Lesson Plans - Company Business and Marketing

Industry Standard, The, Feb 5, 2001 by Lisa Shuchman

Scholastic is seeking success online by combining a new Web site for teachers, parents and kids with a time-tested, old-economy strategy.

FOR SCHOLASTIC, FAILING ON THE Web might have been the best thing that could have happened to the education company's Internet strategy.

In the 1990s, the 80-year-old publisher was one of those old-line companies that then-swaggering dot-com executives liked to sneer at for, as the phrase goes, "not getting the Net." Despite going online early with a deal with America Online in 1993, New York-based Scholastic moved slowly and couldn't keep pace with a rapidly changing market. Over the next six years, CEO Dick Robinson tried and abandoned several Net strategies.

But even as Scholastic came up short on the Web, it struck pay dirt with Harry Potter. The children's book series about a boy wizard became an international publishing phenomenon in 1998 -- with Scholastic in sole possession of all U.S. rights thanks to a winning bid at an auction. Due in part to Harry Potter, Scholastic's stock was trading in the $90 range -- up 53 percent from a year ago -- before a 2-for-1 stock split this January. That success has emboldened Scholastic to commit an unprecedented $22 million in an effort to make the Web work.

The new Scholastic.com, currently being rolled out, includes lesson plans and Web-page builders for teachers as well as education information for parents. Soon parents will be able to connect to their kids' classroom through the site. For kids, the site offers interactive games and discussions with such writers as J.K. Rowling, author of the Harry Potter books.

For all the high-tech flash, Scholastic isn't counting on fancy portal deals to make its new strategy work. Instead, it's using the same low-tech strategy that has kept the firm in business for eight decades. Just as the company sells its books, teaching materials and software to teachers and parents through traditional distribution channels such as book clubs and book fairs, Scholastic is using the same tried-and-true approach to sell its new array of educational services online.

But it's not all Internet. Mindful of the dot-com collapse, the company opened its first store in New York in December. Later this year, it will establish Scholastic boutiques in Toys "R" Us stores.

"The Internet is another form of distribution, and for us to continue our role as a distribution vehicle for books and information, the Internet is critical," says Robinson, son of Scholastic's founder.

That strategy has won Nancy Sharoff's allegiance. "I visit the site at least once a week and use it to help prepare lessons, get ideas and find other appropriate Web sites," says Sharoff, who teaches second grade in Ellenville, N.Y

Sharoff isn't alone. The teachers' section of Scholastic's site recorded 453,000 unique visitors in 2000, up from 77,000 in 1999. Visits to the kids' section rose from 220,000 to 792,000 during the same period.

But that's a mere fraction of the 32 million children the company reaches across its operations. With $1.4 billion in revenues in the fiscal year ending May 31, the firm also has book-club, book-publishing, education, entertainment and Internet divisions, and the company reaches 40 million parents and 1.5 million teachers.

Getting all those people online, Scholastic has learned, isn't child's play. In 1993, the company launched the Scholastic Network on America Online. But two years later, the company canceled the deal after Robinson concluded the AOL alliance was too costly.

Scholastic then launched a subscription-only Web site in 1996 but soon hit a wall. "The selling process took too long," says Robinson. "There were too many roadblocks to rapid growth, and meanwhile Internet use was rising significantly."

This time out, Robinson expects the Net to play a key role in reaching a preschool audience through its recently acquired Grolier subsidiary, which publishes the Dr. Suess books. Grolier currently brings in about $1 million in e-commerce revenues.

"Scholastic will be an anchor for parents of newborns and kids all the way up to age 12," says Scholastic online chief Donna Iucolano, a former teacher and 1-800-Flowes.com executive.

Scholastic still faces formidable competition from such publishing powerhouses as McGraw-Hill and Pearson. All target the $700 billion K-12 market.

But Scholastic has a customer base that competitors can only envy: teachers and parents who fondly remember reading Clifford the Big Red Dog stories when they were kids and who want to share that experience with their own children.