Download Competitor Analysis: Powell's Books - New Product Development | BA 590 and more Assignments Introduction to Business Management in PDF only on Docsity!
Wendy Starker Mark Trivette George Tian Christine Yang BA 590 Evening Section
Competitor Analysis: Powell’s Books
The Industry The book, music and entertainment industry is a mature industry that has served customers for over one hundred years. Unlike other mature industries, it is highly fragmented with thousands of players in the market. In 2004, the total market size of book and music stores was 80 billion dollars. Over the past ten years, this industry had a stable average growth rate of 3.4% per year (Souers & Normand, 2005). A majority of the players are competing for the same customer base. The recent industry trend shows that small independent bookstores are continuously losing market share to large chain stores such as Borders and Barnes and Noble. Powell’s Books Michael Powell founded Powell’s Books in 1971. The original location of the bookstore was on a run-down corner in northwest Portland. It quickly outgrew the first location and was moved to a former car dealership, occupying the whole city block between 10th^ and 11th^ streets on Broadway, where it remains today. Powell’s Books has experienced tremendous growth since 1971. It is now comprised of four full-service bookstores, two specialty stores and one of the world’s most successful dot-coms. All together, they made Powell’s Books the largest independent bookstore in the world. The company’s revenue peeked in 1998, at 45 million dollars (Goliath.com, 2005). Due to competition from large book retail chains and internal union strikes, the company has
been experiencing a steady decline in sales for the past several years. In 2005, Powell’s Books generated 38 million dollars in sales revenue with over 450 employees (Goliath.com, 2005). Facing the intense competition from chain stores, Michael Powell regards them as “predatory, anonymous and characterless” and thrives on making Powell’s Books something different (Doyle, 2003). Powell’s unique business model includes: “a vast offering of used books, a stunning selection of out-of-print books, a crammed roomful of rare books, its knowledgeable and verbose staffers, the comfortable ambience of the mother store, and its secret weapon: www.powells.com, the website through which Powell's sells more than a thousand books a day” (Doyle, 2003). Brand Community Analysis Powell’s Focal Customer Powell’s has a much more segmented market than the other leading booksellers. Amazon.com, Borders and Barnes & Noble seem to try to attract the masses. Powell’s, on the other hand, focuses on a few key segments. The first is bibliophiles, or people that read and collect books. These people vary in age and tend to be well-educated intellectuals. They are Powell’s primary customers. Powell’s provides a library-like atmosphere for these people. Michael Powell states, “I’ve always thought that the point here is to get the author’s voice to the reader’s ear and be as invisible as possible in the process” (Hauser, 2001). Having the world’s largest selection of new and used books, including rare and out-of-print books, is what makes Powell’s attractive to these avid book readers and collectors. “Literate commentary,
(Hauser, 2001). From talking with the woman that worked in the book buyback section, we found out that there are seasons for book buying. More books come in during the spring and summer when people are moving and cleaning. Powell’s actively goes out to estate sales, used bookstores going out of business, and garage sales to get more books. A bookmark picked up in Powell’s says, “Lose 20 lbs. in one day! Sell us your books! Earn cash or trade, it’s your choice.” Powell’s is known for it’s large inventory and one way it collects that is by attracting people to the store to sell their books back. Powell’s specialty stores are targeted to people with a specific interest, hobby or career. It has two specialty stores: Powell’s Technical Books and Powell’s Books for Cooks and Gardeners. This allows Powell’s to target people specifically interested in those topics. Powell’s City of Books can also meet the needs of many people looking for books on specific topics due to the volume of inventory they carry. It’s hard to leave not having found what you are looking for and more. Focal Customer to Powell’s Brand The Powell’s brand is unique. The store is unlike any bookstore we have ever been in before. It is like a library with a sense of adventure. It is a tourist destination and a Portland icon. “There is a great deal of pride about Powell’s and almost community ownership. Every once and a while the rumor goes around that we’re going to sell. It would be almost like selling City Hall,” says Michael Powell (Hauser, 2001). Powell’s supports Portland Arts and Lectures, free-speech initiatives, and young- reader programs (Powell’s Books, 2005). The Coop, an online poultry organization, has partnered with Powell’s books because of the huge selection of new and used books in the poultry subject area and because of Powell’s good reputation. “Poultry folks in the
know visit Powell’s regularly. Powell’s does business with a great sense of ethics, acceptance of diversity, and participation in the communities where they are located” (Hadley, 1998). It can be difficult for bookstores to differentiate themselves because books have become somewhat of a commodity. However, Powell’s has gone beyond a simple store where people shop for books and become a tourist destination. The store has a unique product offering and store layout. People want to purchase products with the Powell’s logo, such as t-shirts and coffee mugs, as souvenirs. People come to see the size and unique layout of the store and to marvel at the sheer number of books being sold there. Powell’s has been able to brand itself as more than just a bookstore. It provides a unique book buying experience unlike like that of any other book retailer. Books are stacked high on the shelves and people are wandering up and down the aisles browsing. The store is like a maze. We asked the employee working on the top floor how many floors there were in Powell’s City of Books and he responded by saying “it’s hard to say.” We got turned around trying to get from one room to the next. It was fun. The shirt that says, “I got lost in the City of Books” captures the feeling of the experience pretty well. Focal Customer to Product/Service Powell’s offers its customers an incredible number of choices with over 1. million books in stock (Hauser, 2001). Customers can choose to purchase new, used, hardcover or paperback books. Powell’s is able to offer more selections than any of the chain stores. “It’s our weapon against Borders,” says Kanth Gopalpur, marketing manager for Powell’s “They’re an excellent store. They create a nice ambiance and have good café, and so do we. But they don’t sell 21 editions of The Catcher in the Rye.
across the ceiling and cracks in the cement floor. The fun of the rooms lies in the unique store layout and what is contained in the books in those different areas. Powell’s provides superior convenience and choice for its customers. It has a website and a physical store. This allows its customers to check and see if it has a book online, read about the book, and then order the book online or go pick it up in the physical store. Powell’s customers can choose from paperback, hardcover, new or used. All the books are together on the same shelf. Powell’s claims to have more books in its inventory than any other bookstore in the world, allowing people to choose from a wide variety of books in any given subject area. Focal Customer to Other Customers Powell’s Books has hosted three weddings and two funerals (Powell’s Books, 2005). This shows that people view Powell’s as an extension of self and they want to share that with others during special times. Powell’s has books that are ideal for gifts, work, school, collectors, and hobbyists. Many of the situations just mentioned will involve customers interacting with other customers. There are several places where customers interact online and offline. Offline, customers talk when they are a part of a group that meets together at Powell’s books or at other locations. There are writing, reading and gaming groups hosted at Powell’s. The coffee shop provides a place for customers to interact with each other and share stories. Online, Powell’s has a Blog. The Blog is a place where authors, readers, critics, media and booksellers can go to post comments about books and respond to each other’s comments. The page is located at http://www.powells.com/blog/.
Focal Customer to Marketers/Company Powell’s has an online e-newsletter that anyone can sign up for free and recently added what is called “the bookcast at Powell’s.” One customer says this about the newsletter, “The newsletter has a sense of humor and includes little bits of good writing by both the staff and their bevy of authors…and it isn’t all just sales pitches, but something akin to thoughts for the day” (Unheimlich, 2001). The bookcast is a 12-minute commentary with interviews from leading authors, breaking news from the book world, short readings and a chance to win $1,000 worth of books from Powell’s. Powell’s attracts some of the world’s best authors to its readings and book signings, which occur nearly every night (Powell’s Books, 2005). Julie Mancini, former director of Portland’s renowned Arts and Lecture Series, states, “if there’s a new edition of the Bible, people expect God to be at Powell’s to sign books” (Doyle, 2003). Powell’s also has writing, reading, collecting and gaming groups that meet at the various stores. Powell’s organizes some groups and others just choose to meet there. Here is an example of a couple days of events from the online calendar of events (http://www.powells.com/calendar.html): Jonathan Harr, Wednesday the 16th^ of November @ 7:30pm, Powell’s City of Books Burnside Book Collecting Workshop, Wednesday the 16 th^ of November @ 7:00pm, Powell’s Books in Beaverton
Powell’s Books has a strong brand image as one of the biggest independent bookstores in the world. This provides Powell’s a competitive advantage in the industry. Within the City of Books there are eight distinct rooms, all with thousands of books on differing topics. Given this huge selection, the customer will have an exceptional experience that cannot be found anywhere else in the world. Powell’s has tons of new and used books that are displayed in a way that makes the customer’s experience more like being at a library than a bookstore. It also offers customers this "third place" – a place other than home or work where they can relax, browse through books and develop a community of friends with a similar interest in books. Powell’s enforces its brand image by having a friendly and knowledgeable staff, selling its branded products, and offering free Powell’s bookmarks, postcards and brochures. Powell’s is devoted to its social responsibility to the community by donating books, time and money. It grants Powell’s a positive social reputation that its chain competitors have a hard time achieving. Enormous Inventory Powell’s keeps a full supply of new titles in stock, including all the latest bestsellers, but its real competitive advantage stems from its enormous inventory of used and out-of-print books. Seventy percent of the books in the City of Books location are used books according to employee Alyssa VanPelt (Alyssa VanPelt, personal communication, November 19, 2005). Powell’s has five warehouses each of which holds thousands of books. Customers can find signed first editions, out-of-print books, and rare books in the Rare Book Room of the City of Books. Powell’s actively pursues purchasing good quality used, rare, and scholarly books. A large part of Powell’s
business is book buying which allows it to maintain its competitive advantage. Offer Specialty Books In addition to the City of Books location, Powell’s owns two specialty bookstores—Powell’s Technical and Powell’s Books for Home & Garden. Powell’s has one of the largest collections of computer books and it sells all kinds of technical reference books. Powell’s also offers a large numbers of foreign language books which you can find in the physical store or online. Another type of specialty book Powell’s offers is e-books. These books you purchase online and download to your computer in a digital format. Consumers can download e-books in the following formats: Microsoft Reader, Adobe Acrobat and Palm Reader. Weaknesses Unorthodox Store Design After visiting Powell’s City of Books location, you see that there may be some things that could be improved about the layout and design of the store. The store feels and looks like a warehouse. It is very easy to get lost. There is only one restroom, and it is hard to find. Powell’s stores and displays ¾ of a million books and the store is busting at the seams. It feels crowded. The aisles are filled with tall bookshelves, which require ladders to reach the top shelf. Powell’s does not have a fancy interior design. The floors are cement and the lightening in the store is barely bright enough to read. Parking is another problem for Powell’s. It is located in downtown Portland. Often the customers
Physical stores are not like the Internet where you can locate the book you want quickly with a few clicks of the mouse. However, physical stores do allow customers to browse the aisles and flip through the books. In order to differentiate Powell’s from other online booksellers, Powell’s could build more physical stores in other places. The combination of having physical stores and an online store puts Powell’s at an advantage over those who are only doing one or the other. Third Party Relationships Powell’s has established a partnership program that allows third parties to partner with Powell’s to sell books. The company doesn’t own the inventory being sold, but it receives a sales commission from Powell’s for the books it sells. The expansion of third-party relationships outside the U.S. may help boost international gross margins and stabilize overall margins. International Expansion Online The competence of companies with a presence on the Internet is growing fast. Powell’s on-line sales have been increasing rapidly, and reached 40% of the total company’s sales in 2003 (Powells.com. 2005). We estimate that online sales account for over half of Powell’s sales today. Powell’s is almost ready to launch its first foreign language website in German and Spanish (Hauser, 2001). Expanding to international markets may fuel consumer demand and increase the desire for Powell’s retailing services. Threats Changes in Readers’ Behavior
The American Booksellers Association, which represents independent bookstores, says its member’s market share has been decreasing (see figure below). Readers' behavior has changed. People don’t just collect books anymore. People buy what they think is practical; students buy what is needed to prepare for exams. One recent study cites the case of philosophy students who sell back their "library" once their exams are over (Prolongeau, 2000). We have noticed that this is popular among OSU students in all fields of study. Alternatives to Buying More economical yet for readers is the option of not buying books at all, but photocopying the required passages. This practice, though illegal, has become commonplace. Also, borrowing seems to be another alternative to buying. Sales to libraries represent only 1.4% of publishers' income (Prolongeau, 2000), so publishers are relying on retailers being able to sell books to customers. Aggressive Pricing and Marketing from Competition It's not an easy job to maintain a business, especially with competition from so many places, such as other bookstores, superstores and online retailers. Pretty soon, Powell’s may be forced to look at acquisition and category expansion, as competitors like Amazon.com and Barnes & Noble begin to focus on aggressive pricing and marketing. Powell’s is required to continually develop its offerings in order to maintain its
Powell’s Books on Hawthorne- a smaller version of the City of Books location. Powell’s Books for Cooks and Gardeners- Specializing in a wide range of botanical, culinary, and gastronomical used, new, rare, collectible, and hard-to- find titles, Powell's Books for Cooks & Gardeners is the largest store of its kind in the country. Powell’s Books at PDX- Powell's currently has three locations at Portland International Airport, the main store in the Oregon Market with satellite stores in the C and D concourses. Within all three branches, Powell's PDX offers an eclectic mix of the latest bestsellers, popular fiction and non-fiction, choice used books, games, toys and a wide range of gifts. Value Chain- Primary Activities Procurement & Inbound logistics Powell’s buys new books the traditional way, through publishing houses and distributors. It has one front list coordinator who purchases books based on bestseller lists and other types of trade publications. The books purchased through publishing houses and distributors are shipped straight to warehouses and then redistributed to different store locations. Used books from individual sellers go through a very different process. Powell’s buys books from the public at any of their retail store locations. The employees process the newly acquired books immediately. They label the books with a barcode sticker as shown. The book is then forwarded to the appropriate room within the store for shelving. At the main store location, the City of Books,
Powell’s maintains a used book buyers table in the Orange room. Customers can bring in their books and the employees behind the counter evaluate the quality and necessity for each book. Customers, or in this case, the ‘vendors’ are often offered up to 25% of the expected Powell’s retail price. If a customer/vendor wants to sell back textbooks, they must have a current student ID. Powell’s buys used books in a variety of ways. For example, in September 2005, Powell’s set up a temporary book buying kiosk in the University Bookstore located in the U-District of Seattle. Powell's offered the public cash for their books or a higher amount in merchandise credit good at the University Book Store (Beason, 2004). Warehousing & Distribution Powell’s owns five warehouses. Powell’s also maintains a relationship with Ingram Book Group, a large book wholesaler and distributor, who supplies books to Powell’s. The internal names of these warehouses and a brief description follow: The Catacombs – Known in-house as “Hoyt,” The Catacombs is home to thousands and thousands of books. Montgomery - Known in-house as "Industrial" or "Our Giant New Warehouse," the Montgomery Warehouse is home to thousands of books. Quimby - Known in-house as "Ramona" or "The Mayor's Place," the Quimby Warehouse is home to thousands of books. The Pantry - The Pantry is Powell's smallest warehouse, a "virtual closet" of sorts, containing thousands of general interest, used editions.
Since Powell’s is so well known as a tourist attraction for visitors of Portland, merchandise like shirts and mugs entice word-of-mouth advertising throughout the country and the world. Customer service Throughout Powell’s, each of the book rooms has an information desk. An employee staffs the desk and is available to answer questions about the location of books or offer suggestions. While at the ‘Rose Room’ information desk, we observed a father asking an employee if they could suggest a book for a five year-old girl that involved fairies or unicorns. Employees that are there to provide information are distinguished by a sticker with a picture of a question mark on it that they wear on their shirtsleeve. They don’t have formal uniforms. For the computer savvy, there are also computers throughout the store that customers can use to search for books. At the retail locations, checkout is handled in the customary way, with rows of cash registers. Online purchases are handled through the warehouses. If a book is purchased online and it is located at one of the retail stores, the book is transferred to the warehouse for shipment to the customer. Value Chain - Support Activities Infrastructure Infrastructure refers to planning, financing, information systems (IS) and legal activities within an organization. Powell’s infrastructure activities are similar to any other type of business. It has employee’s whose responsibilities are planning and financing.
It has IS people dedicated to the online store. It also has IS employee’s dedicated to internal IS support. Technology Powell’s doesn’t really have a research and development department. As is standard with most retail establishments, a lot of the ‘development’ comes in the form of store layout and decoration. However, the website is under constant improvement to keep up with the latest innovations. For instance, adding the capabilities for the Blog, bookcast and gift wish list are recent enhancements made to the website. Human Resources management According to our observations and conversations, the legacy of the general employment strike of a few years ago is still fresh on the minds of employees. We spoke with two employees who, through whispered voices, spoke about the types of employees that are currently being hired. They talked about the types of questions that managers ask in applicant interviews regarding the prospect’s view on unionization and collective bargaining. This message was in contrast to how the manager we spoke with described employment requirements. Employment applications are available on the website. Many employees have retail experience. Some employees have experience working in other bookstores, such as Barnes and Noble or Borders. The manager we spoke with said one underlying requirement of all employees was a love of books. Vertical and Horizontal Integration By buying used books from its customers, Powell’s has jumped upstream in its vertical supply chain. It has eliminated, to an extent, any middlemen or agents that deal in used books. As a retail establishment, however, they cannot really get any further
