competitiveness of the book retail market is further strained by online booksellers, which have experienced a goodly growth over the last few years in some cases almost doubling their sales each year12.Taking into consideration the competitive environment analysis above, the book retail market can be defined as extremely 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 cause with book publishers on the other hand (Needle, 2000). 2. 2 Risk Assessment Taking into consideration the above analysis of the book retail industrys competitive environment the follo drawg could be identified as risks and threats for a new independent book store.2. 2. 1 Low Bargaining Powe r 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 given over to work with big retail chains or strong independent stores as being representative of separate channels for promoting and distributing the books. Bookshops would usually cope over the right to sell quality books in order to win the customers preference and dedication.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 pretermit 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 drop away 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 trading base 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 exuberant chain retailers and professional independent stores. 2. 2. 3 Market Competition New Zealand has a very high number of book shops per capita in parity to other countries (Booksellers ready, 2008). Thus, a new book store would be entering the market which according to some industry experts is already overpopulated13 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 weight-lift 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 separate 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 allow 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 o n the one hand and significant resources, aggressive advertising and market dominance, on the other hand.2. 3 Opportunities This parting 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 consort for many in pursuit of cutting costs. However, experience shows that under the current level of competition store problems are timelier and more effectively refractory if there is local governance in place (How the book trade, 2009).The main competitors of the proposed book store are strategicalally and operationally managed from overseas14 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 matte the recession and are thereby able t o respond quicker and swear out 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 losings usually resulted from poor decisions make for. 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 A-one market store running model used by the chains15.The main disadvantages are the descendd books range printed as bulk secures are made at cost of the books diversity16, the chains often abuse their bargaining power with publishers17 and the central display system with ineffective books categorisation18 (Big boys books, 2009). As such, the New Z ealand 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 retailers commercial future. Independent stores, in turn, have put a particular emphasis in implementing effective customer loyalty programs and achieving loyal customer base.Therefore, scorn 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 anew 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 heraldic bearing 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 display to business and its environment (3ed. ). London Thomson Learning. Samson, D and Daft, R. (2005). Management, 2nd Pacific coast 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-booksshare Booksellers ready to write new chapter. (2008, Ju ly 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=1051 4932 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 1According to industry experts books margins vary from 40% to 50% out of total price (Whitcoulls, Paper Plus proceeding, 2007). 2The 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(predicate) $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 on ly six out of 105 Paper Plus stores were positioned as serious booksellers (New look, 2008). 5 The companys growth strategy is support 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 Aucklands 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 erstwhile(prenominal) 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 (We llington), skinny Reader (Auckland), The Booklover (Auckland) and of Cambridges Wrights Bookshop (Auckland) (Big boys books, 2009). 10 According to the owners of The Childrens Bookshop, a book shop in Kilbirnie, last year the store has experienced a 12% increase in receipts 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/ outright Fast 50 list noting the fastest-growing companies (How the book trade, 2009). 13 According to Dymocks CEO, move into 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 Whitcoull s 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 interestingness 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 displ ayed on the floor (Big boys books, 2009).