Case analysis: Mollie Used Books Store(physical) 茉莉二手書店 TAAZE Used Books Store(online) 讀冊生活 Group members: Managerial Economics Issue - Used Books Market 財政三 王慧貞 財政三 孫琳 財政四 陳明鴻 心理四 張正宜

Agenda 1.Introduction 2.(a)Scale of used books market in Taiwan (b)What kind of groups would buy used books? 3.Analysis of used books market 4.Pricing strategy (a) Mollie Used Books Store( 茉莉花二手書店 )(physical) (b) TAAZE Used Books Store( 讀冊生活 )(online) 5.Conclusion

Introduction In Taipei, there are more than half of used book stores located in 公館 area, which near some universities, NTU, NTNU...etc. Students can buy used textbooks and other used books in this region. However, in recent years, physical used book stores are affected by gradually rise of online used book stores, and we want to find how online used book stores affect physical stores and further investigate their pricing policy.

What kind of groups would buy used books? Factors: 1.Price Elasticity 2.Income Elasticity 3.Other Factors

Price Elasticity 1.People who are sensitive to price → They are elastic. → Compare to new books, used books are much cheaper. → Higher expenditure on used books than new books. EX. Students who don’t really care about whether books are new or not, or maybe they just use books for one semester, so they care much about the price.

Price Elasticity 2.People who are not sensitive to price → They are inelastic. → Compare to new books, used books are much cheaper. → They don’t really care about the price. → Fewer expenditure on used books. EX. Book collectors, who care much about book’s quality, and they hope books that are clean and not damaged, so they are willing to pay more and buy new books instead of used books.

Income Elasticity If we define new books are normal goods, used books are relative inferior People who have more income → because used books are inferior good → demand for used books would be lower → fewer expenditure on used books → more expenditure on new books

Income Elasticity 2.People who have less income → because used books are inferior good → demand for used books would be higher → higher expenditure on used books EX. Students who do not have regular salary now, their income resource maybe just pocket money from their parents, so they are more likely to choose to buy used books which cost them less.

Other Factors 1.Cultural and social factor → environmental protection, reduce to chop down trees → and recently, there are lots of environmental protection groups that promote the concept of recycling. EX. In many universities, take NCCU for example, to promote the concept of recycling used books, if there is any book that you don’t need or read anymore, just take them to the library and you can get a dessert by one book you donated. 2.Mental factor → past experience, individual preference 3.Cost factor → time cost, transportation fee

The market scale of used book Domestic market(Taiwan) ‘The scale of domestic book market is about 25 billions, compares to foreign second-hand books accounted for 10% or more, Taiwan should have 3.0 billion second-hand book business opportunities, but have not yet met.’-the reason why TAAZE established,2010.

How does TAAZE operate? 1.The website:

How does TAAZE operate? 2.The price policy: The price of book decided by the sellers themselves, but charge a 35% management fee.

How does TAAZE operate? 3.The market demand and supply → Through the convenience of the Internet, which gathers the majority of buyers and sellers. There is more complete books on all kinds of books to fit more diverse individual preferences. Therefore, the cost of seeking, selling second-hand books becomes lower.

How does TAAZE operate? 4.Price analysis → Seller may own pricing, indirectly deprive of consumer surplus, but there will be other sellers of lower prices, rendering more transparent prices for both buyers and sellers. For the buyer this market just as the auction market. 5.The main cost → Warehousing, website management, and freight.

How does TAAZE operate? 6.In cooperation with the new book industry, second-hand books try to attract demand preference for those books (other than the high price elasticity of demand of student in textbook market), if the price of second-hand books and discounted new books is almost the same, then these consumers will turn to purchasing this new book selection.

Analysis of Used Books Market A. Mollie Used Books Store B. TAAZE Used Books Store C. Main difference D. Analysis

Mollie Used Books Store I Feature The store owner 蔡謨利 used the same business philosophy as convenience store to manage Mollie Used Book Store. Mollie Used Books Store is a physical used book store, which provides not only physical books but also a clean and comfortable place to customers. Some branches even offer meals.

Mollie Used Books Store II Price Mollie purchases books at % original price and sells books at roughly % original price. Products Mollie cleans the used books first and display them on the shelf. It makes the products accessible and touchable for buyers.

TAAZE Used Books Store I Feature TAAZE Used Books Store is an online used book store which provides an online trading platform to both seller and buyer. TAAZE even has an app which offers the members to check their transactions.

TAAZE Used Books Store II Price TAAZE allows sellers to set the price. Products TAAZE shows their product’s appearances by video.

Main Differences Asymmetric Information Books of Mollie are accessible, providing more information to buyers. Books of TAAZE are untouchable and can only be seen on the screen, providing less information to buyers. Pricing Mollie purchases at a relatively low price from customers. TAAZE allows members to set the price.

Pricing Strategy A. Mollie Used Books Store B. TAAZE Used Books Store C. Comparison

Pricing strategy- (a) Mollie Used Books Store( 茉莉花二手書店 )(physical) Imagine that you are going to sell or to buy second hand book, what the price you should pay? The used book store, Mollie would charge you the second hand books from 30% of the price to nearly 60%. And if sell, you can only get 0.1% to 30%, which depends on the popularity of the books.

Pricing strategy- (b) TAAZE Used Books Store( 讀冊生活 )(online) You can set the price at will(Maximum is 70%), but the 35% of the price will be charged by TAAZE as some kind of management fee. To buy second hand books, you can get a list of prices which provided by the book seller. Just like a auction market, the price is more transparent, and this business model is both beneficial to sellers and buyers.

Comparison of the pricing policy Mollie physical used bookstore TAAZE online Used Books Store Purchase price 10%~20% of the original pricePrice at will set by book seller (Max:70% of the original price) Selling price 40%~50% of the original price The analysis of the pricing policy Restricted to booksellers price, even the highest- selling book, the purchase price is only 30%, resulting in unstable supply of second-hand books. Seller may set pricing, indirectly acquire consumer surplus, but there will be other sellers providing lower prices, rendering more transparent prices for buyers. For the buyer this market just as the auction market. Main cost Personnel costs High store rent Warehousing, website management, freight

Conclusion The cost behind the price The price always reflect on the main cost. Q:How can Mollie physical used bookstore lower its cost Store cost: Merge small stores into a bigger store(joint cost) The cost of warehousing: Focus on certain specific popular books instead of college textbooks(incentive for higher profit also can reduce huge warehousing cost) Loss opportunity on the book lover: Since they are lower price elasticity to books. They don’ even care much about the price, if the price of second hand book are relative to the new ones, they are willing to pay more to get them. Therefore, corporate with a new book store may be a good idea.