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Breaking even: how the bookstore profits off you

Photo by Jade Johnson | The Signal

In 2000, the Georgia State bookstore had a 1.3 million loss in profit. Now, the Georgia State bookstore breaks even in part due to student buyer loyalty – though that’s now on the decline too.

Wade Douglas, store manager of Georgia State’s bookstore has worked for the company for the past 18 years and has seen this change firsthand.

Douglas faced the deficit 18 years ago and managed to shift from red numbers back to black, yet the bookstore hasn’t “made a profit in probably three or four years” because of the commissions [they’re] paying to the school,” in addition to theft during the first week rush.

Follett pays a commission to Georgia State for the retail store space, which makes a margin necessary for the bookstore to thrive.

“The markup that we have for textbooks is the same that any university has in the entire United States,” Douglas said. “What happens is sometimes publishers will sell directly to students. They don’t have a commission to pay the university, so they don’t have margins and bills and stuff like that to cover those costs, so sometimes they’ll sell directly to students at cost, which is what our cost is.”

Because of this, Follett opts to sell books for higher prices at students’ expense, influencing the bookstore’s overall sell-through rate. Sell-through rate represents the amount of inventory a retailer receives to what the customer actually buys.

“When I first started, our sell-through was about 50 percent of enrollment because of competing bookstores. Now our sell-through is about 10 percent,” Douglas said. “So, if you go into the classroom and see 100 students, I’m probably selling to 10 of those students. Ninety are going somewhere else.”

Any student walking into the Georgia State bookstore can relate to the frustration that ensues after learning of the cost required for their needed materials.

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But Georgia State students can direct their hate mail and penniless bank statements to publishers.

“Price is primarily driven by the publisher,” Follett Corporate Communications said. “We work hard to keep course material prices competitive with a growing collection of programs such as rental, used books and digital. Students have full access to these format options in store and online via the campus store website.”

Yet, keeping course material prices “competitive” strains traditional brick and mortar stores like the Georgia State bookstore.

According to the U.S. Department of Commerce, online retail has grown 300 percent between 2000 and 2018 – spanning the same amount of time it took the bookstore’s deficit to turn into an even break. Within that same time, 50 percent of department store sales plummeted.

Georgia State’s bookstore mirrors the national statistic: BrightWave, Georgia State bookstore’s answer to joining the 21st century, is an app that allows students to “buy a book at the convenience of their laptop in their dorm room.”

This may shock students who subject themselves to dial-up service and still sport pagers, but to the average student, this is e-commerce.

“We had 1.1 million in digital sales. Our online sales were 3 million dollars this year. We processed 21,000 orders and it was up 41 percent over last year,” Douglas said.

Most of Georgia State’s bookstore sales profit off course materials, overall.
“Approximately 70 percent is made up of course materials sales (all format types). Approximately 30 percent accounts for general merchandise products [such as t-shirts and backpacks] which continues to be a growing business with category expansion,” Follett Corporate Communications said.

While Georgia State students may not care about doing the bookstore any favors by buying digital and/or cheaper, they are.

“I’ve lost money everytime I sell a new textbook,” Douglas said. “I lose money. Because I pay commissions to the school, I have to pay payroll and by the time I pay those two things on my income statement, the only way I make money is selling used books, renting books and selling clothing and gift items, which have higher margin.”

Margin, in business and commerce, refers to the difference between a seller’s cost and the cost for acquiring the product. The cheaper the bookstore can acquire a products and sell to students at a higher price, the more profitable.

“The publisher is selling to you directly at their costs — the cost that I sell it at. I couldn’t be in business — we’re not a non-profit entity. Just like any business, we have to have margin to pay our bills,” Douglas said.

However, that 10 percent sell-through rate from students choosing other sellers burns up a near million-dollar hole in the bookstore’s profits due to unsold inventory.

“We usually end up with about $900 to [one] million dollars in inventory that’s unsold,” Douglas said. “If you go into our inventory right now, we have close to a million dollars that has not been sold yet and we have to dispose of it. We can’t return unsold product; we have to be very close in our decision making.”

Follett Corporate Communications said they “have not been faced with an economic struggle” over the past 3 years.

The bookstore’s budget was $689,153 in 2017 before dropping to $654,330 in 2019.

The endless list of options for buying books may not drive the Georgia State bookstores profits completely in the ground, but it does dampen it.

“You got Chegg, Amazon, who almost owns the world now,” Douglas said. “A lot of times, what you don’t realize, is people are selling on Amazon. We can’t compete with individuals who are selling stuff online just like Target or Best Buy can’t compete with someone selling a TV online. You have lots of different choices.”

Despite online behemoths such as Amazon, the Georgia State bookstore remains optimistic about theirs – and possibly students’ – futures.

With “90 percent” of Georgia State students staffing the bookstore, they seek to give students an allowance while the bookstore rakes in cash.

“We have over $700,000 of used books available every semester,” Douglas said. “The students this year have saved over $120,000 in buyback and used books versus new books, rented close to half a million dollars worth of books, that again save the students close to 80 percent off the regular retail price. This year alone, when you add all that up, we’ve saved students $1.8 million dollars in their course materials at the bookstore.”