Academic journal article Journal of the International Academy for Case Studies

Ecampus.com: Sitting in the Catbird Seat

Academic journal article Journal of the International Academy for Case Studies

Ecampus.com: Sitting in the Catbird Seat

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns the current trends in the college rental textbook market. After studying this case, students should be able to (1) understand the competitive dynamics and emerging trends of the college textbook rental market, evaluate the competitive position of Ecampus and (3) assess the options facing Ecampus and recommend a course of action.

This case is suitable for graduate and undergraduate strategy classes and has a difficulty level of four. It is suitable for classes in management information systems and management strategy. Students should spend from six to twelve hours outside of class analyzing the case, depending on the breadth and depth of the analysis the instructor desires.

CASE SYNOPSIS

This case presents an overview of the college textbook rental market in which Ecampus competes. It presents a brief history of Ecampus and descriptions of its competitors. The case portrays the company as being in an enviable position in its industry and the company president thinking about the future of the company.

Ecampus.com was created during the "dot com bubble" by investors who hoped to grow it into an IPO. The plan was to "get big, fast" strategy and measure success by brand strength instead of earnings. In its first six months, Ecampus spent $40M for commercials on three cable television networks. These ads created 87% brand name awareness, but only $2M in sales.

Two events forced Ecampus into bankruptcy in 2000. First, the "dot com" bubble burst in March 2000 and venture capital and IPO markets dried up. Second, suppliers and potential investors were scared off by the personal bankruptcy of the CEO.

A Book Company, LLC purchased Ecampus for $2.5M at a federal district court auction in 2001. The new owners employed a traditional business-driven strategy focused on internal efficiency, strict cost controls, highly targeted marketing, and internal financing for expansion. By 2007, Ecampus broke even and profits have steadily increased since.

Ecampus began renting textbooks in 2007. Since then, several new companies, financed by Silicon Valley venture capital companies and employing aggressive business models, have entered the rental market and grown rapidly. These rental companies are dependent on Ecampus' large supply of used books for their rental business. The president is now thinking about the future. How should Ecampus prepare itself for expansion into the e-textbook market? Could it use acquisitions and alliances? Should Ecampus continue using only internal financing for expansion?

INTRODUCTION

"Textbook rental business is booming. We started doing textbook rentals four years ago. Today, it makes up 30% of our revenue. We rank second in the textbook rentals and second in used textbook buy-back volume. Our rental books come from our stock of used books. We make no distinction between a rental book and a used book in the warehouse," states Matt Montgomery, President of Ecampus.com. "If we rent a book twice, we cover our costs. After that, we make a profit. Some textbooks, such as chemistry books, can be rented for ten to twelve times because editions come out only come out about every five years. However, the books that have a new edition every two years, we can only rent them about four times," he explains.

"Our competitors are very price-aggressive," Matt states. "Amazon, Barnes & Noble, Chegg, CampusBookRentals, and BookRenter are well-capitalized companies that spend much more on advertising than we do. We spend about $2 million annually on advertising while each of our competitors spends more than $20 million. We survive because our core competencies are our customer service, the industry's most efficient order fulfillment center, the largest buy-back operations, the best program of shredding and recycling worn out textbooks, and our highly efficient marketing program. …

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