9 - Making Information Pay 2011 -- CATOGGE, TARA (Levy Home Entertainment)

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"Attention Shoppers: Building Opportunity Based on Customer Behavior Data”

Mass retailers face the challenge of converting general shoppers to book buyers. In this presentation, Tara Catogge, an executive at the leading supplier of books to mass merchants, delivers a data-rich examination of category trends and provide examples of how data-based marketing tools can be used to attract consumers at point-of-sale. Tara also enumerates some of the challenges suppliers and retailers face together as they embrace a culture of collaborative, data-driven decision making.

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9 - Making Information Pay 2011 -- CATOGGE, TARA (Levy Home Entertainment)

  1. 1. Attention Shoppers: Building OpportunityBased on Customer Behavior Data LHE Of Distribution Excellence
  2. 2. Attention Shoppers: Building OpportunityBased on Customer Behavior Data “…the brick channel for printed books continues it’s inevitable decline into insignificance” --Mike Shatzkin
  3. 3. Attention Shoppers: Building OpportunityBased on Customer Behavior Data “…the brick channel for printed books continues it’s inevitable decline into insignificance” --Mike Shatzkin
  4. 4. Combined, these retailers represent 25% of total USGDP in 48,000 US locations (that’s a heck of a lot of foot traffic) Mass Merchants Grocery Specialty * * * * * * * * * Club Department Drug * *
  5. 5. 22,082 retail store locations shipped with 1,600 in-housemerchandisers Sales Breakdown of Distributed Products Units sold by Category Units sold by Channel Series Romance Young Adult Paperback DrugOther Specialty Hardcover 2% 1% Department 3% 5% Grocery 0% 7% Kids Hardcover 27% 7% Mass Market Distributors Paperback 8% 20% Club 8% Mass Merchants Adult Hardcover 69% Trade 22% LHE 21%
  6. 6. Mass Merchant retailers have very high share of blockbusterreleases/series TWILIGHT SERIES Market Share (Avg = 20%) BREAKING DAWN (HC) 45% NEW MOON (TP) 50% TWILIGHT (TP) 43% ECLIPSE (HC) 46% ECLIPSE (TP) 60% TWILIGHT (TP) 67% TWILIGHT (Movie Tie In) 72% NEW MOON (HC) 34% SHORT SECOND LIFE BREE TANN (TP) 49% TWILIGHT (HC) 34% NEW MOON (Movie Tie In) 74% BREAKING DAWN (TP) 63% NEW MOON (MASS) 75% ECLIPSE SPECIAL EDITION 26% ECLIPSE (Movie Tie In) 72% ECLIPSE (MASS) 78% TWILIGHT: THE GRAPHIC NOVEL 46% RECENT TITLES MKT SHARE DIARY OF WIMPY KID #5 40% LHE AWAKENED: HOUSE OF NIGHT 52% HEAVEN IS FOR REAL 25% ENGAGEMENT IN SEATTLE (MASS) 83% Life to date sales /BookScan/est. for Walmart
  7. 7. Ask the simple questions (that are really difficult to answer)1. Where is the opportunity to improve? lower returns, increase conversions, improve supply chain2. What questions do we need answered? Ask the organization and rank the results 6 “Rights” by Sol Price 1. Merchandise—brand equity authors, local interest 2. Time –maintain in-stock while avoiding over-stock 3. Price – profitably priced to show a value to the consumer "I guess Ive stolen--I actually 4. Place – merchandising standards to prefer the word borrowed-- maximize sales as many ideas from Sol Price 5. Quantity – just-in-time inventory to as from anybody else in the maximize turns/GMROII business.“ LHE --Sam Walton 6. Format (Right Condition) – paper, audio, ebook
  8. 8. Ask the simple questions (that are reallydifficult to answer)1. Where is the opportunity to improve? lower returns, increase conversions, improve supply chain2. What questions do we need answered? Make a list!3. Are we currently making decisions based on facts? “There are lies, damn lies, and statistics” -Mark Twain nothing will improve until you change the corporate culture LHE
  9. 9. Results-Generating Business Analytics• We all need to collect data (consumer, customer, category, channel, format, genre, title) and mine that data to uncover patterns and derive actionable insights• Invest in analytics tools to understand trends• Provide business, operational and financial insight to all parties in the supply chain• Collaborate, Cooperate and Redefine Competition LHE
  10. 10. Talk to the Customer (not the database administratoror business analyst)SURVEY RESULTS  She is cash-strapped and wants a discount on her favorite authorOPPORTUNITY  “Right-size” the department through category to space analysis On-Line Book Traditional Mass Merchants / Primarily female Shopper Bookstores Shopper Clubs Book Shopper Female Book Shoppers 65% 58% 72% Less discretionary Income < $50k 43% 39% 47% spend % of Purchases made because of specific 59% 56% 75% Author / Series Author (brand) loyalty % of Books Purchased 32% 15% 34% because of sale price % of Purchases Fiction 66% 67% 84% Category Value shopper % of Fiction Purchases Romance / Mystery or 27% 26% 44% Thriller Heavy Fiction % of Purchases Impulse 55% 61% 78% Romance / Mystery / Thriller buyers LHE Very impulsive Bowker Consumer Pub Track – 2010 Full Year Results
  11. 11. How the Customer Learned about the LastBook They Purchased100%90% 25.0%80% 40.0%70% 16.0% Retail Browsing60% Personnal Recommendation 8.0% 10.0% Publicity50% 8.0% Other40% 15.0% Email 15.0% Online Sources30% 5.0% Info From Authors Prior Book 4.0%20% 17.0% 15.0%10% 10.0% 12.0% LHE 0% Walmart Target
  12. 12. Book Unit Share has not Moved Significantly (print to e) Among Thosethat Purchase Books in Mass Merchants % of Units Purchase100%90% 87% 84% 82% 82% 79%80% 76%70%60% 49% 48%50% 46% 46% Nov-1040% Feb-1130%20% 17% 14% 12% 8% 9% 10%10% LHE 0% Print eBook Print eBook Print eBook Print eBook Kindle Owner Amazon (non Kindle) Target Walmart
  13. 13. Shopper’s Marketing—Competing for Footsteps Awareness Discovery Value • Out of Department • Clear recommendations • Everyday Low Price placement and brand (author) awareness • Price Cuts • Events • Repeat visits—tell them what’s coming • Competitive pricing • Fixture Signage • Media Category • Develop new authors in Advertising Mass Merchant channel • Online influence • Consistent and directed merchandising • Wayfinding Book Buyer Conversion
  14. 14. Improving the In-Store Experience Leads to DoubleDigit Sales Increases Price Message Way Finding 30% increase in kids sales 5 – 12% increase in LHE overall sales
  15. 15. Promote out of the Department—Increased Awareness Leads to conversions Lift During 25% Promotion Post Promotion 20% Pre Promotion Sustained Sales 15% 10%% Change in $ Sales 5% 0% -5% -10% -15% -20% -25% 2/27 3/13 3/27 4/10 4/24 5/8 5/22 6/5 6/19 7/3 7/17 7/31 8/14 8/28 9/11 9/25 10/9 10/23 11/6 11/20 12/4 12/18 1/1 1/15 1/29 2/12 2/26 3/12 Test Group Control Group
  16. 16. With limited retail space, and full-face merchandising, Mass Merchantscan drive large sales volumes on emerging and growth authors Emerging Growth Brand Equity Authors Lora Leigh Nicholas Sparks David Baldacci Kressley Cole Kristin Hannah Janet Evanovich Monica McCarty Linda Lael Miller John Grisham Karen Marie Moning Lee Child Debbie Macomber Elin Hilderbrand Robyn Carr Nora Roberts Lori Wilde Susan Mallery Charlaine Harris Lara Adrian Vince Flynn James Patterson Lori Foster Harlan Coben Danielle Steel Kerrelyn Sparks Cathy Maxwell Sandra Brown Larissa Ione Mary Higgins Clark XX% Average XX% Average Tracy Anne Warren Bookscan Bookscan Michael Connelly LHE Marketshare Marketshare Clive Cussler
  17. 17. Buyer Selections, Book Club Picks and Spotlight Author programs arehelping readers discover new authors• Wayfinding is necessary for mass merchants to attract bookstore shoppers• Mass merchants are more successful in breaking out new authors in mass or trade• Test programs have shown an average 16% increase in sales over control group LHE
  18. 18. 3 135446 12.99 14.95 22 12 10 2 22 14 4 135446 12.99 14.95 29 18 11 1 29 20 5 135446 12.99 14.95 45 18 27 2 45 31 12 135446 12.99 14.95 21 10 11 33 21 12 13 135446 12.99 14.95 10 5 5 4 10 4 18 135446 12.99 14.95 15 4 11 5 15 8 19 135446 12.99 14.95 34 16 18 12 34 22 24 135446 12.99 14.95 44 7 37 2 44 22 26 135446 12.99 14.95 48 12 36 1 48 28 43 135446 12.99 14.95 28 12 16 2 28 16 44 135446 12.99 14.95 13 4 9 9 13 9 48 135446 12.99 14.95 27 16 11 44 27 15 52 135446 12.99 14.95 14 11 3 5 14 6 55 135446 12.99 14.95 17 9 8 12 17 12 57 135446 12.99 14.95 13 9 4 3 13 8 61 135446 12.99 14.95 46 7 39 66 46 30 64 135446 12.99 14.95 32 30 2 79 32 21 67 135446 12.99 14.95 21 9 12 0 21 14 68 135446 12.99 14.95 17 9 8 2 17 11 69 135446 12.99 14.95 52 24 28 1 52 32 75 135446 12.99 14.95 8 7 1 1 8 3 76 135446 12.99 14.95 35 10 25 2 35 25 78 135446 12.99 14.95 40 10 30 1 40 25 79 135446 12.99 14.95 46 26 20 2 46 28 80 135446 12.99 14.95 20 10 10 33 20 15 82 135446 12.99 14.95 42 16 26 4 42 31 83 135446 12.99 14.95 21 6 15 5 21 13 84 135446 12.99 14.95 17 5 12 12 17 11 85 135446 12.99 14.95 46 12 34 2 46 28 86 135446 12.99 14.95 37 18 19 1 37 30 90 135446 12.99 14.95 13 10 3 2 13 8 92 135446 12.99 14.95 11 5 6 9 11 9 93 135446 12.99 14.95 27 13 14 44 27 17 95 135446 12.99 14.95 6 4 2 5 6 3 96 135446 12.99 14.95 36 11 25 12 36 19 100 135446 12.99 14.95 34 25 9 3 34 21 107 135446 12.99 14.95 34 6 28 66 34 20 108 135446 12.99 14.95 45 9 36 79 45 27 111 135446 12.99 14.95 15 5 10 0 15 11 120 135446 12.99 14.95 11 7 4 2 11 9 137 135446 12.99 14.95 43 8 35 1 43 28 139 135446 12.99 14.95 28 10 18 1 28 16 144 135446 12.99 14.95 28 11 17 0 28 18 145 135446 12.99 14.95 17 9 8 0 17 9 10,000 ft. high 146 135446 12.99 14.95 42 27 15 0 42 23 147 135446 12.99 14.95 20 7 13 0 20 10 151 135446 12.99 14.95 43 27 16 0 43 26 152 135446 12.99 14.95 40 8 32 0 40 28 3 135446 12.99 14.95 22 12 10 2 22 14 4 135446 12.99 14.95 29 18 11 1 29 20 5 135446 12.99 14.95 45 18 27 2 45 31 12 135446 12.99 14.95 21 10 11 33 21 12 13 135446 12.99 14.95 10 5 5 4 10 4 18 135446 12.99 14.95 15 4 11 5 15 8 19 135446 12.99 14.95 34 16 18 12 34 22 24 135446 12.99 14.95 44 7 37 2 44 22 26 135446 12.99 14.95 48 12 36 1 48 28 43 135446 12.99 14.95 28 12 16 2 28 16 44 135446 12.99 14.95 13 4 9 9 13 9120,000 EXCEL ROWS OF DATA 48 135446 12.99 14.95 27 16 11 44 27 15 52 135446 12.99 14.95 14 11 3 5 14 6 55 135446 12.99 14.95 17 9 8 12 17 12 57 135446 12.99 14.95 13 9 4 3 13 8 61 135446 12.99 14.95 46 7 39 66 46 30 64 135446 12.99 14.95 32 30 2 79 32 21 67 135446 12.99 14.95 21 9 12 0 21 14 68 135446 12.99 14.95 17 9 8 2 17 11 69 135446 12.99 14.95 52 24 28 1 52 32 75 135446 12.99 14.95 8 7 1 1 8 3 76 135446 12.99 14.95 35 10 25 2 35 25 78 135446 12.99 14.95 40 10 30 1 40 25 79 135446 12.99 14.95 46 26 20 2 46 28 80 135446 12.99 14.95 20 10 10 33 20 15 82 135446 12.99 14.95 42 16 26 4 42 31 83 135446 12.99 14.95 21 6 15 5 21 13 84 135446 12.99 14.95 17 5 12 12 17 11 85 135446 12.99 14.95 46 12 34 2 46 28 86 135446 12.99 14.95 37 18 19 1 37 30 90 135446 12.99 14.95 13 10 3 2 13 8 92 135446 12.99 14.95 11 5 6 9 11 9 93 135446 12.99 14.95 27 13 14 44 27 17 95 135446 12.99 14.95 6 4 2 5 6 3 96 135446 12.99 14.95 36 11 25 12 36 19 100 135446 12.99 14.95 34 25 9 3 34 21 107 135446 12.99 14.95 34 6 28 66 34 20 108 135446 12.99 14.95 45 9 36 79 45 27 111 135446 12.99 14.95 15 5 10 0 15 11 120 135446 12.99 14.95 11 7 4 2 11 9 137 135446 12.99 14.95 43 8 35 1 43 28 139 135446 12.99 14.95 28 10 18 1 28 16 144 135446 12.99 14.95 28 11 17 0 28 18 145 135446 12.99 14.95 17 9 8 0 17 9 146 135446 12.99 14.95 42 27 15 0 42 23 147 135446 12.99 14.95 20 7 13 0 20 10 151 135446 12.99 14.95 43 27 16 0 43 26 152 135446 12.99 14.95 40 8 32 0 40 28 STATE BUILDINGS 6 STACKED EMPIRE HIGH AS 1 DAYS DATA FEED IS AS Organize the Data so it Becomes Useable
  19. 19. 3 135446 12.99 14.95 22 12 10 2 22 14 4 135446 12.99 14.95 29 18 11 1 29 20 5 135446 12.99 14.95 45 18 27 2 45 31 12 135446 12.99 14.95 21 10 11 33 21 12 13 135446 12.99 14.95 10 5 5 4 10 4 18 135446 12.99 14.95 15 4 11 5 15 8 19 135446 12.99 14.95 34 16 18 12 34 22 24 135446 12.99 14.95 44 7 37 2 44 22 26 135446 12.99 14.95 48 12 36 1 48 28 43 135446 12.99 14.95 28 12 16 2 28 16 44 135446 12.99 14.95 13 4 9 9 13 9 48 135446 12.99 14.95 27 16 11 44 27 15 52 135446 12.99 14.95 14 11 3 5 14 6 55 135446 12.99 14.95 17 9 8 12 17 12 57 135446 12.99 14.95 13 9 4 3 13 8 61 135446 12.99 14.95 46 7 39 66 46 30 64 135446 12.99 14.95 32 30 2 79 32 21 67 135446 12.99 14.95 21 9 12 0 21 14 68 135446 12.99 14.95 17 9 8 2 17 11 69 135446 12.99 14.95 52 24 28 1 52 32 75 135446 12.99 14.95 8 7 1 1 8 3 76 135446 12.99 14.95 35 10 25 2 35 25 78 135446 12.99 14.95 40 10 30 1 40 25 79 135446 12.99 14.95 46 26 20 2 46 28 80 135446 12.99 14.95 20 10 10 33 20 15 82 135446 12.99 14.95 42 16 26 4 42 31 83 135446 12.99 14.95 21 6 15 5 21 13 84 135446 12.99 14.95 17 5 12 12 17 11 85 135446 12.99 14.95 46 12 34 2 46 28 86 135446 12.99 14.95 37 18 19 1 37 30 90 135446 12.99 14.95 13 10 3 2 13 8 92 135446 12.99 14.95 11 5 6 9 11 9 93 135446 12.99 14.95 27 13 14 44 27 17 95 135446 12.99 14.95 6 4 2 5 6 3 96 135446 12.99 14.95 36 11 25 12 36 19 100 135446 12.99 14.95 34 25 9 3 34 21 107 135446 12.99 14.95 34 6 28 66 34 20 108 135446 12.99 14.95 45 9 36 79 45 27 111 135446 12.99 14.95 15 5 10 0 15 11 120 135446 12.99 14.95 11 7 4 2 11 9 137 135446 12.99 14.95 43 8 35 1 43 28 139 135446 12.99 14.95 28 10 18 1 28 16 144 135446 12.99 14.95 28 11 17 0 28 18 145 135446 12.99 14.95 17 9 8 0 17 9 70,000 ft. high 146 135446 12.99 14.95 42 27 15 0 42 23 147 135446 12.99 14.95 20 7 13 0 20 10 151 135446 12.99 14.95 43 27 16 0 43 26 152 135446 12.99 14.95 40 8 32 0 40 28 3 135446 12.99 14.95 22 12 10 2 22 14 4 135446 12.99 14.95 29 18 11 1 29 20 5 135446 12.99 14.95 45 18 27 2 45 31 12 135446 12.99 14.95 21 10 11 33 21 12 13 135446 12.99 14.95 10 5 5 4 10 4 18 135446 12.99 14.95 15 4 11 5 15 8 19 135446 12.99 14.95 34 16 18 12 34 22 24 135446 12.99 14.95 44 7 37 2 44 22 26 135446 12.99 14.95 48 12 36 1 48 28 43 135446 12.99 14.95 28 12 16 2 28 16 44 135446 12.99 14.95 13 4 9 9 13 9830,000 EXCEL ROWS OF DATA 48 135446 12.99 14.95 27 16 11 44 27 15 52 135446 12.99 14.95 14 11 3 5 14 6 55 135446 12.99 14.95 17 9 8 12 17 12 57 135446 12.99 14.95 13 9 4 3 13 8 61 135446 12.99 14.95 46 7 39 66 46 30 64 135446 12.99 14.95 32 30 2 79 32 21 67 135446 12.99 14.95 21 9 12 0 21 14 68 135446 12.99 14.95 17 9 8 2 17 11 69 135446 12.99 14.95 52 24 28 1 52 32 75 135446 12.99 14.95 8 7 1 1 8 3 76 135446 12.99 14.95 35 10 25 2 35 25 78 135446 12.99 14.95 40 10 30 1 40 25 79 135446 12.99 14.95 46 26 20 2 46 28 80 135446 12.99 14.95 20 10 10 33 20 15 82 135446 12.99 14.95 42 16 26 4 42 31 83 135446 12.99 14.95 21 6 15 5 21 13 84 135446 12.99 14.95 17 5 12 12 17 11 85 135446 12.99 14.95 46 12 34 2 46 28 86 135446 12.99 14.95 37 18 19 1 37 30 90 135446 12.99 14.95 13 10 3 2 13 8 92 135446 12.99 14.95 11 5 6 9 11 9 93 135446 12.99 14.95 27 13 14 44 27 17 95 135446 12.99 14.95 6 4 2 5 6 3 96 135446 12.99 14.95 36 11 25 12 36 19 100 135446 12.99 14.95 34 25 9 3 34 21 107 135446 12.99 14.95 34 6 28 66 34 20 108 135446 12.99 14.95 45 9 36 79 45 27 111 135446 12.99 14.95 15 5 10 0 15 11 120 135446 12.99 14.95 11 7 4 2 11 9 137 135446 12.99 14.95 43 8 35 1 43 28 139 135446 12.99 14.95 28 10 18 1 28 16 144 135446 12.99 14.95 28 11 17 0 28 18 145 135446 12.99 14.95 17 9 8 0 17 9 146 135446 12.99 14.95 42 27 15 0 42 23 147 135446 12.99 14.95 20 7 13 0 20 10 151 135446 12.99 14.95 43 27 16 0 43 26 152 135446 12.99 14.95 3 135446 12.99 14.95 22 128 10 40 32 20 22 14 40 28 4 135446 12.99 14.95 29 18 11 1 29 20 5 135446 12.99 14.95 45 18 27 2 45 31 12 135446 12.99 14.95 21 10 11 33 21 12 13 135446 12.99 14.95 10 5 5 4 10 4 18 135446 12.99 14.95 15 4 11 5 15 8 19 135446 12.99 14.95 34 16 18 12 34 22 24 135446 12.99 14.95 44 7 37 2 44 22 26 135446 12.99 14.95 48 12 36 1 48 28 43 135446 12.99 14.95 28 12 16 2 28 16 44 135446 12.99 14.95 13 4 9 9 13 9 48 135446 12.99 14.95 27 16 11 44 27 15 52 135446 12.99 14.95 14 11 3 5 14 6 55 135446 12.99 14.95 17 9 8 12 17 12 57 135446 12.99 14.95 13 9 4 3 13 8 61 135446 12.99 14.95 46 7 39 66 46 30 64 135446 12.99 14.95 32 30 2 79 32 21 67 135446 12.99 14.95 21 9 12 0 21 14 68 135446 12.99 14.95 17 9 8 2 17 11 69 135446 12.99 14.95 52 24 28 1 52 32 75 135446 12.99 14.95 8 7 1 1 8 3 76 135446 12.99 14.95 35 10 25 2 35 25 78 135446 12.99 14.95 40 10 30 1 40 25 79 135446 12.99 14.95 46 26 20 2 46 28 80 135446 12.99 14.95 20 10 10 33 20 15 3 STACKED MT. EVEREST 82 135446 12.99 14.95 42 16 26 4 42 31 83 135446 12.99 14.95 21 6 15 5 21 13 84 135446 12.99 14.95 17 5 12 12 17 11 85 135446 12.99 14.95 46 12 34 2 46 28 86 135446 12.99 14.95 37 18 19 1 37 30 90 135446 12.99 14.95 13 10 3 2 13 8 92 135446 12.99 14.95 11 5 6 9 11 9 93 135446 12.99 14.95 27 13 14 44 27 17 95 135446 12.99 14.95 6 4 2 5 6 3 96 135446 12.99 14.95 36 11 25 12 36 19 100 135446 12.99 14.95 34 25 9 3 34 21 107 135446 12.99 14.95 34 6 28 66 34 20 108 135446 12.99 14.95 45 9 36 79 45 27 111 135446 12.99 14.95 15 5 10 0 15 11 120 135446 12.99 14.95 11 7 4 2 11 9 137 135446 12.99 14.95 43 8 35 1 43 28 139 135446 12.99 14.95 28 10 18 1 28 16 AS HIGH AS 144 135446 12.99 14.95 28 11 17 0 28 18 145 135446 12.99 14.95 17 9 8 0 17 9 146 135446 12.99 14.95 42 27 15 0 42 23 147 135446 12.99 14.95 20 7 13 0 20 10 151 135446 12.99 14.95 43 27 16 0 43 26 152 135446 12.99 14.95 40 8 32 0 40 28 1 WEEKS DATA FEED IS
  20. 20. Assign Attributes to the Data Onix Coding to Capture “Title DNA” (get it right the first time!) Sorted data relates to space productivity and category trends “Control Tower” makes sure data tables are populated correctly Regression and Correlation Analysis is a powerful tool to spot trends (you can run multiple regressions by loading the Data Analysis Add-On for Excel) LHE
  21. 21. Customer Relationship Management• Non-linear Regression— new data points create new demand outcomes that feed the supply chain• Systems Communication— retailer demand forecasts need to drive print quantities so stock is available at the right time• Returns—If we’re all making analytical decisions based on the same demand forecasts can we get rid of LHE the old returns model?
  22. 22. The Future of Books in Big BoxRetail (If past events are any indication)1. Books will Remain an Important Margin Category for Retailers • Consolidation with electronics and media LHE
  23. 23. Despite tremendous unit growth, the Digital Music Industry represents only 39% of the dollarsales. Digital Unit Growth has hit a Plateau 7 years after the iTunes launch. Mass Merchantsare still a significant portion of Physical Album Sales Digital Unit (Physical Album) Market Share Dollars only 39% $14.0 $ share 100% 9% 7% 6% 6% 7% 6% 8% 13% 11% 90% $12.0 $0.1 $0.2 $0.9 80% $1.6 40% 36% 36% 33% $10.0 35% 38% 40% 41% 70% 34%Sales $ (Billions) $2.4 $8.0 60% $2.6 50% 1% 3% 5% 8% 12% $6.0 18% 25% $11.3 $11.5 $2.7 29% $10.5 40% 36% $9.4 $4.0 $7.5 30% $5.5 52% 51% 48% $4.3 20% 45% 41% $2.0 36% 33% 29% 10% 23% $- Year of Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 0% iTunes after after after after after after 2002 2003 2004 2005 2006 2007 2008 2009 2010 iTunes iTunes iTunes iTunes iTunes iTunes Chain Outlets Non Traditional (On-Line) Mass Merchants Independents Physical CD (Full + Single) Download (Full + Single + Mobile) RIAA & Nielsen SoundScan
  24. 24. The Future of Books in Big BoxRetail (If the past is any indication)1. Books will Remain an Important Margin Category for Retailers • Consolidation with electronics and media2. Juvenile Space will Increase Significantly Leading into Fall • Category is growing YOY and Returns are Decreasing • Mass Merchants have a very high market share in Young Reader and Young Adult categories • Mass Merchants will continue to dominate share of novelty, movie tie-in and event driven publishing events LHE
  25. 25. As Adult Categories Continue to Shift Toward eBooksMore merchandise space is Devoted to Juvenile 100% 3.1% 5.7% 5.6% 3.5% 3.7% 3.8% 3.8% 3.8% 3.6% 90% 16.0% 16.7% 17.5% 19.4% 20.3% 21.4% 22.4% 23.5% 24.7% 80% 70% 31.8% 31.8% 31.1% 31.0% 30.7% 60% 30.4% 30.1% 29.8% 29.5%% of $ Sales 50% 9.1% 40% 9.7% 9.8% 9.3% 8.9% 8.4% 8.0% 7.6% 7.2% 30% 20% 40.1% 36.1% 36.0% 36.8% 36.4% 36.0% 35.7% 35.3% 35.0% 10% 0% 2007 2008 2009 2010 2011e 2012e 2013e 2014e 2015e LHE Hardcover Mass Market Paperback Trade Paperback Kids YA Historical – BookScan + non reporting chains, $’s extrapolated Projection – Levy estimate
  26. 26. The Future of Books in Big BoxRetail (If the past is any indication)1. Books will Remain an Important Margin Category for Retailers • Consolidation with electronics and media • Some space loss, but not retailer profits2. Juvenile Space will Increase Significantly as Endcap Space for Adult Fiction Shrinks • Category is growing YOY and Returns are Decreasing3. Market consolidation has historically been good for Big Box retailers when they can show a value LHE
  27. 27. Similar to music, video, and greeting cards Mass Merchants can get abigger piece of a shrinking pie by 2015 100% 2.5% 2.4% 2.3% 2.4% 2.1% 2.2% 2.2% 2.2% 2.1% 90% 18.7% 19.5% 19.6% 19.9% 19.3% 20.0% 21.7% 23.0% 23.8% 80% 70% 16.0% 17.6% 20.1% 24.0% 31.9% 60% 36.7% % of $ Sales 40.4% 44.4% 50% 48.8% 40% 30% 62.9% 60.5% 58.0% 53.7% 46.7% 20% 41.1% 35.7% 30.4% 25.2% 10% 0% 2007 2008 2009 2010 2011e 2012e 2013e 2014e 2015e LHE Retail (Bookstores) On-Line Mass Merchants / Clubs Specialty / Grocery / Drug Historical – BookScan + non reporting chains, $’s extrapolated Projection – Levy estimate
  28. 28. Excluding the Borders Liquidation, Recent Mass Merchant Market Shares are Close to Prior Year100% 2.0% 1.9% 2.2% 2.4% 2.6% 3.0% 2.7% 3.0%90% 16.1% 15.9% 17.9% 17.8% 20.0% 22.1% 19.9% 21.3%80%70% 25.6% 31.9% 22.9% 25.6% 25.0% 22.6% 21.8% 24.5%60%50%40%30% 56.3% 54.5% 54.3% 53.1% 54.8% 54.7% 50.2% 51.2%20% Impact of10% Relatively Borders 0% Unchanged Liquidation LY TY LY TY LY TY LY TY January February March April Retail (Bookstores) On-Line Mass Merchants / Clubs Specialty / Grocery / Drug
  29. 29. Based on market shifts we estimate print books will still beover $5.5 billion in 2015 Print eBooks Books 2010 to 2015 -44% +324% $12,000 45.0% $323 39.6% $96 $161 40.0% $862 $10,000 $1,768 35.0% $2,599 $3,171 $8,000 $3,488 30.0% Book Sales (millions) eBook Market Share $3,662 25.0% $6,000 $10,923 $10,963 $10,884 20.0% $10,024 $8,520 $4,000 $7,668 15.0% $6,902 $6,211 7.9% $5,590 10.0% $2,000 2.9% 5.0% 0.9% 1.5% Print Books $5.5 Billion $- 0.0% 2007 2008 2009 2010 2011e 2012e 2013e 2014e 2015e Total Market Print (Trade Channel) Total Market eBooks eBook Market Share LHE Historical – AAP & BookScan (Trade Channel excludes Scholarly, K-12, University Press) Projection – Levy estimate
  30. 30. The Future of Books in Big BoxRetail (If the past is any indication)1. Books will Remain an Important Margin Category for Retailers • Consolidation with electronics and media • Some space loss, but not retailer profits2. Juvenile Space will Increase Significantly as Endcap Space for Adult Fiction Shrinks • Category is growing YOY and Returns are Decreasing3. Market consolidation has historically been good for Big Box retailers when they can show a value4. Economics of book retailing need to adapt to a new value benchmark We must abandon the archaic business models of the past(push strategy) and adopt compatible demand planning and LHE analytics tools (pull strategy)

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