BookRenter, a rising star in the textbook rental industry, announced Wednesday that it has raised $40 million in a Series C round led by existing investors Adams Capital Management, Comerica Bank, Focus Ventures, Lighthouse Capital Partners, Norwest Venture Partners, and Storm Ventures. Concurrently, the company also announced its new partnership with the National Association of College Stores (NACS) as part of its strategy to make campus bookstores the primary purveyor of BookRenter rental textbooks.
While BookRenter allows Web users to order textbooks directly from the website, its overall strategy for attacking the textbook market focuses less on direct communication with students through the site and more on partnerships with campus bookstores, to which most students look first for their textbooks.
But with the bookselling atmosphere moving almost entirely online—so much so, in fact, that Borders recently filed for Chapter 11 bankruptcy protection—why is BookRenter focusing its strategy on in-store purchases?
“You have to realize that there is a big difference between trade publishing and textbooks,” said BookRenter CEO Mehdi Maghsoodnia in an interview. “Textbooks is a very robust market—18 million students twice a year have to buy their books, so the spending adds up to north of $10 billion. It’s a very robust spending pattern as opposed to trade publishing, where purchasing is discretionary and impulse buying.”
Indeed, BookRenter’s mode of attack is paying off. The company’s revenue has grown 600% in the last year and its employee headcount has grown 500% to 100 people. More than 560 campus bookstores use BookRenter, including eight of the ten largest college bookstores.
As part of its partnership with NACS, BookRenter will be offering three new services for campus bookstores: RapidReturns, which allows students to return their rented textbooks to their campus bookstore rather than mailing it back to BookRenter, thereby increasing foot traffic in the campus bookstore and promoting the sale of other merchandise; BookRenter Inventory Purchase and Fulfillment, which allows NACS college stores to sell inventory to any BookRenter Partner store’s customer directly from their own inventory shelves; and BookRenter Local Warehousing, which allows NACS campus stores to earn revenue by acting as local warehouses.
NACS’ on-campus research has found that students who can rent BookRenter textbooks from their campus bookstore are 21% more likely to do so, and 10% more likely to buy other items from their campus bookstore.
Interestingly, Mehdi Maghsoodnia told me that this year, the company doesn’t see Chegg as its primary competition.
“We’re about half their size now, but we were a tenth of their size 18 months ago. But we’re far more capital efficient. We’re catching up with them, but we’re doing it at a tenth of the cost. We don’t see Chegg as competition this year—we saw them as competition last year. The real competition is online providers. If you don’t get your books on the local campus store, there’s an 80-90% chance you’re getting it online at Borders or Amazon.”
The new capital from this round of funding will enable BookRenter to hone in on its focus for the next two years, which is to outfit campus bookstores with the most cost savings and best quality of service at the campus level.
Image source: BookRenter.com