Management Consulting Report
The New Zealand Book Retail Industry Analysis
| | | | | | | | | |Date: | 27 August 2009 |
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
Table of Contents
2.1 Competitive Environment
2.1.1 Whitcoulls Group
2.1.2 Paper Plus
2.1.4 Independent Booksellers
2.2 Risk Assessment
2.2.1 Low Bargaining Power with Publishers
2.2.2 Lack of Resources
2.2.3 Market Competition
2.3.1 Independency and local governance
2.3.2 Closeness to Publishers and Customers
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).
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 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...
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
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
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
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
 According to industry experts books margins vary from 40% to 50% out of total price (“Whitcoulls, Paper Plus proceeding”, 2007).
 The recent achievement of Paper Plus is being recognised as the top seller of greeting cards (“New look”, 2008).
 Historically only six out of 105 Paper Plus stores were positioned as serious booksellers (“New look”, 2008).
 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).
 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).
 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).
 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).
 Tom Beran owning independent stores in Grey Lynn (Dear Reader) and Takapuna (The Booklover) (“How the book trade”, 2009).
 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).
 According to Dymocks CEO, Don Grover the New Zealand bookselling market is already over-supplied (“Booksellers ready”, 2008).
 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).
 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).
 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).
 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).
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