HellerResults
K-12 Textbook Rental: Post-Secondary Success Drives Into New Territory
Nelson B. Heller, President, EdNET, MDR — Friday, July 01, 2011
The serious traction obtained by post-secondary market textbook renters, outlined in last month’s Heller Report column, has generated some similar initiatives in K-12. The low-hanging fruit is in private and parochial high schools, but the serious money, if it happens, will be in public school districts where it is just starting to get some uptake. Firms with K-12 rental footprints include Follett Virtual Bookstores, BookRenter.com, College Book Renter, FindersCheapers.com, and Budgetext. In both post-secondary and K-12, the biggest market driver is the cost of textbooks. Because cost is one of the issues in used and eBooks, what’s happening in book rental also sheds some light on where the K-12 market’s going for these alternatives to traditional books. Read on to see if you agree that for K-12 what’s happening here is about more than just getting books into students’ hands.
Under the Radar
For a business opportunity that’s taken off so dramatically in higher education, it has gotten precious little attention in K-12 in places where you’d expect concern. At the Association of American Publishers, Jay Diskey, Executive Director of the School Division, told me, “I hear very, very little about textbook rental in the K-12 space. I haven’t heard any of my members mention it nor have I seen any state legislation on the matter.” He added, “Be aware that several states use the term ‘textbook loan program’ to label their categorical fund for instructional materials; however, ‘loan’ is used merely to assert the state’s ownership of the books. They don’t want the districts to sell the books.”
John Lopez, Vice President of the National Association of State Textbook Administrators (NASTA), told me it’s been at least a year and a half since rental was even mentioned at a NASTA meeting. Lopez, who is Managing Director, Instructional Materials and Educational Technology, Texas Education Agency, said, “Renting textbooks hasn’t been an issue for NASTA. States that are ‘adjusting’ to high book costs are exploring digital content, both commercial and OER, or substituting supplementary material for basal. The few states doing rental tend to have local appropriations and decision making, so some districts aim to save money by renting. Here in Texas, we use state adoption lists and buy the books for districts selected from it.” But, he added, pending Texas legislation proposes an allotment for local districts that would give them more control over how they acquire instructional materials with state funds and in what media. If passed, it would specifically allow more e-content, equipment for digital content, and rental.
Secret Sauce: An Online Transaction Platform
To get a handle on how this works in K-12, let’s have a look at Follett Virtual Bookstores. Follett Virtual Bookstores provides an e-commerce solution to K-12 institutions that don’t wish to have a physical bookstore location. This can be due to space constraints, economies of scale, and dispersed student populations, but whatever the reason, Follett Virtual Bookstores provides end-to-end e-commerce and fulfillment services so that schools can focus on education—not on running a bookstore. Each Follett Virtual Bookstores partner institution gets their own URL, a branded, customized storefront on efollett.com, Follett’s proven e-commerce platform, which was just re-designed and re-launched to deliver an enhanced e-commerce experience to the more than 4 million K-12 and higher education students it serves. Follett currently supports 53 K-12 virtual bookstores, offering textbooks for purchase and for rental, as well as general merchandise and other products. Follett supports its partners with local account management, personal customer service, on-campus book buyback, and marketing support.
George Fisher, VP Sales, Follett Virtual Bookstores, told me, “Offering textbook rental to the K-12 market is part of Follett’s overall mission of supporting students’ academic success, bringing down the cost of course materials and delivering additional value to the schools Follett serves. With textbook rental, parents and students can expect to save, on average, 50% or more versus the cost of a new textbook.” Announced in April of last year and launched in time for back-to-school 2010, Fisher said the program has been “very successful” so far, a “real benefit for schools, students, and parents.” Follett’s K-12 rental program, an initiative of Follett Higher Education Group, is built on the Rent-A-Text platform, which Follett created to serve its higher education business and which has saved students more than $130 million to date. It also makes use of their 500,000 square foot warehouse in River Grove, Illinois, to store and process books. “We’re dealing mainly with high schools and concentrating on parochial and private, but we recently wrote our first public school order in Chicago for a virtual bookstore,” he added.
Follett is also one of the leading providers to K-12 of integrated educational technology for the management of physical and digital assets; the tracking, storing, and analyzing of academic data; and digital learning environment tools for the classroom, focusing on student achievement. Here again, virtual bookstores and textbook rental form a nice synergy.
Britt Hinton, VP & General Manager, Follett Virtual Bookstores, is responsible for their K-12 virtual bookstores and rental program. Follett has been in business over 135 years, and Hinton has been with them for 25. Commenting on their relationship with participating schools, he said, “We look at books as either national or local. National books are more readily offered as rental because we can source them and rent them on a national basis. However, in some cases, schools want to offer books for rental which aren’t nationally rented titles, and in those cases, we ask schools to commit to a three-year book use to mitigate the ownership risk for the investment. We then offer these titles for rent on a local basis. Rentals cost students less up front than any other choice, and renting students have no risk connected with reselling when the book’s no longer needed.” He anticipates public schools doing more outsourcing to firms that have scale, infrastructure, and relationships with publishers. Follett sees its role as being a major consolidator and aggregator of educational content across the country, allowing schools to avoid having to deal with returns, damaged books, PO timing, buybacks, and depot collection of rental books.
When asked about competition, Hinton said, “In the private/parochial world, it’s either schools themselves or for-profit outsourcers. We also see some sell-it-yourself online book markets that compete on price, but orders may not arrive on time, there’s no return policy, and the product may be marked, damaged or not the right book. When you partner with Follett Virtual Bookstores, service is the key—both to our institutional partners and to their students and parents.”
Another post-secondary market company taking K-12 rental seriously is BookRenter.com. Mehdi Maghsoodnia, CEO, told me that over the past year and a half, high school students, mostly from parochial and private schools, have represented 5% to 10% of their revenue even though they don’t market to them. This fall, BookRenter will roll out a K-12 program with an as-yet-to-be-announced partner. “We don’t see that much difference between K-12 and the higher education market from our business model’s perspective. Maybe K-12 wants the book longer (a year versus a semester),” he said. As for ownership risk, "our platform’s rich market data capabilities facilitate shifting inventory from one high school to another, lessening the risk we’ll be stuck with unwanted books.” The real big opportunity, he said, is in public K-12 schools, “and we’ve already got some discussions under way. Their very real problems of buying and maintaining books for students are a strong incentive for them to outsource.”
Companies like College Book Renter, funded in part by a $10 million investment from South Eastern Book Co., are just putting their toes into the K-12 pond. Dave Reeves, VP, Public Relations, told me, “We’ve had discussions with several private high schools, and a few have begun offering rental as an option in their schools.” To the extent that high school and early college materials overlap, the connection with a college distributor is an attractive synergy. On the value proposition for K-12 textbook rental, he said, “A lot of school systems are strapped for cash. Many are using really old and outdated books, some with missing pages, some have to be shared. Rentals would allow schools to provide current editions in acceptable condition.” Regarding the types of materials for which it seems to have the most traction, he said, “Core textbooks work best; most workbooks are designed to be written in and have tear-out pages.” As for the demographic that characterizes the best market, “Rentals would be most beneficial in the most economically challenged systems. Schools struggle with the large up-front capital expenditures to buy new books so lower yearly rental expenses are a solution.” How much further the firm will go with K-12 rental will depend a lot on what the publishers are willing to do. From Reeve’s perspective, “If they get in the rental game, it may cut out the wholesale companies. However, the major players in the rental market already have the business model, experience, and technology to launch the programs. We’d be willing to work with publishers to facilitate their programs.”
Budgetext is another player cautiously exploring K-12 rental. Park Anders, CEO, said they’ve gotten into it to respond to specific long-term school customers’ needs. “There’s not as large an interest as one might think. Maybe it’s where a subset of students can’t be satisfied financially. Rental is a natural extension of our traditional model.” Anders added, “We’re seeing the most interest in private schools, not much in public schools. Looking at this from a broader perspective, parents aren’t being listened to much in the debate about curricular materials. Eventually they’ll be the most important voice.”
Compared with the higher education market, K-12 is still small potatoes. James Krewson, FindersCheapers founder, whose site serves many verticals including K-12, told me, “My search engine lists K-12 used textbook prices, and I do see some used K-12 textbook sales. But my impression is that I’m selling primarily to teachers and home school families. I haven’t noticed large volume K-12 textbook rentals, but if you check for K-12 rentals at my site, you’ll find items from CampusBookRental, such as a biology text for Grades 5-8 and a teacher resource book for teaching geometry Grades 3-5, and from several other online vendors. Reeves of College Book Renter said, “The higher education textbook rental market is growing at triple digit rates—our own business doubles every semester. It would be hard to compare higher education with K-12. Higher education students are responsible for finding and purchasing their own books, whereas most K-12 books are provided by the schools.” But, he added, “If the K-12 rental model follows the higher education trend, the growth potential is enormous. In the public school system, it makes sense because owning textbooks isn’t an asset to the schools.”
Sleepy Segment or Wild Card Stalking Horse for the Digital Future
So far K-12 textbook rental hasn’t attracted nearly as much attention as in higher education. The private and parochial school segment has been the most responsive, a universe of some 23,000 schools out of a total of roughly 117,000. Of these, the roughly 18%, which are senior high schools where book needs most closely resemble the post-secondary market, account for less than 4% of the K-12 universe. It’s in the other 96% that the big money for K-12 textbook rental will be found, if the value proposition for public schools strikes a resonant chord.
The persuasive combination of budgetary stress and maturing digital technology isn’t being lost on school administrators. Drivers include a growing aversion to the cost of new print textbooks, faculty and student desire to buy just the parts of learning products which they want, and the recognition of the need for differentiated instruction in K-12. Add in the multiple pain points of school administrators dealing with having to manage the provision of instructional materials, and the prospect of kicking over the old models becomes less remote. Next month we’ll look at Indiana, where state law requires universal K-12 book rental but whose funding model currently discourages commerce, and Illinois, where state support for textbook purchases has been cut significantly. Putting those together with today’s more substantial technology infrastructure in schools, publishers’ growing digital offerings, the increasing supply of open educational resources, and gradual recognition of student-owned devices as legitimate for school networks, we’ll see that K-12 textbook rental may well be a stalking horse for tomorrow’s digital future.
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