According to estimation, there are approximately 500 active bookstores in Israel. There are two leading chains in the industry: Steimatzky owns approximately 170 stores and Tzomet Sfarim, the competitor, owns approximately 34 stores.
- Dominancy of bookstore chains- About half of all bookstores belong to the large chains.
- High competitiveness.
- High penetration of internet purchases.
Customers: Defining the Target Market and its Size, Market segmenting
The target market is defined as the general population, according to socio- economic status (affecting purchases) and customer preference for book types.
It is customary to group customers into two segments: private customers and corporate customers (schools, local authorities) who conduct large, concentrated purchases.
Competition in the industry stems from a number of sources: chain stores, stores in the geographical vicinity, book departments located in large retail chains, the internet, and book publications utilizing direct sales.
- Publishers are, in fact the vendors of the industry, supplying original literature and translated literature. In addition, importers supply literature in various foreign languages. Vendors market their merchandise to stores via one of three ways- directly, by a sole distributor or by secondary distributors.
- Additionally, separate vendors are used for supplementary products: magazines, CD’s and tapes, computer software.
Bookstore marketing involves a number of parties:
- Publishers- most resources are spent at national level
- Chains- national marketing
- Private stores do not normally use national marketing. They occasionally advertise in local print, conduct promotions, establish and convene reading clubs, and incorporate additional services such as coffee shops.
Factors Affecting Success:
Location, appearance and design of the store, shopper convenience, book selection, professionalism and knowledge of sales representatives, competition in the geographical vicinity, reputation, and price level.
Limitations on Entering the Industry:
Establishment costs are relatively high, both due to initial store investment and initial inventory investment however, entering the industry as a franchiser enables the store to enjoy the chain’s professional and marketing support, and somewhat decreases the risk.
At stores with an area greater than 50 square meters, there is a need for at least two employees, in order to keep the merchandise safe, and in order to organize the store. In order to improve sales, it is preferable to hire employees who are familiar with literature, although it is possible to employ workers who do not have this knowledge if one of the employees present (including the business owner) is extremely knowledgeable on the subject.
Principal investments include store construction and inventory acquirement.
Industry revenue and profitability
Typical raw profit percentages:
- Reading and reference bookstores-32-42%
- Bookstores selling only textbooks- 16-22%
- Combined stores- 26-34%
Profit percentages are affected by acquisition source. The more initial the source (publisher, sole distributor, main distributor), the higher the store’s profit percentage
Typical Terms of Payment
Vendor payment terms are usually EOM+30 to EOM+60.
A 10-20% discount is available if purchasing a large number of copies from a certain title, promotions, or cash purchases,
- Customer sales are conducted in cash, check, or credit cards.
- Corporate customers usually pay EOM+30 to 60. These customers, purchase in large quantities and should receive up to a 10% discount on textbooks or a 25% discount on reading books.
- Risk level is high when opening an independent store, especially due to high competitiveness stemming from the large chains, who hold a relative advantage stemming from their size.
- Risk of Opening a franchise store is lower on the professional, logistic, and marketing support levels, and allows the store to enjoy size advantages in purchase.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.