The launch of Amazon’s Kindle in 2007 triggered the downfall of physical books and the rapid closure of independent bookstores. The e-book presented a big challenge, and a big opportunity, for Barnes & Noble. Almost immediately, Barnes & Noble decided to re-brand itself as a technology company and build a digital strategy. It began to operationalize this strategy in 2008 by hiring a team of engineers, software developers and designers. This small team of engineers had six months to battle the forces that were upending the way books were published, sold, bought and read. 
Early negotiations on prototypes and patents with Spring Design led to Barnes & Noble’s first e-reader, Nook, that was launched in 2009. The Nook was the culmination of Barnes & Noble’s digital strategy. Leading up to the launch of the Nook, the bookstore chain purchased independent e-bookstore Fictionwise, opened its own e-bookstore, developed iPhone apps and partnered with Irex Technologies to serve as the e-bookstore for the company’s e-reader. In 2009 and 2010, Barnes & Noble invested heavily in its online ecosystem, and using existing relationships with publishers to acquire digital versions of their books, it captured 20% of the e-book market. Barnes & Noble’s goal for the e-book reader, Nook, was that it would “serve as the centerpiece of [their] customer-centric digital strategy.”
However, with the advent of tablets by Apple, Samsung and Asus, e-reader sales declined, and Barnes & Noble saw an even more rapid decline in its sales of the Nook despite new models of Nook Color, Nook Simple Touch, Nook Tablet and Nook HD. The bookstore chain reported losses of almost $70 million on sales of only $211 million in the first year after launch. Where Barnes & Noble drastically failed was in continuing to deliver on the retail experience that had traditionally been its biggest value proposition. The digital zones created for the Nook took retail space away from the customer experience of “curling up on the floor and reading a book”. As a result, in 2012 Barnes & Noble was the fastest falling retailer on the Forrester’s Customer Experience Index.
With the failed execution of this aspirational digital strategy, CEO William Lynch stepped down in 2013. Barnes & Noble had failed to integrate the physical and e-book experiences into one device, and was far from achieving the ecosystems that Amazon, Apple and Google had built. Microsoft had high expectations from Nook and had invested $300 million to acquire a 17.6% stake in the e-reader in 2012. However, it ended up selling its share back to Barnes & Noble in 2014 and took a $238 million loss on the investment. Samsung similarly ventured into a commercial partnership with Nook in 2014, that is yet to deliver positive results. In 2015, the new CEO Ron Boire made another weak attempt at launching digital efforts by hiring a chief digital officer, launching a new website bn.com, and working on improving the Barnes & Noble mobile shopping app.
Does this mean Barnes & Noble is doomed? No. The failure of the Nook clouds the fact that the physical bookstores are actually still generating profits and the decline in number of stores across the U.S. has slowed down in the last few years. Drawing on lessons we learnt from the failure of Li & Fung’s website lifung.com, Barnes & Noble should focus on optimizing its retail brick-and-mortar business instead of trying to transfer those efficiencies to the digital world. While the internet may make these exchanges possible, I do not believe that it is the best platform for Barnes & Noble to successfully expand its bookstore business. It should instead focus on remaining competitive in its physical bookstores and enhancing the in-person experience it offers its patrons, especially with arch rival Amazon trying to enter the brick-and-mortar bookstore business as well.
- Milliot, J. (2009). The nook arrives. Publishers Weekly, 256(43), 6-n/a. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/197106807?accountid=11311