Current Market for Retail Book Industry in Australia - Case Study Example

A REPORT ON CURRENT MARKET FOR RETAIL BOOK INDUSTRY IN AUSTRALIA. Institution’s Name Author’s Name A Report on Current Market for Retail Book Industry in Australia Executive summary This is a report on the current market for Retail Book Industry in Australia. The environmental analysis regarding the macro environment and the information on market segmenting and target markets regarding the industry are provided. The results depict that the target market is the aging population otherwise known as baby boomers and the population of these aged individuals is expected to rise over the coming years. In addiion, the findings from the macro environmental analysis show that the book retail industry in Australia is declining. Conclusions about the decline in the retail book industry in Australia is provided discussing all the factors that might have contributed to this decline. Also, the report also concludes that the target market chosen will provide an opportunity for increased profits margins. Finally, the report provides some recommendations on retail book industry in Australia including some of the ways organizations in the industry can use the decline to their advantage. Contents Introduction 4 The Macroenvironment 4 Political or Legal 4 Parallel importation 4 Imposing GST (Goods and Service Tax) on international book purchases 5 Social 5 Economical 6 Revenue Volatility 6 Strong currency 6 Industry/Market 7 Technology 7 Low technological change 7 E-commerce 8 Market segmentation 8 Target market 9 Conclusions 10 Recommendations 10 References 11 Appendix A 13 Appendix B 14 Introduction This is a report on the findings of the current market for Retail Book Industry in Australia. The report provides an insight into the macro environment of the retail book industry in Australia regarding the social, technological, political, and economic environments. Further, an analysis of the market segments available to the industry is carried out by selecting the best target segment that a new organization planning to enter the industry can invest in. The Macroenvironment The macro environment that the print book retail industry in Australia operates in has been one of the primary factors that have led to the steady decline of the Industry (Clayton, 2016). An analysis of the macro environment in which the industry operates regarding the political, social, economic, and Technological (Gale, 1976) will be provided in this section of the report. Political or Legal The main legal issues that the booksellers in Australia have been lobbied upon by the Australian Federal Government are based on the ability of the industry to compete with international retailers. They include: Parallel importation Booksellers in Australia are required to buy books in bulk orders from the rights holder as stated in the Australian Copyright Act. If the rights are, locally held, Australian booksellers are not in any capacity able to buy from international suppliers that sell cheaper editions. This scenario often leads to a rise in the price of locally produced books and ultimately affects how Australian bookstores compete with international online stores. The customers would often prefer to purchase books offshore from international online stores, and this has led to the decline of the book retail industry in Australia (Clayton, 2016). Imposing GST (Goods and Service Tax) on international book purchases The current Australian Federal Government does not subject Australian Goods and Services Tax on books bought from international stores. This has led to international booksellers to sell the books 10% less. However, the Australian Federal Government will start subjecting all imports to GST from July 2017, and international stores will collect the taxes on behalf of the government (Clayton, 2016). Social Book reading in Australia is normally regarded as an individual activity, but it can be done as social activity especially between individuals who share the same interests. To build communities around their industry, bookstores can promote activities such as author talks, reading groups, and genre specific forums. This activity from the bookstores has been on the rising online because of social media. In Australia, services such as GoodReads and LibraryThing have become prominent, and they provide forums where book lovers can share ideas and grow. In the next year's most of the Australian population will be entering retirement because of the aging population. The financial independence of these retirees will provide a market ground for the booksellers. Besides, the retirees also have more time, and this will lead demand for printed books, therefore, offering a great opportunity for booksellers (Clayton, 2016). Economical Over the past five years, the economic environment in Australia for selling printed books has not been conducive for booksellers. Issues of the drop in customer confidence, weak global economy, and instability in the international markets have characterized this period. With reduced spending on printed books, booksellers have turned to the reduction of prices to gain an advantage competitively. This has resulted in the poor economic performances of some booksellers and economic extinction in other cases for example in the case of Borders, and Angus and Roberson. Some of the major issues in the economic environment include: Revenue Volatility The bookselling industry in Australia has been experiencing moderate volatility levels over the past few years as shown by revenue growth rates. Competition from other industries in the retail sector has been a major factor in the stagnating volatility levels. The reason behind the rise in competition is the instability of international markets. The revenue has been lost to international retailers and the online booksellers. Some of the major aspects that have led to a medium volatility levels include internet shopping, improved adoption of information and technology, and consumer sentiments due to the variation of income. Strong currency The Australian dollar has been relatively strong over the five-year period, and this has led to more customers purchasing books online from international stores. In the overseas online stores, there is a greater value for the Australian dollar. The value of the Australian dollar is further improved by the fact that imports are exempted from GST and lower costs of shipping. For example, the free shipping provided by Book Depository. Industry/Market The bookselling industry has suffered over the last five years especially concerning profit generation. Issues such as a rise in industry competition and hard trading environmental conditions have been the driving force leading to weak profit margins by the industry both globally and in Australia. Australian industry The bookselling industry in Australia is monopolistic concerning competition. The trend of industry profitability has been dropping over the last five years, and it is projected to continue dropping as the conditions are expected to worsen thereby leading increased operating costs and low-profit margins (Claudia, 2016). The graph in Appendix A shows the percentage change in revenue from 2009 to present and further projected to 2023. Technology The print bookselling industry has been negatively impacted by technology, and it has driven it into inadequate inherent capacity regarding reinvention. Low technological change The print book retail industry has been subject to low levels of technological change. Some of the technological aspects of this industry include the computerized point of sale (POS) and the integrated PC-EFTPOS systems. The POS simplifies the management process by operators especially inventory management of best sellers and stock items. It allows best sellers to be readily available and reduces the levels of overstocking. The PC-EFTPOS systems are essential in managing orders and generating reports, therefore, ensuring efficient inventory management systems (Claudia, 2016). Over the past five years, there has been little to know improvement in technology. For any organization, technology is essential for growth and development through gaining a competitive advantage over its rivals. The print book retail industry is not an exception, and because of low technological change, the industry in Australia has been declining over the last few years. E-commerce E-commerce entails selling of physical books through online services. Technological change and development have led to more sales regarding substitute products including audio and electronic books. Because a large percentage of the Australian population have access to the internet through connections to their homes that are of high speed, most prefer to buy electronic books or even order internationally cheap books. E-commerce has led to the drop in sales of print books and thus a decline in the industry. Market segmentation This is the process of breaking the market down into small pieces on the basis of common needs (McDonald & Dunbar, 2013). Market segmentation can be based on many factors depending on the suitability of particular organizations. Market segmentation is an important aspect in identifying the target market for a particular organization. Segment Segment description Segmenting variables Demographic This is market segmentation based on gender, age, race, ethnicity, income, education, marital status, religion, social class, occupation, and family size. Gender, age, race, ethnicity, income, education, marital status, religion, social class, occupation, and family size. Behavioral This type of segmentation is dependent on how the customers respond regarding behavior. It is normally applicable together with the other types of segmentations. Volume of usage, brand loyalty, end use, price sensitivity, and benefits of expectation Psychographic It is a multidimensional type of segmentation. It considers factors that drive, and individual to purchase the type of book he or she chooses. These factors are advantageous to the organizations in the industry as it provides information on who buys the books and why they buy them. Motives, personality attributes, and lifestyles. Geographic It is the division of large markets into small markets based on regions or geographic units. Country size, city sizes, region, market density, terrain, and climate. A chart on the market segmentation based on the demographic factor of age can be found in Appendix B. Target market Several steps have to be followed in the identification of the target market. They include market-segmenting, selection of profitable markets, and product positioning to increase the value of an appeal to the target market (McDonald & Dunbar, 2013). The company should consider demographic segmenting as the best way to ensure that revenue generation is high. Some key trends in Australia that will ensure selecting demographic segmentation becoming a success include: The aging Australian population. Baby boomers are key to the book retail industry as they are financially able and have the time to read books. With this fact, then the target market should be the aged who are retiring. Australian ethnic diversity, especially in urban areas, should be key in the book retail industry. The rate at which ethnic diversity is growing in the country is encouraging thus creating a good target market. Conclusions In conclusion, this report provides a clear analysis of the macro environment and the market for the book retail industry in Australia. The analysis regarding economic factors including revenue volatility and the relatively strong Australian dollar. Political factors entail parallel importation and imposition of taxes on imported goods. Technologically the environment is affected by low rates of technological changes and the emergence of e-commerce. The social environment entails promotion of services such as services such as GoodReads and LibraryThing. Besides, an analysis of the market segmentation of the book retail industry is provided, and the demographic segment is selected as the target market regarding age and ethnic backgrounds. Recommendations The retail book industry in Australia is projected to continue dropping over the coming years. Several recommendations are therefore provided to organizations in the industry and those willing to invest in the industry. 1. As the industry declines, it will consolidate after some time, and therefore organizations should capture the market share from other sellers. 2. Organizations are also recommended to focus on their brands and reach as a way of having a market position that is clear. 3. Improvement of customer services and provision of proper pricing structures should also be the aim organizations in the industry as ways of maintaining their competitive edge. References Claudia, Burgio-Ficca. (2016). “Booked out: Intense competition and shifting consumer trends are driving down revenue.” IBISWorld Industry Report OD5496 (Book Stores in Australia). Clayton, Wehner. (2016). “An Industry Analysis of the Australian Print Bookselling Industry.” Bluetrain. Retrieved 31 March 2017 from https://bluetrainenterprises.com.au/blog/2016/11/18/industry-analysis-australian-print- bookselling/ Gale, J. D. (1976). Macro-environmental analysis systems for corporate planning: An information-flow model and technological developments for the political sector. McDonald, M., & Dunbar, I. (2013). Market Segmentation: How to do it, how to profit from it. Chichester: John Wiley & Sons. Appendix A A graph of the percentage change in revenue from 2009 to present and further projected to 2023 (Claudia, 2016). The results from the graph show that over the last five years there has been a decline in revenue in the retail book industry in Australia and the change is projected to be stagnant over the coming years. It is predicted that there will be a contract in revenue of about 6% annually over the five years. Appendix B A chart of market segmentation (Claudia, 2016). Young people aged 15 to 34 prefer educational books rather than trade books and will, therefore, form about 26% of industry revenue. Those aged 35 to 54 and above 55 are the major shareholders in the industry revenue as they account for about 68%. Business and educational organizations are expected to produce about 5% of the industry revenue. This, therefore, concludes that the target market for the organization should be those aged 34 and above. Read More