Saving the Physical Bookstore: Barnes & Noble Edition

Barnes and Noble has tried many different paths to avoid complete shut down, but has been largely unsuccessful to date. What, if anything, can they do to save the bookstore as we knew it?

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For some, nothing will ever replace the experience of opening a new book, leafing through the pages, an adventure awaiting within. But as the world increasingly moves online, this may be a slowly dying moment, one that generations may miss entirely. Borders has already closed its doors after filing bankruptcy in 2011, and Barnes and Nobles might follow suit if it doesn’t embrace the digital world quickly.

Barnes and Noble, one of the country’s largest book stores, has seen a rapid and sustained decline in sales over the past several years as books move to e-readers and consumers move to online markets like Amazon. Books purchased for e-readers, like Kindle, hovers around 35% of total book share, although in recent months that number seems to be trending downwards[1]. Meanwhile, Amazon Books accounts for 7% of the company’s total revenue, bringing in a staggering $5.25 billion annually[2] (compared to Barnes and Noble which posted revenues of $4 billion in 2015[3]).

What’s Being Done

  • New Branding: To increase foot traffic, the retailer is trying to position itself as a “lifestyle” brand, a third place for consumers to hang out and socialize (and hopefully buy a book or two)[4]. Results are mixed on this front as many consumers still consider the chain a bookstore and nothing more.
  • The Nook: This was originally envisioned as a tablet, letting B&N play in the same space as Apple’s iPad and Amazon’s Kindle Fire, but was more widely compared to e-readers alone. It was an attempt to steal market share away from Amazon as well as find a new reason to drive customers to the retailer’s brick and mortar stores. While customers could read books from a wide variety of companies, they could only download apps produced (badly) by Barnes and Noble. Not to understate it, but the Nook was an epic failure and continues to hemorrhage money[5].
  • Online Play: Barnes and Noble focused on its website, hoping to take more of the market there to offset losses in its physical stores. Unfortunately, this also backfired when a relaunch of the website caused major issues and caused sales to drop 12.5%. In fact, in the same period, in store sales increased by 1.3%[6]. Why might this be? The company has expanded its percentage of non-book items around the store and spent significant capital to host events at the stores in order to increase foot traffic.
  • Close Stores: Finally, when all else fails, the company has been closing stores consistently, decreasing its total store count from 798 to 640 over the last 8 years[7]. While this hasn’t helped revenues of course, it does provide some relief on the company’s bottom line and helps it stay afloat for another year.

So, what’s next? The retailer is looking at a slow and painful decline unless it takes immediate steps to embrace the newly digital world and find its place within it.

Up Next

  • Figure out Nook: Easier said than done of course, but this move is essential for a company looking to stay competitive against Amazon. CEO Ronald Boire acknowledged this recently and plans to cut operating costs significantly in the coming months. Another key step will be opening the app store to outside developers, giving the tablet the increase functionality that consumers expect. Even with a $39 million loss in the division, B&N can’t walk away from the investment given that many of its most loyal readers are on the platform and drive high volumes of sales[8].
  • Master discovery: One thing Amazon does very poorly is helping costumers explore new options which is a huge gap for dedicated readers. These individuals often wander the aisles looking for a new author or genre, waiting to be inspired by a handwritten “staff favorite” card or a vibrant cover. Online, there is a massive hole in the market for these individuals. By figuring out “discovery” in the digital age, B&N will set itself up nicely to be the preferred book store, online and offline.
  • Stay Physical: The chain needs to close some of its stores, but in order to thrive in this new economy, Barnes and Noble needs to celebrate the fact that it exists online and in the local community. The company needs to find ways to create experiences that straddle both worlds and more tightly tie the consumer to them.

It’ll be a bit of a rocky road for the bookseller, but as Jack Keruoac says in On the Road, “Nothing behind me, everything ahead of me, as is ever so on the road.” Barnes and Noble, keep looking forward – the road ahead is mostly inside that computer in front of you.

Word Count: 794

 

 

[1] http://www.publishersweekly.com/pw/by-topic/digital/retailing/article/70696-as-e-book-sales-decline-digital-fatigue-grows.html

[2] http://www.forbes.com/sites/jeffbercovici/2014/02/10/amazon-vs-book-publishers-by-the-numbers/#6fa2baa065a3

[3] https://finance.yahoo.com/quote/BKS/financials?p=BKS

[4] http://www.nytimes.com/2015/12/04/business/media/barnes-noble-wants-to-become-more-than-books.html?_r=0

[5] http://the-digital-reader.com/2016/03/03/bn-is-shutting-down-its-second-greatest-digital-blunder-on-15-march/

[6] http://fortune.com/2016/03/03/barnes-noble-results/

[7] http://fortune.com/2016/03/03/barnes-noble-results/

[8] http://www.cbsnews.com/news/whats-barnes-nobles-next-chapter/

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7 thoughts on “Saving the Physical Bookstore: Barnes & Noble Edition

  1. This was great Kenzie. As a former frequent visitor of bookstores, it has been so sad to see the demise of all these bookstores. One thing I was curious about, if we look at Amazon’s book’s division (not including text books if that’s possible to break out) is that rising or falling? One thing I was wondering is if the demise of barnes and nobles is emblematic of general consumer disinterest in reading books like before.

    I really liked the point you made about mastering discover and I think that is so key. Finding a good book is often done through recommendation. I wonder if Barnes and Nobles could tap into the growing popularity of podcasts where they could have authors (or their librarians) read a chapter of a very good book to give people a taste of that book which could cause them to buy it. Of course the problem then would be how do you get them to buy it at barnes and nobles and not amazon.

  2. Great post, Kenzie. Poor Barnes & Noble. The Nook simply couldn’t catch on due to the superior marketing and functionality of the iPad and the Kindle, which expanded beyond books into music, web browsing, and movies. Further, the Nook always seemed like a side gig for Barnes and Noble—a little kiosk off in the corner, a “we had to” of sorts—and the company didn’t reorient to make the Nook a core part of the brand promise to consumers.

    In my opinion, Barnes and Noble also missed a major opportunity in not acquiring Goodreads, the social network built around book reviews, reading lists, and literature recommendations. Amazon bought up Goodreads when it realized the power of seeing in real time how hardcore readers felt about content and what additional functionalities they would find useful in future reading innovation. Barnes and Noble certainly could have made the same move, but lacked Amazon’s foresight.

    As for their “third place” strategy, I’m pessimistic. I love browsing a bookstore, but, by my count, local communities now have about ten different companies jockeying for “third place.”

  3. I echo Kiernan’s pessimism around Barnes and Noble successfully creating a third place for its customers. However, I do like your recommendation about trying to create experiences for the community because I do believe there exists a niche customer base that values and appreciate the ability to walk through a store and pick up a new book (like me). Two additional considerations: I would recommend that B&N consider reducing the size of their retail stores, which are currently averaging at 26,000 square feet. One of the reasons they’ve had to maintain such large spaces is to manage inventory, so I would love to see them better leverage technology to manage and predict what inventory they should hold. If B&N was able to engage in the discovery process of books, they could stock in-store inventory accordingly. Additionally, if B&N is able to identify their target base online, perhaps they could monitor social media to see what topics and books are trending for this population and then participate in the conversation by driving traffic to their physical stores with a promotional event.

    Regarding Nook, I wonder if one of the reasons B&N couldn’t successfully capture market share was because producing and selling hardware didn’t align with their operating model. I think the problem with Nook as a product goes beyond its functionality and becoming “open” to the ecosystem. Fundamentally, B&N is not equipped to manufacture an electronic hardware device that requires continuous innovation. What can they do now from an internal organizational perspective to help salvage Nook so that they don’t lose their loyalists?

  4. After reading Spencer’s post on Amazon’s attempt to open physical bookstores, I am more pessimistic on this company’s future. Face with the choice of entering an independent book store, an Amazon book store, or a Barnes & Noble, I will struggle between the first two but certainly forget about B&N. I think the reason for that is that in many ways an independent book store will always have charm but comparing B&N to Amazon is just to easy to see why a consumer would choose B&N. I completely agree with Kenzie that B&N will need to figure out Discovery to have any chance at competing with Amazon but Amazon has such a significant lead in this area that I question B&N’s ability to compete.

  5. As an avid reader and lover of books, this post worries me. Call me old fashioned, but I think there is a magic to reading physical books that e-readers just cannot replace. I also love Barnes and Noble, because it provides the ‘thrill’ of walking through the store and hoping to discover a book that catches your eye. I think that your recommendations for B&N is spot on. Most of the time, I open a new book because a friend has recommended the book. I think if the Nook can tap into this concept (for example it can see what my friends are reading through social media), this could be an untapped opportunity. I also think that B&N needs to continue to focus on making the store into a location where people come to hang out (like starbucks), and can pick up an interesting book.

  6. Thanks for this post, Kenzie. I definitely agree with Jesse’s description of the thrill of finding a new book to read – sometimes good things can come from judging a book by its cover (in-store)! Perhaps Barnes and Noble could try to bundle the physical and digital versions of books together so that people can choose more easily how and where they consumer literature. This way, more people may be tempted to use Nook to read and hopefully prop up that area of the business. I’m not sure how easily this bundling can be made to happen as it would require negotiations with the different publishing houses, but I would think that publishers too are struggling with the digitization of books and would be willing to try bundling if it increases their revenues too.

  7. Interesting read, Kenzie. I really like your point around B&N trying to be a “third place” and unlike some of the commenters above, I’m actually more optimistic about their potential in this area. I think going forward, they can look to leverage and monetize the experiences they offer more than the physical books themselves – for example book readings, book clubs, lectures and talks by authors, podcast recordings, etc. By charging visitors a nominal fee for tickets to attend these events or join these loyalty clubs, they might be able to draw in more revenue (and they could also potentially generate more revenue from their in-house cafes by bringing in increased foot traffic). I wonder if they can even go beyond their traditional offerings and partner with universities or online learning website such as Coursera to provide literature programs and courses, leveraging their vast supply of books. As the need to be able to communicate clearly and effectively in English is a key criteria in any job, I could see there being some demand for these kinds of programs and B&N could potentially capitalize on this and position themselves as the one-stop shop for anything reading-related.

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