Niche E-Commerce in Textbooks: ClassBook CEO Tony Pfister (Part 4)

Sramana: Who pays for the initial inventor, you or the schools?

Tony Pfister: We pay for the inventory, which requires us to be a very efficient operation. We are good at managing inventory levels for schools, and now that a lot of curriculum is all digital, we will have to adjust our approach there as well. The schools are no longer focused on managing textbooks; they are now focused on managing education.

Sramana: Do you run a traditional e-commerce model for your textbook business?

Tony Pfister: Yes, we buy at wholesale prices and we sell at retail price.

Sramana: You effectively have a demand-controlled e-commerce business.

Tony Pfister: You can describe it that way.

Sramana: That is very smart, I like that approach. What were some of the early challenges of growing the business?

Tony Pfister: Scalability was the biggest. It is very easy to manage one, two or even three clients. When we hit 10 clients, our operations were manageable but still complicated. Once we moved beyond 15 clients, we have had to rework our processes and rebuild some of our systems. It changed the tools that we made available to our clients to help us streamline ordering and processing the books.

Sramana: What were some of the solutions you initiated to achieve scalability?

Tony Pfister: We were one of the first services to eliminate paper. We moved everything onto the web. We did not want to deal with emailing spreadsheets back and forth. We put a tremendous amount of effort into online management. We allow our schools to digitally manage their book lists. We did that in early 2000, when the concept of going digital was not completely there. That went great and helped us improve turnaround time.

Eventually we had to look at our processes and determine what was preventing us from moving up to the next level. Each time we doubled the business, it added a new layer of complexity onto our operations. A million-dollar business will not always support a $10 million dollar business.

Sramana: How many schools do you service today?

Tony Pfister: We service around 200 schools now.

Sramana: How much business do you do with each school?

Tony Pfister: It varies widely by account. Some accounts do more than $500,000 and others do around $30,000. The great thing about it is that once you build scalability into the model, the size of the account is not a significant factor. You can bring on more and more clients without disrupting your business model and operation.

Sramana: There must be some cost of acquiring those clients, right?

Tony Pfister: Yes, but when you look at the tenure of our clients, you will see that our cost of acquisition is covered by tenure. We have a 98% retention rate. Clients stay with us for seven to 10 years on average.

This segment is part 4 in the series : Niche E-Commerce in Textbooks: ClassBook CEO Tony Pfister
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