III. Industry Analysis
[Company Name] directly or indirectly competes with all book stores nearby our store. Competition will come from department stores, specialty children’s stores, and discount mass retail stores. Direct competition will come from companies offering book selections similar to [Company Name].
Industry Statistics & Trends
The following industry size facts and statistics bode well for [Company Name].
Despite rising disposable incomes and consumer spending, the Book Stores industry will struggle to turn over a new leaf. The industry will continue to experience intense external competition, primarily from online retailers and mass merchandisers. Even as e-book sales are forecast to plateau over the next five years, the industry is expected to continue contracting, albeit more slowly than in the previous five-year period. Over the next five years, industry revenue is projected to decrease an annualized 0.2% to $13.5 billion.
External competition will continue to eat away at industry revenue and threaten profitability. Over the previous period, department stores, mass merchandisers and online retailers sold millions of books to consumers in the United States. Their competitive advantages over traditional book stores pertain to price and convenience. Many of these outlets offer books at prices considerably lower than book stores, a result of buying in bulk and access to large storage facilities. As the percentage of services conducted online continues to grow, online retailers will experience the most growth, as consumers can peruse titles and compare prices with virtual ease. For stores specializing in textbooks and other educational materials, the shift towards e-commerce is expected to be particularly detrimental over the next five years. Because textbooks generate the most revenue for the overall industry, the growing popularity of online rental and third party seller platforms will further erode both segment sales and overall industry revenue.
While e-book and e-reader sales surged in the previous period, growth from these items are anticipated to be more subdued over the next five years. According to The Association of American Publishers, while paperback book sales rose 8.4%, e-book sales declined by 7.5% in the first quarter of 2015. While this decline is largely due to rising e-book prices resulting from contract negotiations between Amazon and top book publishers, the drop shows that print books will not become irrelevant as digital technology improves. Industry operators who offer e-books and e-readers, namely Barnes and Noble, have also experienced decline in their digital sales in recent years, after brief success early in the previous five-year period. Even though e-books are expected to remain popular among existing users, they are not expected to detriment industry operators as they did over the past five years.