Tony DiCostanzo: When I started engaging customers on the website in the broader segment of enterprise sales rather than just healthcare, I initially put up the books and made single copies available. It was difficult to say, “We’re great at these bulk sales but we also can do one copy.” That’s what everybody else was doing. Within two months, I realized that we needed to get rid of all the small sales to position us as experts. That was an important distinction for us because it enabled us to convince publishers that don’t normally ship on behalf of book distributors to become drop-shippers for us. We have some unique leverage in the market that we’re really the only company that some of these major publishing houses will drop-ship for.
Sramana Mitra: What is the minimum size of the order that makes sense for your business model?
Tony DiCostanzo: We just set it, across the board, at 25 copies, but there are obviously exceptions. We started doing 10 copies on our new e-book platform because the distribution model is quite different. There’s a lot more automation to e-book sales. We do 10 copies on e-books as well as on most professional titles. It’s at a much higher price point. For any of the core trade titles, it is at 25 or more.
Sramana Mitra: At this point, we fast forward a few years of you being in business. What does the logistics and inventory operation look like?
Tony DiCostanzo: We have engaged two partner warehouses depending on the logistics component. As the business has expanded, we’ve had a number of unique requests come up. Rather than building out that capability, we’ve found partners that are more suited towards it. In some cases, we have school districts that order thousands of books that need to be distributed to 10 different high schools and 5 middle schools. They want to have only one P.O. with 200,000 books on it. We have a warehouse where we can send 50 pallets and they can redistribute those out to each school site.
We have another warehouse that we use when we have a customer who says, “We need a thousand copies, but we want them to be sent to a thousand different homes.” We’re sticking to the bulk model. For the distribution side of things, we found people that really have strong competencies in those areas. We engage them for support in that type of sale. With the partner that does the pallet distribution, they also handle some of our inventory as well. We only keep a few core business titles in stock that give us the ability to more rapidly turn those types of book if someone has a 2-day need.
Sramana Mitra: You don’t really have to worry about too much inventory.
Tony DiCostanzo: No. It’s fantastic that way. It doesn’t tie-up the cash. Part of that are the great relationships that we form with the publishers. They have to inventory these books anyway for their own requirements for bookstores and distributors. For us to tap in to their inventory and warehousing is a great partnership. One of the key differentiators between us and most other booksellers is that what we sell is non-returnable. Whereas if some book chains buy too many copies of a new release, they can actually send the extra copies back. Publishers don’t have to worry about that with us.
Sramana Mitra: School districts seem to be a big category. Corporate buyers are another category. Can you explain to us the segmentation of the business?
Tony DiCostanzo: Those two are the biggest. They make up 30% each of our sales. The rest is comprised of literacy and education programs. These are community outreach initiatives like the First 5 Program in California. It helps kids prepare for kindergarten. We support a number of those types of programs. There’s a significant Christian and religious segment that’s also buying. They buy for their congregations and members. We’re still doing quite a bit of business with the Federal and State governments.
Sramana Mitra: When you started getting serious about the business, which of these segments did you focus on?
Tony DiCostanzo: Schools and education market really became more important to us about 18 months ago. Until that point, it was mostly corporate-driven sales that made the bulk of our transactions.