The big-business bookstore: with innovation, strategic thinking, and some seat-of-the-pants risk-taking, Cornell and Beloit are turning the quiet campus bookstore into big business - Campus Bookstores

University Business, July-August, 2002 by Nicole Rivard

The proliferation of distribution channels is firing up competition in art forms of retail, especially in book retailing. What's more, with the likes of Amazon.com and War-Mart setting texts to college students, college bookstores will have to get better at retailing, and they'll have to get better fast, say consultants in that area.

According to Richard McDaniel, associate VP/Business Services at Cornell University, "Roughly 64 percent of the business in campus bookstores involves course materials. But we've just gone through a two-year period where companies like Varsitybooks.com tried to sell course materials on the Web, and though they've since gone bankrupt, they've had their impact." Then there are the other product lines that historically supply sales revenue for campus bookstores: general supplies (now facing competition from Office Depot and Staples) and computers (where prices continue to plummet). "Even if you sell the same quantity of computers year in and year out, the dollars drop every year because of price reductions," McDaniel says.

What puts campus bookstores at an even greater disadvantage, insiders say, is that most colleges and universities don't know a whole lot about retail--and some do it astoundingly badly. Administrators and store managers look at a retail area and see an empty space to be filled, instead of thinking in terms of gross margin per square foot. The result? Aisles cluttered with items that turn slowly and don't create interest.

But it doesn't have to be that way. Consultants and savvy campus merchandisers urge IHEs and their store managers to consider the following, to build strong businesses:

Flex merchandising--rotating goods and store layouts to optimize yield. At Cornell University, Cornell Store employees are savvy about optimizing real estate for changing consumer needs. The store's textbook department converts from 400 to 4,000 square feet, and back again, during the two-week textbook rush. Annual yield per square foot is more than $6,000 at the store, white the campus-bookstore industry average is $1,200. The key, says McDaniel, is planning--and having several floor plans. Cornell originally had six floor plans, but now store employees change the floor on a weekly basis. Rolling racks shelved with books are warehoused off-site, enabling employees to roll in 150,000 books at a clip, and set them in place in a matter of three or four hours. Similar mobile racks house other product lines as well.

Getting "in touch" with customer needs and wants. Because of the intense competition from private sector retailers these days, tapping into trends and understanding the customer's mind is crucial.

Creating a `campus center.' "College bookstores are in transition right now," says Michael Crosson, CEO of MI-based JGA, bookstore consultants. "They're looking at how to become the `campus center' as opposed to just a store." One way they're doing this, he says, is with the addition of services such as copying and custom publishing.

Custom publishing involves creating course packs for faculty who want to use teaching aids created from articles or papers they've authored, instead of traditional textbooks. Cornell was a pioneer in the custom publishing arena, says McDaniel. He explains that the average size of a course pack is 25 articles, and the average article is 10 pages. "You're looking at 300 pages a packet, and we print and sell thousands of those," he says. At Cornell, custom publishing is now 14 percent of its business (vs. nationally, where custom publishing comprises 4-5 percent of the course materials business). He admits the business is slowing down a bit, as some course materials are moved to the Web.

Bring in consultants. Cornell's McDaniel says, "You have to be competent in your own right, but you have to be humble enough to know that when it comes to retailing expertise, you're not that smart. In any of the areas involved, such as store design, you want to use consultants, albeit judiciously. The right consultants can pay off in spades." He says that while college retailing is similar to general retailing, it is also significantly different, and needs the expertise of those experienced in the niche. During the textbook rush period, he's seen the campus bookstore go from sales of $30,000 a day to a million dollars a day, in under a week. "That's a sales cycle so intense, if you're thinking like a general retailer, you'll miss your opportunities." And recently, when Cornell administrators wanted to rethink the warehouse logistics (the warehouse is a half-mile from the bookstore), the school spent $56,000 in consultant fees, bringing in UPS to help. A yearly savings of $90,000 will result, says McDaniel.

Outsource management. Turtle Creek: The Beloit College Bookstore was originally positioned as an independent hometown bookstore poised to go head-to-head with the sizeable Barnes & Noble and Borders, located half an hour away. But within six months of the store's June 2001 opening in the "rescued" and historic downtown Hilton Hotel, administrators were seriously considering shifting management of the struggling store to an outside operator. The store had become a catalyst for economic revitalization of the downtown area, but there had been tough challenges, too: adapting to a space three times the size of what the school was used to, dealing with the public as well as the campus community, and learning the bookstore business in the wider sense. "What we had before was more of a convenience store that happened to sell textbooks in the basement of our student center," says John Nicholas, treasurer and VP/Administration at Beloit. "Then suddenly, we were in the cruel world, and even though we were meeting our sales goals, we were also paying for staffers with specialized skills, which was raising our labor costs beyond what the sales could support." On June 1, 2002, Barnes & Noble College Bookstores, Inc. took over operations of Turtle Creek. "They have a whole organization of people with specific skills--technology, and trade-book business expertise, for instance--who can be counted on to provide a solution to a problem," says Nicholas, admitting that was the deciding factor in outsourcing. In addition, B&N brought to the table expanded services (e.g., custom ordering and custom publishing) that Beloit didn't have. Meanwhile, B&N is solving the labor-expense imbalance by utilizing fewer, better trained, but less expensive staffers.