From Reuters:
biz.yahoo.com
Tuesday February 8, 7:55 pm Eastern Time
Student retailer VarsityBooks to woo Wall Street
By Reshma Kapadia
NEW YORK, Feb 8 (Reuters) - Online college textbook retailer VarsityBooks.com Inc. will test Wall Street waters with its initial public offering Friday and industry watchers expect a modest reception for the IPO.
But while some analysts noted that new e-tailing issues have fallen out of favor recently as investors moved to infrastructure and networking deals, the positive reaction to Amazon.com's fourth quarter results may be supportive.
The company plans to offer 4.075 million shares in a range of $12-$14 through Robertson Stephens on Feb 11.
Washington, D.C.-based VarsityBooks.com, armed with a network of student representatives, hopes to become a marketing channel to college students, as well as sell textbooks online.
College students are the most wired segment of the U.S. population. They wield over $100 billion in annual purchasing power, according to a recent Jupiter Communications survey that predicts students will spend $2.5 billion online in 2002.
``The college market, in itself, is not a small market. They wield an unbelievable amount of power and yet the student market is treated as a secondary niche market. They are treated like second rate citizens and are preyed on because of the naivete of this market,' said Adam Kanner, chief executive of edu.com.
Kanner's privately-held company helps set up relationships between branded products and students and sells everything from software to textbooks.
Online retailers are trying to break the grip that traditional college bookstores have on the market.
Barnes & Noble Inc.'s (NYSE:BKS - news) textbooks.com and ecampus.com Inc. are launching $5 million and $10 million dollar campaigns, respectively, in an effort to join a field that includes Bigwords.com, VarsityBooks.com and efollett.com, Jupiter said in a report
``The online textbook market has been screaming out for competition for some time and the Internet (players) will be a welcome break from the monopolistic ways of college bookstores,' said Ken Cassar of Jupiter.
But the market will be competitive because it is largely based on relationships the retailers have with universities and professors, Cassar said. He added that it was difficult and expensive to buy and hold the appropriate inventory.
``While the college bookstore should probably be worried about new online textbook sellers, I don't think their business is going to dry up in the next couple semesters,' he said.
VarsityBooks.com is among the companies that have some of the right ingredients to give the traditional stores a run for their money.
``VarsityBooks is definitely a leader, mostly because of their network of college students on campuses,' said Carrie Johnson, an analyst at Forrester Research. ``The key to this market is total integration with the school. You have to have the right books and integration with the campus, meaning actual professor lists and students championing it.'
While some analysts see the potential for online textbook retailers to expand their offerings, few see these companies becoming big players in the overall college market, or in the after college market.
``There is the potential to expand product offerings out of textbooks into school supplies and university apparel and potentially music and other books,' Cassar said.
``It would be a real challenge for online textbook sellers to extend themselves into the life of the post-graduate. Once they have graduated, they are going to quickly forget about college bookstores. But while they are in college, I think there is significant potential for them to sell things other than textbooks.'
Johnson agreed, adding that it was an expensive proposition for them to move into other areas and a risky one, especially because the consumer behavior of students is a bit fickle.
``We are seeing a lot of consolidation,' she said. ``A company like VarsityBooks.com could get bought by someone like Amazon.com Inc. (NasdaqNM:AMZN - news) because it is difficult to get into the (textbook) category. But the behavior in college is not necessarily the same afterward. So trying to keep consumers loyal may be the wrong approach.' |
