At its peak, Australia’s largest online bookstore, Booktopia, had turnover of A$2.4 million, 5 million customers and sold 1 book “every 3.9 seconds”. This week it’s entered into voluntary administrationa month after announcing the elimination of fifty jobs and the resignation of senior staff, including the CEO. Shares fell to 4.5 cents, compared with about $3 a share in 2021.
But even at its peak, in fiscal 12 months 2022, Booktopia was still unprofitable. What happened?
Booktopia co-founder Tony Nash who said “I was never a big reader,” he railed against the bookselling industry’s expectations of a bookseller. The Australian bookseller is a business of slim profit margins, where employees are driven by their love of books.
But Nash simply saw the book trade as a business opportunity in the early stages of online sales. When he attended a booksellers’ conference firstly of Booktopia, Nash reviewed its local competitors consisting of individuals with no business sense: “These people have no idea about anything.”
However, shortly after its twentieth birthday, Booktopia went into receivership. In contrastThe variety of independent stores and native chain stores has definitely decreased, but they are still doing quite well.
How can a data-driven, market-driven business fail while traditional bookstores proceed to define the industry?
“It’s not that bookstores aren’t viable businesses,” said Robbie Egan, chief executive of the Australian booksellers association BookPeople he told the Sydney Morning Herald last month“it looks like Booktopia doesn’t exist.”
The Rise and Fall of Booktopia
Booktopia’s history is certainly one of modest wealth to skyscraper. A software programmer by trade, Nash co-owned, together with his brother Simon and brother-in-law Steve Traurig, a family business that benefited from the founders’ early knowledge of the Internet and Google’s search practices. initially he ran Booktopia as an after-hours activity, with $10 a day to invest from the family business.
The company was founded in 2004 grew quicklyfrom a turnover of $2,000 in the primary month to $30,000 in the fourth. In 2014, the corporate moved to a bigger warehouse, and in 2018 it shipped 30,000 packages a day.
COVID-19 lockdowns have given people more free time at home and encouraged online commerce. In 2020Booktopia was listed on the ASX.
Diego Fedele/AAP
The fate of Booktopia is the most recent in a series of major bookseller collapses. In the 2010s, global “megastore” Borders failed in AustraliaDespite initial fears that this might lead to the closure of Australian-owned stores, this turned out not to last long.
These big box stores were sandwiched between two sorts of competition: online bookstores like Booktopia and local hand sales in independent bookstores.
Unlike traditional bookstores, where space constraints force them to stock just a few copies of a limited variety of “first list” (recently released) titles, Booktopia offers hundreds of thousands of titles on its website and has roughly 150,000 in stock.
Booktopia touted its predictive sales algorithm as a competitive advantage, allowing the corporate to manage inventory levels and allocate promoting spend by monitoring and forecasting product demand in real time.
Nash he described it as a pc company that simply sold books. In contrast, stationary bookstores They typically depend on the opinions of publisher sales representatives and their very own assessment of the local customer base when choosing stocks.
Why is Booktopia failing?
The principal competition for Booktopia is not physical bookstores, but international online bookstores. American Amazon captured a serious share of the Australian book market in recent years. Much of Booktopia’s early growth occurred before Amazon began trading in Australia.
Low costs, international operations and high competitiveness, Amazon, and before it Book Depository, forced Booktopia to match its discounts. In particular, Book Depository was able to lower its prices since it offered free shipping due to partnership with British Royal Mailuntil its termination in 2023.
Booktopia’s previous growth led to over-investment in storage capability. In 2023 doubled the space for storing and introduced automatic packagingCombined with rising inflation-related running costs like rent and electricity, and a decline in book sales following COVID-19, this investment has further eroded margins.
Perhaps Booktopia’s biggest mistake was undermining customer trust. It was targeted allegations of misleading promotingwith titles advertised as “in stock” taking several weeks to reach their recipients and sometimes damaged. CEO Blamed inventory bottleneck during peak periods.
Adding insult to injury was Booktopia’s decision to give customers just two days to seek a refund or alternative if their orders were damaged or faulty. Considering this a “reasonable time,” The Federal Court ordered last 12 months to pay $6 million in penalties. But the damage to consumer confidence drove business to competitors.
For those concerned in regards to the health of the local publishing industry, Booktopia’s demise is not cause for celebration. “They play a really important role in supporting Australian authors,” Egan said he told the Sydney Morning Herald last month.
Unlike Amazon, Booktopia he had a commitment to the local publishing industry. It selected to buy from Australian publishers relatively than their international counterparts where possible, and to support Australian authors.
The ability to offer hundreds of thousands of titles on the market also allowed consumers to discover and access previously unavailable titles, increasing the potential sales period for publications.
While Booktopia’s demise could result in other local bookstores taking a rather larger share of its market share, it is more likely to profit Amazon, which is in no way connected to the local industry.