Sp Analysis

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The Company - "SP"
The company is engaged in the retail sale of books and stationery. The company operates primarily in the UK but has limited presence in other cities like Paris, Shannon, Copenhagen and Stockholm. The company operates through two business segments: travel and high street. The travel business focuses on operating stores in airports, railway stations, motorway service areas, hospitals, workplaces and bus stations. As of August 31 2010, 516 travel locations were in operation of which 128 operated under franchise agreements. These stores are more "convenience" oriented and sell a tailored range of products targeting people on the move. Travel stores are smaller with units ranging in size from 90 square feet to more than 6,000 square feet with a total of 0.4m square feet of selling space. Of the 516 travel units, 136 are in airports, 117 in railway stations, 119 in motorway service areas, 103 in hospitals and 24 in locations such as bus stations and workplaces. A limited number stores are located abroad but is not representative. Travel stores are located in the high footfall areas (i.e. areas with significant numbers of people going through). The high street stores are extensively spread across the UK and have presence in several significant high streets in the city. The high street stores sell a wide range of products compared to the travel stores, with a product mix that includes books, stationery (including greetings cards), news and impulse (including newspapers, magazines, confectionery and other impulse products), and a convenience offer of entertainment products. The high street stores are large with store size ranging from 777 square feet to more than 23,000 square feet and the total retail space under the portfolio as of August 31, 2010 was 3 million square feet. SP operated 573 High Street stores by the end of FY2010. The high street segment also operates online retail business and sells a range of books, stationery, magazines and gifts through its own website www.spx.co.uk and entertainment products through www.spxentertainment.co.uk.

The Industry

Who buys SP's products and/or services

Buyers within the UK book market are numerous, small and with little financial muscle. However, there exists some differentiation as content is protected by copyright. Moreover, although many retailers stock similar titles within similar genre (e.g. fiction, novels) sections, not all retailers stock the same academic or professional books. In these instances, the consumer’s choice of retailer is limited. However, the buyers are willing and able to switch to whichever retailer offers the best price. Switching costs are negligible (meaning, switching costs can be disregarded as a factor). Books are not classified as essential items, and as such may be considered a luxury (or non-essential good). In addition, buyers generally have sufficient time to shop around for the best deal, as well as assess the availability and worth of alternatives such as the internet (digital-only) and magazine publications. However, in the case of professional or academic texts, these kind of books can be considered to be essentials to buyers. Brand loyalty does not tend to be towards publishers or retailers. Authors may command a certain amount of brand loyalty.

SP's suppliers

Suppliers within the book market vary greatly in size. There exist large publishers, providing books for many segments of the market, alongside smaller ones who focus on specific areas such as academia. Established authors are often represented by a literary agent to market their work to publishers and negotiate contracts. Here, the 'raw materials' can be highly differentiated and even experienced publishers may find it difficult to judge how successful or otherwise a book may be in the marketplace. This is only likely to be a significant problem where a publisher has paid a very large advance (for, say, a celebrity autobiography) that is not recouped...
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