The Indiana University eText Experience: The Economics
The Indiana University eText Experience: The Economics
6 The Role of Physical Bookstores for eTexts
Brad Wheeler, IU Vice President for Information Technology and Chief Information Officer; Professor of Information Systems, IU Kelley School of Business
For many colleges and universities, no topic is more mobilizing or constraining for an eText initiative than the goals, opportunities, and constraints of the campus bookstore. Two questions can provide essential clarity:
- What role should a physical bookstore play in the transaction between digital content creators (publishers) and content consumers (students)?
- What is the cost and value to students of this role for the bookstore?
Institutions with clear answers to these questions will have greater clarity in shaping their eText initiatives. Without goal clarity, a proposed eText initiative and the bookstore risk becoming an internal proxy for conflicting institutional goals—the internal “family feud” from the previous section.
The Economics of Goals and Sourcing
There are certain retail operations and inventory for which a campus bookstore in a great location with high traffic is ideal. Those may include sales of university sweatshirts, memorabilia, sundry goods, a café, and other unique or convenience items. They may also include large inventories of new and used books per the requests of the faculty, and bookstores may play critical roles in gathering course materials requirements for each section. Bookstores require capital investment, skillful management, space, and staff to operate, and all of these costs must be recovered in mark-up on the costs of the items they sell if the goal is to lose no money or to possibly make money.
Over the last 15-20 years, many, but not all, institutions have chosen to get out of the business of owning and operating their bookstores. Several large chains generally won most of the outsourced deals, and they brought relationships with publishers, warehousing and distribution for physical goods, expertise, branding, and cash upfront to take over campus bookstores under sale or other contractual arrangements. Institutions ridded themselves of trying to run a business that was not their strength, received a large cash payment up front, and an ongoing revenue stream from some fixed or profit-sharing arrangement on sales in exchange for some terms of exclusivity.
Institutions leased space and a campus brand by entering into a mutually valuable contract with an experienced operator, and those contractual terms for the deal were often established via a rigorous bidding process. This proved to be a winning formula for most everyone, and retail pricing of books was constrained by a growing online market and alternative places to acquire books just as Amazon and others do for most goods.
The figure below provides a matrix to illustrate the monetary institutional goals with the sourcing approach of insourcing or outsourcing the physical campus bookstore.
For many institut