Alibris Case Study

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Team # 8

Kate Flournoy (1100794) Marco Guzman (1143575) James Montague (1152064) Ridhima Sharma (1063407)

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Team # 8

Kate Flournoy (1100794) Marco Guzman (1143575) James Montague (1152064) Ridhima Sharma (1063407)

The situation in our industry has drastically changed as the barriers to entry have been virtually eliminated causing more firms to enter the market. The influx of suppliers is shifting our industry towards acting like a perfectly competitive market. As shown in the supply and demand curve in the appendix, the natural supply and demand created by the new market conditions forced sellers to take huge hits in their profit margins in order to sell products as other reductions to barriers to entry drove down prices (See Appendix A and B). Used books are very homogenous products in the eyes of most consumers; if a firm charges too high of a price, customers will purchase books from one of the many competitors with lower prices. There exist low costs to enter the market and no cost to exit via these online services, shrinking the producer surplus and consequently diminishing the gains of a firm.

In order to gain a thorough understanding of the online retail market for books, it is necessary to conduct a Porter’s Five Forces and SWOT analysis model. The retail book market was once a very attractive market that enjoyed high profit margins. However, new entrants, more easily accessible substitutes, and increasingly aggressive competition has changed market conditions so quickly that many suppliers have not realized this, and therefore, not adapted accordingly. Historically, suppliers in our industry have wielded considerable power. They were able to price their goods in a way that yielded high profit margins. Suppliers in our industry have shifted from a majority of professional booksellers selling hundreds of books to individual sellers selling...