Internet Vendors Test College Textbook Market

By JEFF GOTTLIEB

June 25, 2000 12 AM PT

TIMES STAFF WRITER

The venerable college bookstore, target of student grumbling about long lines and high prices, has come under attack from newly established Internet companies in a fight that is transforming the way textbooks are sold.

No longer are students from UC Irvine or UCLA or Cal State Fullerton forced to buy their books from the campus bookstore. They can order them from an Internet bookseller that claims lower prices and quick delivery, without the lines.

College bookstores say these Internet competitors have taken only a tiny percentage of the $5-billion-a-year textbook business. But they have shaken the industry to its title pages, prompting bookstores to fight back with their own online operations, better service and a lawsuit.

College stores no longer can consider the sale of textbooks their near-exclusive domain. “I think, across the country, we’re seeing [college bookstores] losing their complacency because of these online booksellers,” said Daniel Archer, director of the USC bookstore.

The five largest such online companies say their customer base is growing by volumes.

According to the research firm PC Data, the number of people logging on to online booksellers grew 140% from August to January. “The shocking thing is that even a year and a half ago, you didn’t see the presence you do now,” said Jeff Friedel, manager of Stanford University’s bookstore. “It’s almost like an overnight boom.”

While efollett.com was the first to sell texts on the Internet when it started setting up Web sites for its college stores in 1995, it wasn’t until August 1998, when Varsitybooks.com and Bigwords.com came online, that the fight really began.

Students report mixed experiences with Internet booksellers. Some tout the money they’ve saved--generally 10% to 15%--while others complain about prices not being low enough to matter, books not being available and delivery problems.

“There’s no sense [in] ordering books online if you don’t get them on time,” said Sandra Paulo, a junior at UCI, echoing complaints by her friends.

Shin Hwang, a junior sociology major at UCI, saved $15 to $20 per book on Bigwords.com because she was able to find them used.

But UCLA law student Frank Dunnick had the opposite experience. He bought a new book online for $65 and later found a used copy in the bookstore for $48.

UCLA freshman economics major Alexis Walters saved about $30 in spring quarter when she bought $200 worth of books online. “I don’t really do it for saving money,” she said, “but the lines in [the bookstore] are so long, it’s just so much easier to do it on the Internet.”

Online booksellers say that grabbing even a small part of the textbook market, one in which the students spend an average of $600 a year, would be lucrative.

“Is it reasonable to think of 10% [of college students] migrating online?” asked Patrice Litchfield, president of Textbooks.com, which is affiliated with Barnes and Noble. “Absolutely. Twenty percent eventually? It’s not that absurd.”

The new competition in the industry was illustrated this spring quarter at UCI as Varsitybooks.com representatives stood outside lecture halls passing out fliers comparing their prices with the school bookstore and even stood up before classes to proclaim how much cheaper their books were and offered fliers for free pizza.

Virtual bookstores have changed the complexion of the textbook world simply by advertising aggressively where there was little promotion before. In all, the online bookstores have spent $50 million to $100 million on ads on radio, TV, newspapers and magazines.

These new booksellers claim discounts of as much as 40%. Some offer an additional 5% cut if the professor has signed up as an affiliate with the company.

Textbooks.com’s faculty affiliate program offers professors 5% of the sale from books their students buy. But university officials discounted potential ethical problems.

“I doubt that in more than a minute segment of the community would any professor choose books that would somehow give him or her some kind of minuscule economic advantage,” said Sheldon Steinbach, general counsel of the American Council on Education.

Cal State Fullerton President Milton Gordon said his faculty members have plowed the money back into course materials or their academic departments.

Few students report saving anything close to 40%. But there are signs some of the tactics may be working. At UCI, while the student body is growing, book sales are down 1% to 2%.

But the most impressive statistic comes from the online bookseller Bigwords.com. The San Francisco-based company said that in fall 1999, 3,000 of its customers identified themselves as Harvard undergraduates. If true, that would mean half the university’s undergrads bought books from Bigwords.

Jerry Murphy, president of the Harvard Co-op, said that while the bookstore has seen some impact from onliners, it has not seen nearly that kind of drop. A figure that high, he said, would throw him into a panic.

These new e-tailers have cast themselves as renegades, fighting the supposedly monopolistic college store. They have played on the reputation of college stores for having long lines, lacking books for every student in a class, and, of course, having high prices.

College bookstore managers acknowledge that their service may not have been the best, but they say they’ve gotten a bad rap for the high price of books, some of which cost more than $100. For that, they blame the publishers.

Bookstores charge 25% to 33% over wholesale for their books. But after costs, said Laura Nakoneczny, spokeswoman for the National Assn. of College Stores, bookstores make just 4% on textbooks.

Competition from online booksellers is the latest change to hit college bookstores in the last 10 years. The decade has seen a growing number of colleges lease their campus stores to companies such as Barnes & Noble and Efollett, both players in the online world.

The emergence of Amazon.com already had students ordering Toni Morrison novels and other literature from the pioneer e-tailer.

Many college bookstore managers think that by reacting quickly and imitating the online companies, they have beaten back the threat. Others, however, think onliners remain serious competitors.

Colleges have added more cash registers to shorten checkout lines and tried to make book buying more convenient.

More than 300 schools have started their own Web sites where students can order books online and pick them up or even have them delivered. At CSUF, the online business is growing 20% to 30% every semester, and it makes up close to 10% of the book business, said Omar Iftikhar, information systems manager there. The bookstore even offers free delivery.

College bookstores also have gone to great lengths to try to disprove one of the biggest attractions of the onliners: their claim of cheaper prices. The bookstores insist the discounts exist on only selected books, that shipping costs eat up most savings and the onliners don’t stock all textbooks.

The National Assn. of College Stores has taken the issue seriously enough to file suit in October against Varsitybooks.com.

The suit accuses the company of misleading advertising by saying it offers discounts of 40%. The suit does not ask for monetary damages but an injunction forcing the company to change its advertising.

Eric Kuhn, the former lawyer who is CEO of Varsitybooks, said the suit is without merit.

The lawsuit is just one problem his company faces.

Varsitybooks.com, the only publicly traded virtual college bookstore, showed revenue of $12.2 million for the first quarter of this year, higher than its $10.5 million for all of 1999. But investors have shown little confidence in the company, and its stock has plunged to less than $2 a share, down from its opening price of $10 in February.

Still, most experts expect the online textbook world to keep growing.

“We don’t know if we’re winning the battle or losing it,” said Iftikhar at CSUF. “These companies are a viable threat. They will affect us a lot more in the future, and we know that.”

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Store or Online?

College bookstores have come under pressure from companies selling textbooks online. Here is a comparison between the price Cal State Fullerton’s book store charges for texts compared to Varsitybooks.com. The online company charges $4.95 shipping per order for UPS 2nd Day Air and $17.95 for next-day shipping.

1. Major Principles of Media Law: $62.95

Varsitybooks.com: $60.75

2. Nature of Mathematics, 8th edition: $78.40

Varsitybooks.com: $75.95

3. Applied Management Science w/CD: $95.90

Varsitybooks.com: $89.46

4. Calculus and its Applications, 7th edition: $95.55

Varsitybooks.com: $91.20

5. Human Sexuality in a World of Diversity, 4th edition: $76.05

Varsitybooks.com: $73.15

6. The Legal, Ethical and International Environment of Business, 4th edition: $96.25

Varsitybooks.com: $94.00