Online Second-Hand Bookstores’ Strategic Decisions: A Theoretical Perspective

Abstract

The development of second-hand bookstores has received ample attention in the book industry. However, research on their operational strategies is still in its infancy, especially concerning how they compete with new bookstores. We used the Hotelling model to investigate second-hand bookstores’ differentiation strategy. We analyzed how product mismatch problems and consumer preferences affect bookstores’ strategies and profits. We came to three major conclusions. First, second-hand bookstores can effectively compete with new bookstores using a product differentiation strategy. Moreover, it is better to set high prices for special old books. Second, a higher breadth and depth of mismatching will increase revenue for second-hand bookstores and lower revenue for new bookstores. Third, new bookstores’ profit decreases with consumers’ preferences for special old books, while the influence of such preferences on the second-hand bookstores’ profits depends on the transportation cost. These findings provide valuable insights for second-hand bookstores to compete with new bookstores. An important implication of this study is that using a differentiation strategy for second-hand bookstores needs to consider the mismatch problems and consumers’ preferences.