CAMPUS STORE INDUSTRY TRENDS 2013 AOA Annual Conference Pasadena, California January 17, 2013

Gary Shapiro Follett Higher Education Group

Agenda  Course Materials Environment  What does it mean to be the “bookstore” today?

 New Business Models/Activities – Streamlined delivery of digital content – includED™ – Concierge Strategy

 Discussion Proprietary and Confidential 2012

Follett Higher Education Group -Exclusively Focused on Education  Largest campus store operator in North America – 900+ campus stores & 300+ virtual stores – 1,200+ online sites

 Nearly $3 billion in annual sales  Serving over 5,000,000 students  State-of-the-art text management (system & staff)  First to market with comprehensive digital and technical solutions

 Family owned and operated since 1873 Proprietary and Confidential 2012

Environment Competition

Consumer Trends

Economic Shifts Technology Shifts 4

Competition COMPETITION IS INTENSE  Transparency  Amazon  Emphasis on affordability  Publishers’ institutional sales  Digital competition  GM competitors ---------------------------------

LEADING TO CONSOLIDATION, PARTNERSHIPS & NEW MODELS  Nook Media  Random House/Penguin  Verba 5

Consumer Trends CONSUMERS ARE CHANGING  Online / mobile shopping  Demand for services  Technology / networks influencing shopping decisions  Multi-cultural changes in demographics ---------------------------------

RETAILERS ARE REACTING  Personalization  Price Matching

6

Economic Shifts FUNDING IS CHALLENGED  Lower government support  Rising college costs and student debt

 Enrollments down  Changes in financial aid  TBD impact of debt ceiling negotiations ---------------------------------

PRESENTING NEW OPPORTUNITIES  Enrollments projected to grow long term  Campus outsourcing strong

 Course materials in tuition  New pricing models 7

Technology Shifts DRIVING FORCES  Availability/use of quality homework management, assessment tools  Declining print sales challenging publishers to drive digital adoption

CHALLENGES  Most digital content unexciting replica of printed text; extended reading on desktop/laptop is difficult for most

 LMS integration standards

 Digital, while cheaper than new print, is more expensive than traditional (buy used/sell back) model; rental countering cost savings of digital

 Depth in availability of digital content (& favorable pricing)

 Student access to fast bandwidth not ubiquitous

 Growth in distance learning/use of digital

 Some faculty still resistant to technology; institution reliance on adjuncts

 Rise in student ownership of tablets & smartphones

 Gamification, courseware and other learning technologies

 ADA concerns

Just the bookstore?

More Than a Bookstore  New business models and online/digital solutions in addition to traditional textbooks and other merchandise  Single point of contact, transaction and delivery for all physical and digital course material content – with established relationships with more than 7,000 publishers and education service providers

 Technology, systems and processes to best serve customers – local, online, mobile and social Proprietary and Confidential 2012

Aligning With Campus Goals  Attract, retain, engage and graduate students. – Maintain faculty choice by providing content from all publishers – Integrate with campus systems to streamline processes and offer one-stop access for your students – Increase student achievement, faculty workflow and effectiveness Proprietary and Confidential 2012

Stores of the Future -- Course Materials • Physical inventory • Local Physical Infrastructure (Stores) • Brick/Click Fulfillment • Freight • Markdowns • Returns • Shrink Book Butler

Core Competencies • Adoptions (editing, verifying, policy compliance) • Aggregation of content • Student transactions • Customer Service • Paying content owners • Paying commissions

• Digital inventory • Central Digital Infrastructure • Click/Brick Fulfillment • Digital Content Acquisition • Less Freight • Fewer Markdowns • Fewer Returns Concierge

Plus a host of programs, channels and services to drive success includED™ BookLook™ © 2007-2009 Follett Corporation CONFIDENTIAL

BookNow™

Skyo Streamlined Digital Delivery

efollett January 19, 2013 Page 12

New Campus Store Model Addressing a Channel and Product Shift / Improving Productivity Productivity Improving store productivity by optimizing store investment levels and streamlining operations to reduce labor

Technology Utilizing new tools and software to enhance the shopping experience

New Products, Services & Brands Developing a pipeline of new products and services including leveraging 3rdparty partnerships

Space Utilization Re-purposing course material footprint incorporating new retail concepts (i.e., “pop-up” stores)

Omni-Channel Engagement Connecting the in-store and online experiences

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STORES OF THE FUTURE Endless Aisle: Increase revenue and wallet–share through implementation of broader inventory visibility and order management functionality

Course Materials – Four Cornerstones AFFORDABILITY Competitive pricing; program options that drive lowest price

CONVENIENCE

ACCESS

Online/in store, all forms of tender, easy returns, customer service

Streamlined and seamless transactions and access

CHOICE Multiple options and formats to provide for customer choice and flexible institutional programs Proprietary and Confidential 2012

Digital Content will Continue to be Distributed in Multiple Formats Under a Variety of Business Models. No one platform, device, format, publisher or business model will be able to fully satisfy complex evolving student, faculty, and institutional needs.

Proprietary and Confidential 2012

Digital Content Will Continue to be Distributed in Multiple Formats Under a Variety of Business Models For the foreseeable future, no single platform, device, format, publisher or business model will be able to fully satisfy complex and evolving student and faculty needs Online

Transaction System

In Store

Learning Mgmt. System

or Credential Authorization

Standalone App

Desktop * Laptop * Tablet * Netbook * Smartphone

includED™

The “Shelf” CafeScribe (and other ereaders)

Other ebooks Native Digital Content Faculty Content/ Open Source

STREAMLINED DELIVERY OF DIGITAL CONTENT Simple system for transaction management and access to all digital content, optimized to work with existing campus technology and strategy 17

Digital Content Student Transaction Today… start

end

Student registers for course

Access and Start Learning Go to bookstore, buy pass code

Student assigned Materials

Find URL

Go to URL, enter pass code

Go to Pub website, buy pass code/access

Contact Customer Support

Faculty evaluates re-adoption? Proprietary and Confidential

Faculty complains to Pub Rep

Student complains to Faculty about ease of access

Digital Content Student Transaction …includED™

start Student registers for course

Proprietary and Confidential

Student accesses course in LMS

Access Product and Start Learning

end

 A program that supports different variations of “text with tuition” where all registered students within the program receive all required materials on or before the first day of class  The fee is imposed and collected by the institution within the tuition and fees framework  Maintains faculty adoption choice – any content, any publisher, any format Proprietary and Confidential 2012

 includED

FHEG Student & Faculty Surveys, 2012

Concierge Solution

Concierge Premise  Increasingly complex course materials market – Affordability options driving customers to new competitors – Changes in products and technologies

 Complexity = Opportunity  Being inside institution = Competitive advantage  Concierge – Change agent and educator – Solutions oriented – Links together Faculty, Publisher, Campus IT, Store

 Goal = Drive delivery of new products through store

Concierge Role(s) EXPERT  Understanding platforms/channels, services and products FACILITATOR  Manages interactions and relationships among key players – Faculty, Publisher, Bookstore, Campus IT & Finance

INNOVATOR

 Culture changer; problem solver  Trainer/Educator

Concierge Role(s) EXPERT  Expert

– Understanding platforms/channels, services and products

 FACILITATOR Facilitator – Manages interactions and relationships among key players • Faculty, Publisher, Bookstore, Campus IT & Finance Teams

 INNOVATOR Innovator – Culture changer; problem solver – Trainer/Educator

Concierge Responsibilities       

Identifying needs Understanding resources Making sure campus knows service offerings Bringing all participants to the table Setting expectations Managing implementation Communicating

Concierge Skill Set        

Good listener and learner Strong analysis/problem solving skills Excellent communicator Trainer Positive attitude…exude warmth Patient, yet persistent Very comfortable with technology Experienced with managing culture change

Concierge Learnings  No infrastructure exists to handle integration of digital content through campus systems  Lots of hand-holding required – Publishers, Campus IT, Faculty/Instructors

 Very important to set and manage expectations  Training and communicating essential  All about culture change – New products – Including cost into fees and tuition – Digital content use can be overwhelming • Plays a calming role

 Work grows exponentially with success

Just the bookstore?

Store of the Future – A Strategic Partner With the Campus EXPERT  Experience and expertise: existing/emerging digital learning technologies and traditional course material  Need to have the fundamentals in place: process, systems, customer service, integration

Proprietary and Confidential 2012

FACILITATOR  A credible, neutral advocate for your school; no ties to a publisher or platform

INNOVATOR

 Develop and provide new business models, products, services and systems  Variety of flexible models and options to meet specific needs instructor/course needs

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Thank You! Questions?

Proprietary and Confidential 2012