image courtesy Fundamentally Flawed
Barnes and Noble is taking an extremely strong anti-Amazon stance this week. Engadget is reporting that They’ve declared all books published through Amazon or in an exclusive deal with Amazon will not be carried in their brick and mortar stores, just online at BN.com.
I am going to ask you to pardon my language, but that is the stupidest $&@*! thing I have ever heard. I am not an expert in business, but I do understand basic economics, and I am an avid reader…and here’s why I think this is suicide for the brick and mortar business.
Let’s look at B&N’s sales for a moment. From their 2nd quarter press release:
SECOND QUARTER SALES
Total sales decreased 0.6% as compared to the prior year, from $1.90 billion to $1.89 billion. Barnes & Noble store (“Retail”) sales decreased 1% from $931 million to $918 million, with comparable sales decreasing 0.6%. Physical book sales declined, offset by increases in NOOK products and were positively affected by the liquidation of the remaining Borders stores. Comparable store sales improved each month throughout the quarter.
Barnes & Noble College (“College”) sales declined 4% from $797 million to $768 million, due to a shift from selling new and used textbooks to lower priced, higher margin textbook rentals. Comparable store sales increased 0.4%. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period.
BN.com sales increased 17% over the prior year, from $177 million to $206 million. Comparable sales increased 38%, on top of a 59% increase a year ago. This increase was driven by continued growth of digital content sales and purchases of award winning NOOK™ devices. BN.com comparable sales reflect the actual selling price for eBooks sold under the agency model rather than solely the commission received.
Yes, brick and mortar stores dominated the sales in terms of pure numbers, but they dropped in volume. During the holiday season! Meanwhile, BN.com and NOOK business soared, with decent percentage increases in sales. So while the physical bookstores are keeping the lights on at B&N for now, the trend is very much in favor of the online and NOOK business.
Now imagine you head to B&N to pick up a book, and it is published by one of Amazon’s imprints. The nice bookstore clerk tells you the stores don’t carry it, but you can order it from BN.com. Even assuming the sale stays with B&N and you buy from their website and not Amazon, all this does is shift further sales away from the brick and mortar business. The clerk could give you a ten minute passionate speech on Amazon, exclusivity, and the death of the bookstore, but that doesn’t change the fact that you wish to buy a book and the bookstore doesn’t carry it.
Yes, B&N’s intention here is to harm Amazon’s publishing business. But Amazon is a behemoth in online sales, and already leads the way in ebook sales. So while this punishes Amazon, it also punishes physical B&N locations. And Amazon is stubborn and has far deeper pockets. Eventually they’ll have a hit…is B&N going to refuse to carry the next “Da Vinci Code” or “Twilight” in their stores? And if they do start encouraging more consumers to use their website instead, will they get those people back in store? This is a big gamble for Barnes and Noble. It is an arrogant move where they bet the strength of their stores against Amazon’s online presence, and it punishes consumers along the way. We will have to wait and see what the long-term impact is, and I am happy to be wrong here, but I think this hurts an already weak B&N more than it hurts Amazon.
What’s your take on Barnes and Noble’s exclusivity stance? Poorly conceived stunt or a David vs Goliath showdown? Let us know in the comments!