Tag Archive: college bookstores

A Very Big Deal: B&N Acquires MBS

Barnes & Noble Education Acquires MBS Textbook Exchange: The Guru’s First Thoughts and a Little Background on the Deal

In less than a month of being the new Guru, I’ve already talked industry consolidation (Follett acquires Baker & Taylor) and touched upon Barnes & Noble Education’s stock woes. In today’s post about the B&N Edu $174.2 million acquisition of MBS Textbook Exchange, I combine the two.

A Bit of Background About the Deal

  1. B&N Edu and MBS have a long-standing sister-company relationship. B&N runs college bookstores and MBS does textbook fulfillment (B&N gets preferred used-book inventory). This relationship comes down to Len Riggio, who, even though now retired from B&N, holds a lot of B&N stock and is Chairman of the MBS Board and holder of 49% of MBS stock.
  2. B&N Edu is a leading campus bookstores retailer with a large physical and online presence. MBS is a leading textbook wholesaler, college-bookstore systems provider, and provider of 700+ direct school-associated online fulfillment for both colleges and K-12 institutions.

What we have in this acquisition is really just two connected, complementary companies becoming one. But what’s it all about?

In a nutshell, it’s about classic textbook vertical integration where the same company controls both the retail and wholesale market in order to drive efficiencies and reduce costs and redundancies, while also shortening the supply-to-sales chain, and empowering bookstores with tighter inventory control and pricing.

B&N has historically relied upon acquisition-and-consolidation has historically as its driving growth strategy. Since purchasing the company in 1971, B&N as guided by Riggio, has acquired bookstore chains, including:

  • Bookmasters
  • Supermart Books, which operated The Missouri Book Company (All retail stores sold to Barnes & Noble College Stores. Name changed to MBS Textbook Exchange, Inc. and company focused on textbook supply, store systems, and direct fulfillment.)
  • B. Dalton Bookseller
  • Doubleday Book Shops

B&N’s super-size retail presence was massive, and in addition to putting numerous independent bookstore out of business, it also took a toll on larger competitors:

  • Superstores: Borders — filed for Chapter 11 in 2011.
  • Mall stores: Waldenbooks — (owned by Borders) also defunct in 2011.
  • College bookstores: Follett and Nebraska — the former acquiring the latter in 2015 and then wholesaler Baker & Taylor in 2016.

The Missing Link Is Put Fully Into Place

B&N has had (and continues to have) a strong grip on retail bookselling. What they did not have prior to the acquisition of MBS was a wholesale book distribution operation. This absence, however, was not for lack of trying. In 1999, Barnes & Noble (the nation’s largest bookseller) announced its plans to buy Ingram Book Group (the nation’s largest book wholesaler). Within six months, B&N called off the $600-million deal as a result of the FTC stating intent to oppose the deal on grounds that it was “anti-competitive.”

And now B&N has finally filled that void. That B&N Edu acquired MBS Textbook Exchange less than one year after Follett acquired Baker & Taylor could not be less surprising or more timely. It is both a reaction to Follett taking ownership and control over the second-largest book supplier and an action that has been expected for decades and likely would have transpired regardless of Follett’s acquisition. Now that it’s happened, expect B&N stock to get a much-needed bump and for the B&N Edu vs. Follett fight for college bookstores to intensify.

Barnes & Noble Education and Pearson PLC Stocks Getting Crushed

The Bad News from the Textbook Market Keeps Coming

Both Barnes & Noble Education and Pearson PLC saw double-digit drops in their stock prices recently after sales failed to meet Wall Street expectations. B&N Education (NYSE: BNED) CEO Max Roberts said that the decline was related to lower enrollment at colleges and a “softer retail environment.”
Taking a hit far worse than B&N Education, Pearson PLC (NYSE: PSO) lost 29% of its value in one day in mid-January after dramatically lowering revenue-and-profit expectations for 2017. How bad has it gotten for Pearson? Well, the folks at The Motley Fool writePearson stock is now down 66% over the past three years, and the market is showing no confidence that the company will turn itself around anytime soon” and Bloomberg’s “Pearson Forecasts Years of Textbook Gloom; to Sell Penguin” is in no way reassuring.

The Elephant in the Room

B&N Education and Pearson are really proxies for the whole textbook industry. The underlying causes of the industry malaise are rooted in two powerful trends: demographics and technology. After reaching a peak of 17.3 million students in 2010, college enrollment decreased 4% between 2010 and 2014 to 16.6 million in 2014 (according to the National Center of Education Statistics). This falling college enrollment is unprecedented, and obviously fewer students equals fewer textbook sales. Technical trends, including new business models (rentals), online sales, and digital books, further undermine the old model of new textbook sales to students through brick-and mortar-campus bookstores.

While the publishers try new tactics such as access codes and custom publishing in order to revive sales of new textbooks and shrink the used-textbook marketplace, the fact of the matter is these types of tactics only serve to alienate their customer base. Students are not stupid; they realize that algebra doesn’t change that much from year to year, so why should the textbook? The publishers would be well advised to create value-added services or pass on savings for students instead of thinking up new ways to milk students for their last dollar by inflating book prices.

The textbook industry is in the midst of some serious disruption. It will be interesting to see how it all plays out.

Who’s Screwing Whom? – The Great Textbook / Bookstore Debate

As we’re in the midst of back-to-school rush, I’m reading some interesting industry-related articles and posts. While many are the standard “how to save on college, dorm decor, food, textbooks, etc.,” types of writings, a few more-detailed (and more honest and daring) posts have caught my attention. I wanted to take a moment to share them with you. (more…)

More Rental Options for the College Bookstore, New Survey Results

Report

The battle over textbook rentals is moving off line and into the campus bookstore, and the turf up for grabs includes both institutional and private stores. During our

CAMEX recap, we shared stories about Follett’s new partner program with independent bookstores, as well as a new partnership between Chegg and ICBA and one between BookRenter.com and NACS. And the trend continues with other companies following suit.

  

South Eastern Book Co. Joins Forces with CollegeBookRenter.com
SEB, through their $10-million investment in CollegeBookRenter becomes an in-store rental player catering to the needs of today’s college students by offering an online textbook rental program. SEB Rental customizes each bookstore’s rental site using the appropriate school colors and bookstore logo. Unlike its competitors that require a 7-10 day turnaround, SEB guarantees that a bookstore’s rental site will be live within three business days of the initial request. SEB provides the necessary customer support and IT assistance and even facilitates customer returns. SEB will assume any losses associated with students’ failure to return textbooks, and bookstores will collect a 10% commission on all textbooks rented through their SEB rental site. SEB Rental offers a store-reporting function and the company provides promotional materials to drive traffic to bookstores’ rental sites and help ensure their success.

CAMEX RECAP – Rental, Digital, and Bankruptcy!

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Last week was the annual Campus Market Expo. The 2011 event was held in Houston, Texas, and while this show is for anything and everything college bookstores, the textbook industry favors the expo as a launching pad for new programs, training, and announcements, as well as a chance to set the stage for the August back-to-school season. So what’s the scoop on CAMEX 2011?  What was the buzz? What were the trends? And what were the expectations? Keep reading to find out.
Rental
Like general e-commerce, textbook rental was again center stage. In addition to the traditional CAMEX vendors, several online rental companies, including BookRenter.com, CampusBookRentals.com (through Bookstore Solutions), and Chegg, were present at the show. 

Surrounding the event were several important press releases regarding rental and the rental players:

  • BookRenter.com announced its partnership with NACS in order to position the move as uniting online rentals and bricks-and-mortar college stores as the ultimate source for affordable textbooks.
  • BookRenter also had a nice timely release on the company’s stability and immediate intentions as they announced raising a Series-C round of funding in the amount of  $40 million.
  • Chegg announced its partnership with the Independent College Bookstore Association in a new commitment to deliver affordable textbook rentals to campuses nationwide.
  • Follett announced a new online-rental solution for independent bookstores.

(more…)