Macro-Environmental Analysis - IT and Telecommunications Technologies - Essay Example

INDUSTRY REPORT Student’s Name Course Professor’s Name University City (State) Date IBISWorld Industry Report OD5496 Macro-Environmental Analysis There are quite a number of external factors that continue to portend serious consequences on the strategies and performances of the retail book industry. One such factor is the real household discretionary income, that is, the amount of money left to households after they have purchased essential goods for daily living. Books are generally regarded as purchases that are non-essential. Consequently, variations in the real household discretionary income will affect book sales. The adoption of IT and telecommunications is another important factor in the retail book industry. Increased adoption of IT and telecommunications technologies , such as smart-phones, tablets, and e-readers, is predicted to increase the demand for audio books and e-books as customers gradually abandon the purchase of physical books (IBISWorld 2017). With an increase in the perceived value of these technologies and the enhanced speeds of connectivity, the adoption of IT and telecommunications is expected to further soar in the year 2017. Increase in the demand for shopping through online platforms amid the increased tendency of consumers to purchase, compare and search for products through online systems only serve to further retard the viability of conventional retail stores and bookshops. Online shopping is also expected to increase in the year 2017. Moreover, since the consumer sentiment index is predicted to decrease in 2017, spending on retail books will be largely impeded. Besides competition from online book sales, bookshops also continue to face stiff external competition time after time. Such competition normally comes from discount and traditional department stores. Among other things, the competitors are often able to provide competitive prices for their range of books. This in turn increases pressure on the profitability and margins for players in the retail book industry. Successful entry into the retail book industry and acquisition of a market share has been made difficult due to the competition posed by other well-established retail stores. The Dymocks Pty Ltd, for example, is one of the oldest and well-established booksellers in Australia with a market share of over 6%. Other notable players in the industry include the Collins Booksellers Pty Ltd (which has over 32 retail stores that are spread across all the states in Australia) and the QBD The Bookshop (that was established in around 1890 and so far has over 50 bookstores throughout Australia). Furthermore, online stores that are multinational are free from the Australian GST which means that they are well able to sell their e-books at cheaper prices without incurring losses (IBISWorld 2017). As a result of price competition, retail store players are forced to lower their prices as well, which translates to lower profit margins and sometimes, crippling losses in the retail book industry. High revenue volatility in the retail book industry substantially affects the operations of individual booksellers. High revenue volatility levels translate to higher risks in the industry. This can negatively influence strategic decisions like the timing of investments. When a bookshop makes poor decisions on investment timing, the company may face either capacity constraints or capacity under-utilization (IBISWorld 2017). Regulations such as the Competition and Consumer Act of 2010 continue to influence the retail book industry by outlining such things as trading hours, trading conditions, importation restrictions, and so on. Regulations instituting importation restrictions, for one, have been blamed for the low variety of books sold in Australian bookshops, hence giving an advantage to online reading and buying of books such as by students. Segments (and Segmentation variables) Used in the Industry The most commonly used segmentation used in the retail book industry is the demographic segmentation which predominantly hinges on the age variable. Younger consumers, those between 15 and 34 years of age are most likely in university or secondary school, and hence mostly purchase educational books than they do other kinds of books, such as trade books. This age group is known to be largely technology savvy and hence prefer to buy online books than the traditional physical books. In this segment, the older consumers are more likely to be in jobs and therefore their demand for books generally shifts to trade books other than educational books (IBISWorld 2017). As the educational needs of this segment have generally considerably increased over the last few years, so has the overall size of the segment. This has led to an increased demand for e-books and e-readers as their proportion in the book industry also significantly improves. The next segmentation is basically those consumers who are aged between 35 and 54 years. This segment is composed of individuals with higher discretionary incomes, careers that are well-established, and a superior exposure to technological advancements. In contrast to the previous segment which is composed of younger consumers, this segment prefers to purchase books concerning trade/ careers than they do educational material. Even though the consumers in this category are able to afford tablets and e-readers for reading online/ e-books, they are more drawn by the desire to hold an actual, physical book in their hands rather than read books from such digital devices (IBISWorld 2017). However, as a result of other age categories increasingly demanding for e-books, this segment’s relative size in the last 5 years has declined. The third age segment consists of those who are of age 55 years and above. Once again, in the last half decade, the individuals that are aged 55 years and above have become much more technologically savvy. However, a majority of the books that are purchased by this segment are still the printed kinds other than the digital and online versions (IBISWorld 2017). Consequently, this segment’s relative size has also considerably decreased in the last few years because of technological advancements that have facilitated a boom in the purchases of e-readers and e-books by consumers that exist in the younger age groups. Another important segmentation variable under demographic segmentation is the income of households. Families that earn higher incomes are more likely to have some amount of money left following the purchase of essential items which allows them to indulge in book buying (IBISWorld 2017). On the other hand, poorer families are often financially strained and living from hand to mouth. Their budget constraints do not thus allow them to be able to afford the luxury of buying books. In such instances, the purchase of cheaper online books for educational and career purposes is preferred over the buying of expensive printed materials. Psychographic segmentation also strongly comes into focus in the retail book industry. This is mostly defined by variables like lifestyle, interests and activities of the target market population. The contemporary world has fast become a den of technological advancements, and acquiring both locally published and foreign books for academia purposes or otherwise has become possible by the click of a button. Such is the trend of the modern consumer in the retail book industry (IBISWorld 2017). Therefore, younger students with laptops, tablets and e-readers see no need for printed books while they can obtain online versions much faster and at lower costs (sometimes even free downloads). However, the older consumers have still not fully taken to the craze for technology with a good number still opting to purchase printed versions. Furthermore, these older and well-established consumers have personal libraries and shelves in their homes that can accommodate their collection of books, unlike the younger generation who are still in school. Recommendation It is quite clear that the greatest threat to the long-term existence of the retail book industry is the emergence and quick growth of online book sales. Online book sales have particularly been boosted by the creation of novel IT and telecommunications technologies such as the above mentioned laptops, smart-phones, e-readers, and so on, which can be used to purchase, download and read online books in a very convenient and cost-effective fashion (IBISWorld 2017). The improvement of connectivity speeds have also seen to an unprecedented boom in the online books business. According to the industry analysis, the segment that is mostly drawn to the use of online books and e-reading is consisting of people aged between 15 to 34 years. It is this segment that needs to be targeted since the future of the entire retail book industry depends on whether or not the consumers in this segment make a complete/ considerable shift to online books. The more elderly segments, that is, those of people between 35 to 54 years and those aged 55 years and above, can also be targeted owing to their conservative preferences for printed books and their financial capabilities. However, the impact of targeting these older segments may only be short-term as their generations are replaced by the younger ones who are increasingly taking to e-books and e-reading. The company can therefore come up with strategies that seek to attract a majority of the younger segment generation after generation such as by using various technologies to market and deliver books, while also ensuring that overall process are completive compared to the prices of online books. Moreover, the company ought to also focus on maintaining its customer base in these young generations moving into the future so that they do not lose them to competition. However, for increased short-term gains, equally sustained focus on the financially able and conservative older segments is necessary. Reference List IBISWorld 2017, Industry Report OD5496, Market Research Reports & Analysis | IBISWorld AU, Retrieved April 6, 2017, from https://www.ibisworld.com.au Read More