A business plan for "Online Book Rental Business"

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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)
PackagingDistribution
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