Players are entering into the market
Crossword is one of the pioneers in the field of retail book stores. Currently, the industry is going through a phase of rapid transformation – existing players are consolidating and new players are entering into the market. The already tight margins in this business appear set to be squeezed further. The major players currently in the market are: Landmark and Odyssey, both of which are present primarily in South India and Crossword. Pantaloon Retail Ltd has announced that it plans to enter into the book retailing business. The smaller stores are going to feel the pressure of the competition both in terms of size and brand value.
Crosswords Ahmedabad started in 1995 and ever since it has been a hunting ground for the book lovers of the city. Offering a wide variety of books, it has positioned itself as a lifestyle bookstore with an offering for customers of all ages. It is different from the other bookstores in the sense that it offers its customers the chance to find out for themselves where their tastes in reading lie, thus making it a pleasurable experience. The Crossword(CW) stores are franchise stores of the Shopper’s Stop Limited. There are 28 stores spread all over India, out of which 3 are in Ahmedabad.
The franchise system: When a CW store is set up, the franchisee invests in infrastructure which has to follow the norms set by the company. The franchise pays a fixed commission on each book sold and an annual royalty to the company. The company ensures that the franchise CWi procures books from publishers and wholesalers in Delhi and Ahmedabad. There are approximately 85 suppliers of books mostly in Delhi. The non book suppliers are local suppliers and there are approximately 85 of these. The orders are sent to the store using road transport.
The local suppliers have a 30-day credit cycle and the outstation suppliers have a 90-day credit cycle. The suppliers are paid post-dated cheques and these are collected at the end of each month. The order takes 5 days to arrive if the supplier is based in Delhi and takes 2-3 days to arrive from a supplier based in Mumbai. Supplier relationship: In a decade of operations, the store has maintained good relations with its suppliers and has not faced any major problems with the stock or payment. The principle concerns of the suppliers are – dead stocks i. e. unsold books, prompt payment of dues and steady trade relationship.
In the book retail industry, there is standard practice of 10% dead stocks – the retail store is allowed to return 10% of the stock that it bought. By using effective inventory management practices, CW has managed to keep the problem of dead stocks to a very low scale. Moreover, by paying promptly, it has cultivated a trusting relationship with its suppliers. The store in return, expects the suppliers to send the orders on time and provide discounts on bulk orders. Inventory management: In order to minimize losses due to dead stock, the CW store operates on a philosophy of minimum inventory.
There is no specific store room and all the stock of the book is displayed on the shelves. The movement of the stock and the information flow is depicted in Exhibit 1. The movement of stocks is closely tracked and the inventory levels are continuously monitored by a proprietary software. Whenever the stock of any title drops below a stipulated reorder level, orders are placed for restocking. The order quantity and the reorder level depends on the demand pattern, the title etc. The data on this is provided by the sales record of the item and the decision about the quantity to be ordered is made by the sales staff.
Constant monitoring of every title assures that there is no need for rush orders. It also prevents the occurrence of dead stocks(books that failed to sell). There is a constant trade-off between ensuring that the books are available on the shelf and minimizing the dead stock losses. The problem is even more acute in the case of books for which demand builds up even before the stock arrives. For these books, there is considerable delay in obtaining the re-order stock, and hence, availability of these books in the initial days of peak demand is very crucial. Trade promotions:
The CW retail chain has a stated policy of not promoting specific publishers. However, CW launches promotion drives for specific titles that are expected to perform well. The drive includes listing the book as a hot selling title on the website, recommending it on the website and placing the placard/book title on prominent positions within the store. The store displays the list of its top selling books and new arrivals in special sections in the store. CW also organizes different festivals from time to time like the children’s book festival and Gujarati books festival. These festivals are meant to push sales of particular categories of books.