Secrets of College Textbook Rental Programs
Understand the risks and rewards of renting textbooks
One of the biggest trends in the collegiate retailing industry is renting textbooks. Moreso than ebooks, which have been given much more press, renting textbooks has been the dominant retailing change in academic resource departments across the college bookstore industry. The push to move from an emphasis on used books to an emphasis on rentals was largely initiated by online textbook rental company Chegg. Several years after Chegg's emergence, virtually all online textbook sources, including Amazon and Half.com, now rent textbooks.
With equal fervor, students have been renting their textbooks and demanding that their college stores offer some kind of rental program. But what do you really know about textbook rentals? Is it the right solution for students to save money? Is it the right solution for college bookstores looking to remain relevant in a changing industry?
Whether you are a student or a bookstore director, this article will provide you with the information you need to make an informed decision about whether textbook rentals is right for you.
The Risks for Students
There are two risks for students when renting textbooks. The first one is probably fairly obvious to most students while the second one, which is far more concerning, is not.
The first risk is spending more money on the rental than in the buying/sellback process. Many students are used to the process of buying a book and then selling it back at the end of the semester. In many bookstore scenarios, a student may purchase a used book for $75 and then sell it back at the end of the semester for $50 for a net cost of only $25. Thus, if this book is being rented for $35, the student is actually spending an extra $10 for the rental in the long run.
Just to be clear, the above scenario can occur on a new book that sells for $100 new and $75 used. The student buys a used book and then is fortunate at the end of the semester when the book is being used again and is able to sell it for 50% of the new price.
While the above scenario can happen, it should be a minor concern for most students. First, renting a book, even if the cost is more than the used price minus the buyback price, is a hedge. It's a hedge against the possibility that the buyback price will not be 50% of the new price, which happens when the book is not being used in school the following semester. However, it's even less of a concern because most college bookstores are no longer paying 50% of new price even if a book is being reused. While the impact of the internet has been to lower prices overall, it's also lowering buyback prices because college bookstores can purchase stock online at the going market rate and they're not likely to pay above that rate. 50% of new is frequently above that rate. Thus, a student need not be concerned about spending more money renting a book due to this situation.
The second risk for students is that they forget to return the book on time. College students aren't known for being responsible and an estimated 1 in 5 will forget to return their rental book prior to the return deadline. While this is a burden to the textbook rental companies and college bookstores, it is also a financial windfall. If a student pays $40 to rent a $100 textbook and then forgets to return that textbook, they will likely pay a $75 additional late charge and possibly more. Some college bookstores charge as much as $100 plus an additional penalty. While this may seem like highway robbery to many college students, they don't understand that the store or online rental company must then pay to replace the book the student hasn't returned and that is the source of the additional charge. Ultimately, the danger for most students renting college textbooks is that they assume the late fee will merely be the difference between the cost of the book and the rental price and that is not the case.
The Risks for College Bookstores
The risks of starting and maintaining a textbook rental program are many, but the well-run college bookstore can easily overcome these risks, keep themselves relevant, and even profit by running a healthy textbook rental progam. However, there are many things worth knowing about the difficulties presented by starting a college textbook rental program.
Fortunately, there are several options for college bookstores. While some stores may choose to run their own program and assume all the risks, there are tons of partners out there willing to accept certain risks in exchange for a piece of the business. Major wholesalers like Follett, Nebraska, and Missouri have robust rental programs. Then there are the new players like Chegg and Rafter. College bookstores can easily partner with any of these businesses and immediately offer textbooks for rent.
Bookstores that choose to do it themselves are likely to run into these problems:
Staffing - the administration of a successful college textbook rental program requires significant additional labor to accomplish. Rented textbooks must be disposed of and unreturned books must be charged. All of this requires resources that most college bookstores aren't used to supplying.
Late returns and no returns - The college textbook industry has between a 10% and 20% non-return rate when it comes to textbook rentals. This represents a unique challenge for stores who may rely on those books for future semesters. Not only must the books be replaced, but the customer interactions must be managed and fees charged to those customers. If a store rents 20,000 textbooks, they may find themselves with 4,000 unreturned books. This can present a huge obstacle for stores with limited staff as charges often need to be manually applied since PCI compliance rules prohibit anything automated from happening. Any bookstore thinking of entering the textbook rental business shouldn't underestimate the amount of hassle unreturned books will create.
Inventory/Disposal - Renting textbooks may increase sell-through, but when those textbooks are returned, it can dramatically affect inventory and accounting procedures. Bookstores must have a clear, effective plan in place to dispose of all returned textbooks that are not adopted for a future semester. This can include write-offs, selling the books to a wholesaler, or selling them online. No matter what the plan, the bookstore must understand before the books are rented, what kind of money they will reclaim in the process since this is critical to their budgeting.
The Rewards for Bookstores and their Customers
The rewards for both the bookstore and their customers can be many with regard to renting textbooks:
- Lower prices
- Increased marketshare
- Increased customer satisfaction
- Increased store relevance in the marketplace
- Increased gross margin
- Increased sellback
All of these are common results of implementing a rental program in a college bookstore. Customers save money and do more purchasing at the bookstore. Bookstores can increase their gross margins and often report an increase in the buyback of non-rented textbooks because students who return their rented textbooks sell back anything that they purchased in greater numbers. Ultimately, the stores that decide to initiate a rental program themselves, without the help of a partner, will incur more risks, but they will also reap more rewards.
This makes renting textbooks a win/win for both the bookstore and the customer.
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