Amazon Competitor Chegg to Outsource Its Print Operations in Bid to Become Digital Services Company
Chegg is one of the few startups to have survived the tense textbook market over the past few years, in part because it knew when to shift its focus to new activities. And today that includes outsourcing one of its core functions.
Chegg announced on Monday that it has struck a deal with Ingram. The book distributor is going to be taking on responsibility for Chegg’s physical textbook business. Ingram will handle the warehousing and shipping of inventory on Chegg’s behalf, leaving the startup to market the service to students, run the website, and provide CS and other support.
In a way, Chegg is turning their online bookstore into a virtual store which is not to different from the service offered by Aerbook.
The company is making this move in part to satisfy investors, and will likely show a dip in revenue as a result of only being able to book only a 20% on the sale of a print book, as opposed to the 100% of a rental or sale it recognized previously.
On the plus side the reduced overhead should also boost profitability, something which Chegg sorely needs. The company earned $1.7 million profit on $84.4 million in revenue in the 4th quarter, a 9% increase over the same quarter last year.
In a statement, Chegg CEO Dan Rosensweig said, "Students will gain the benefit of Ingram’s world-class logistical capabilities and network of warehouses which means they will get their books faster while still receiving all of the benefits of working with Chegg."
Ingram is expected to start taking over for Chegg by 1 May and be running all of Chegg’s warehousing by the end of the year.
Chegg is a competitor to Amazon in both print and digital college textbooks. Both parties sell and rent them, but Chegg has also expanded into providing other services to students, including homework help and tutoring.