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A

Business plan

On

Online Textbook Rental System

Subject: Entrepreneurial Strategies

Professor: Mr. Bibhas Basumatary

Submitted by: Saurabh Mhase

Roll No.: 1362

Batch: MBA3

Universal Business School, Karjat

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Business Plan: To set up an Online Textbook Rental Store

Category: E-Commerce

Brand: ―Texty‖

Website: www.texty.in

Executive Summary and Opportunity Analysis

‗Texty‘ is an online book rental store. Texty will serve the used as well as brand new

books and students will have choice to order book of their choice online. Texty will have

books for junior college students as well as Graduation level and Post- graduation level

books. Texty will also have a ‗Competitive Exams‘ section which will be useful for

competitive exams like UPSC, MPSC etc. Texty will serve students using their university

data of recommended books and most preferred books in the university. Texty will also have

‗Group buy‘ options to have massive discounts on books.

The USP‘s of Texty:

1. On returning a book, students will get 60% money back

2. Website available in Hindi and regional languages

3. Group buy discounts

4. Easy return policy

5. Delivery within 24 hours for orders on University Textbooks

6. Cash on delivery

Texty will be a combination of marketplace and general E-commerce business model.

Texty will operate as marketplace for the ‗University books‘ and competitive exam books

will be stocked by Texty. So, a customer ordering the University Textbooks will access local

bookstores online and will get the delivery within 24 hours.

Situational Analysis

Market size and Future Projections:

India is expected to have the third-largest number of internet users in the world by

2015. Statistics for the publishing industry are also promising. India is the world's third-

largest market for English books, and its entire book market—in English, as well as regional

languages—is estimated to generate Rs. 10,000 crore annually. The online book market in

India is expected to grow at 30–35% annually for the next five years till 2018.

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Political and Legal:

Economic:

India is huge market for E-commerce. Indian population of internet users in 170

million and it‘s ranked third highest number of internet population. The penetration is just

13%. So, E-commerce sector can grow with lot of speed.

The private education market in India was 5% and in terms of value was estimated to

be worth US$40 billion in 2008 but had increased to US$68–70 billion by 2012.

As per the latest (2013) report issued by the All India Council of Technical Education

(AICTE), there are more than 3524 diploma and post-diploma offering institutions in the

country with an annual intake capacity of over 1.2 million. The AICTE also reported 3495

degree-granting engineering colleges in India with an annual student intake capacity of over

1.76 million with actual enrollment crossing 1.2 million. Capacity for Management Education

crossed 385000 and post graduate degree slots in Computer Science crossed 100,000.

Pharmacy slots reached over 121,000.Total annual intake capacity for technical diplomas and

degrees exceeded 3.4 million in 2012.According to the University Grants Commission

(UGC) total enrollment in Science, Medicine, Agriculture and Engineering crossed 6.5

million in 2010.

Social:

As per the Annual Status of Education Report (ASER) 2012, 96.5% of all rural

children between the ages of 6-14 were enrolled in school. This is the fourth annual survey to

report enrollment above 96%. 83% of all rural 15-16 year olds were enrolled in school.

However, going forward, India will need to focus more on quality. Gross enrollment at the

tertiary level has crossed 20% (Ernst & Young Report cited in Jan 2013 in Education

News/minglebox.com). So, along with private education market, educational awareness has

increased in the country and more and more students are being enrolled in the schools.

Technology:

With the increase in the internet and mobile phone users, the serviceability of the e-

commerce business has increased comprehensively. Individuals are getting used with the e-

commerce websites and payment methods. They are able to order the goods online and pay

online as trust in the system has increased. For attracting users for the tier-2 or tier-3 cities,

Texty will develop websites in regional languages so, language would not be a barrier for

online purchase.

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Competitive Review

SWOT Analysis of Online Book Rental System

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Competitive Analysis of other operators

There are two main competitors which are operating in the online book rental models

are mentioned below. These two competitors are operating locally and have intention to grow

nationwide.

LazyWyre.com RentMyText.com

Headquarters Mumbai Bangalore

Operating Since 2009 2012

Region of operation Mumbai Bangalore and Mysore

Growth Low Moderate

Strengths Quick service as operates in a

single city

All books are stocked so

delivery system is good

Weakness Poor Website

Poor Marketing

Very low penetration

Complicated GUI on

web

User has to login before

order

Website www.lazywyre.com www.rentmytext.com

Industrial Competitive analysis using Porter’s five forces model

Intensity of rivalry

MODERATE

Threat of Entrants

MODERATE

Bargaining power of buyer -LOW

Threats of substitutes

LOW

Bargaining power of supplier

HIGH

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1. Threats of new entrants: is MODERATE in the online book rental business. It is

easy to start a new online book rental service as it is attractive industry. But coming

with the differentiated business model is difficult. A lot of tie-ups are required to have

a marketplace model so it‘s a time consuming process.

2. Bargaining power of buyer: is LOW in this business model. As books prices are listed

on the website and do not have any bargaining options. Overall price of individual

buying and bulk buying is controlled by the seller so bargaining power of buyer is not

effective at all and does not even come in picture.

3. Threats of Substitutes: is LOW. Though e-books are trying to penetrate the market,

Indian education system supports physical books in every manner. And in country

like India E-books are less preferred so threat of substitutes becomes low.

4. Bargaining power of suppliers: is HIGH. Suppliers do have a lot of experience in the

industry. So as start-up while setting up the marketplace, bargaining power of the

suppliers be a highly effective force on the model.

5. Intensity of rivalry: is MODERATE. Cumulatively summing up every force, we find

the total intensity of rivalry is moderate in this business model.

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Segmentation, Targeting and Positioning (STP)

Segmentation for ‗texty‘:

Exam-time

Buyers

Comp-Exam

candidates

Start of year

buyers

Bulk- buyers

Purpose

Exam studies

Cracking

Competitive

exams

Throughout

reference to

study

Cost saving

deal

Age 19-24 22-30 19-26 19-26

Book

returning

habits

High

Low

Moderate

High

Online

Buying

habits

Low

High

Moderate

High

Cost

sensitivity

High

Low

Moderate

Moderate

Segment

attractiveness

Low

High

High

Moderate

Segment Size 10% 30% 40% 20%

This segmentation is based on the behaviors of customers. There are four different segments

made as follows:

1. Exam- time buyers:

These are the buyers who buy the books at the time of exams. The purpose is study at

the time of exams. This kind of customers prefers buying offline because they want

the books instantly. Characteristics show that this would not be much attractive

segment for texty.

2. Competitive Exam buyers:

This segment is for students appearing for the competitive exams. These students

generally do prefer buying online because of availability and variety of books. They

have very good spending capacity for the books they need. Characteristics show that

this would be a very attractive segment for texty.

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3. Start of year buyers:

This segment refers to the students who do buy books at the start of the year. These

students do have tendency to buy online as they have time to wait for delivery and

they seek good offers. So, this is the most attractive segment to target.

4. Bulk buyers:

Bulk buyers have tendency to look for cost saving offers online. This segment is also

moderately attractive.

Targeting:

From the above table, Texty will be targeting the ‗Start of the year‘ buyers and the

‗Competitive exam candidates‘ contribute to the attractiveness rating of ‗60‘ together.

These segments have characteristics which will push the customer to buy books

online.

Positioning:

Highly Cost- effective

Texty

Rentmytext

Less Reliable LazyWyre More Reliable

Conventional

Book stores

Less Cost effective

Positioning is creating an identity or an image of brand in the mind of the consumer. The

positioning strategy of Texty is based on two variables- Cost effectiveness and reliability.

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Marketing Objectives:

Texty‘s marketing objectives are:

1. Increase sales by 30% yoy.

2. Increase the number of users of Texty at least by 40% yearly.

3. Provide 100% ROI by end of 2nd

year.

4. Provide a loyal customer base and build a reliable brand.

5. Capture and lead the open Indian online book rental market.

Our Mission:

―To serve the customers by providing a reliable, accessible way to rent books at reasonable

cost‖

Marketing Mix Strategy

Product strategy:

Texty will tie-up with the books suppliers in all universities in India. Then the books

from these suppliers will be listed on the website. Simultaneously books for the competitive

exams will also be listed on the website which will be stocked at Texty‘s headquarters.

The product lines will be as follows:

University books Competitive Exam books

Books under all the universities in India.

University recommended books

Students preferred books.

Books for competitive exams.

e.g.

UPSC and state exams

Railways exams

C.A. exams

Entrances exams (MBA/Eng./Med.)

Packaging:

Every book sold through and by Texty will have the Texty logo, sticker, bookmark,

QR code and barcode for the book.

Packaging will be done by the suppliers themselves in a package which will be

provided by Texty and which will have the brand color, logo, and tagline.

Package will be attractive and give a branded feeling to customer.

Main package will contain another package with the supplier‘s address on it. This

package will be useful for the customer while returning the book.

Customer has to pack the books and just put that package in post-office.

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Website:

Website will use the brand colors and a bookish theme.

Website as stated earlier will be in English, Hindi and few regional languages.

The payment gateway will be given a lot of security.

Overall design of the website will be simple and it will give pleasant shopping

experience.

Total Product concept:

1. Core benefit:

Core benefit provided by the business model is ‗Knowledge‘.

2. Actual Product:

Delivery of books at doorsteps of customer. Return policy to save 60% money of

customer.

PP

Aug Prd.

EP

AP

CB

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3. Expected Product:

Expected product is ‗on-time delivery‘ and fair book return policy.

4. Augmented Product:

Free physical bookmarks with books. A person should come to pick up books at the

time of return.

5. Potential Product:

Website with a superior user interfaces and has enough knowledge about the customer

to suggest him some books. And delivery is within 24hours.

Pricing Strategy:

Pricing for University textbooks

Texty is a business model which will directly be competing against the

traditional book market. As traditional book market has same business models offline.

Patching up with those traditional retailers will give them a chance to sell online and

increase the sales beyond their physical reach to sell the books. Customer asking for

service will get a home delivery with same price and fewer efforts. So, pricing

strategy is designed to push retailers to give a 10% margin on sales driven through

Texty website.

Category of books Price for customer On return Texty’s Margin

Fresh M.R.P 60% of MRP 10% of sales

Used 70% of MRP 60% of price paid 10% of sales

Pricing for Competitive Exam Books

Competitive exam books are stored and stocked by Texty, so margins on

the competitive exam books are healthy as compared to the University books.

Category Price for consumer On return Texty’s margin

Fresh MRP 60% of MRP 10% after returns

Used 70% of MRP 60% of price paid 10% after returns

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Place and process strategy:

Place:

Texty will be serving customers through the website and it is place strategy

for Texty. Place to buy the books will be website and the mobile application of Texty.

Process:

1. The buying process:

Competitive exam book

2. Returning Process:

Cash returned

Customer Texty Dealers(Univ.

books)

Packaging Distribution

Texty

Warehouse

Customer Pack books in

given package

Post the prepaid

package to post

office

Texty

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People:

Texty will be following the above organizational structure. The managing director

will be the owner and will oversee the functionalities of the organization.

Roles of people:

1. Marketing head:

Marketing department will be taken care of by this post. Marketing head will draw the

online/ offline marketing strategies and plans for PR, brand building.

2. Web manager:

Web manager will look after the website content and regular updates of charts. He

will manage the advertising put by external people on the Texty website.

3. Distribution and vendor manager:

Distribution manager will look after the distribution of the orders taking place on the

Texty website. Cash on Delivery mechanism will be handles by Distribution manager.

He will look after the vendors for the books and manage that relationship.

4. Accountant:

Accountant will look after all the online transactions and the accounts of the dealers.

Managing director

Marketing Head Web manager

Distribution

and vendor manager

Accountant Dealer

manager

East Area manager

North Area manager

WestArea manager

SouthArea manager

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5. Dealer manager:

Dealer manager will be responsible for managing dealer relationships. Dealer

manager will have four area managers under him.

Business Model Canvas

PARTNERS

1.Book dealers

2.Delivery system

3.Web hosting

ACTIVITES

1.Online Selling

2.Taking Back books

3.Providing

Marketplace for

used books

Cost

1.Website hosting

2.Delivery system

3.Inventory mgmt

Resources

1.Warehouse

2.Dealers

3.Websites

4.Mobile

Application

Value

Prepositions

1.All kinds of books

on rent

2.Books return

policy

3.Timely delivery

4.Reliable

transaction system

Customer

relationship

1.Website

2.Mobile App

3.Email/Calls

Channels

1.Website

2.Telephone calling

3.Mobile Apps

Consumer Segment

1.College students

2.Institutes

3.Professors

4.Bulk buy retailers

Revenue streams

1.Sales to students

2.Sales to institutes

3. Advertisements

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1. Key Partners :

Key partners of this model are book dealers, delivery partners to have timely delivery

of the books to the customer who are ordering the books. The book dealers will form

the marketplace for the used and fresh books. Also the website will be hosted on the

server and it will need constant updating. So, web hosting firm will also be a key

partner.

2. Activities:

Key activities will include the functions provided by the business. Key activities will

include online selling of books, taking back the returned books by the customers,

providing marketplace for the used books. Also, looking after the payment of the

returned the books.

3. Resources:

Resources include key resources needed. Resources will include warehouse to store

the books. It also includes resources like website, mobile applications.

4. Value proposition:

Value proposition includes the value proposition for customers. Value proposition

will include following:

All kinds of books on rent

Books return policy

Timely delivery

Reliable transaction system

5. Customer relation:

Customer relation will include all the relationship channels those are used to

strengthen the relationship between the customer and dealers. Website, mobile

applications will be used to strengthen the relations between customer and dealer.

6. Channels:

Channels include all the channels those are used to reach customer for purpose of

selling. Channels used in this business model are – website, mobile application etc.

7. Cost:

Costs include all the costs included in hosting the website, salaries of the employees.

It also includes inventory management costs like- rent for warehouse.

8. Revenue system:

Revenue system will include all the areas of generating revenue for the business

model. Revenue system will include the revenue generated through sales,

advertisements etc.

9. Consumer segments:

Consumer segments will include the targeted consumers. Here, consumer segment

will include students, professors; retailers who want bulk buy orders.

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Financial Analysis

Texty – Financial Model

Projected Profit

and Loss account

Year 1 Year 2 Year 3

Sales 10,20,500 13,26,650 16,58,312

Sales growth 30% 25%

Revenue from other

sources

3,50,000 5,00,000 9,00,000

Cost of sales

Website

maintenance

(10,000) (10,000) (10,000)

Salaries of workers (12,00,000) (12,00,000) (12,00,000)

Warehouse rent (1,00,000) (1,20,000) (1,20,000)

Miscellaneous

Expenses

(50,000) (50,000) (50,000)

Advertising cost (1,00,000) (1,50,000) (1,00,000)

Gross Profit (89,500) 2,96,650 10,78,312

Less: Depreciation (50,000) 55,000 75,000

PBT (1,39,000) 2,41,650 10,03,312

Tax (30%) - (72,495) (3,00,993)

PAT (1,39,000) 1,69,155 7,02,319