Tech, Autos, & Gear in Layman's Terms Since 2006

166

February 2, 2012 • Editorials

Does Barnes and Noble WANT To Kill the Bookstore?

20120201-105230.jpgimage 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!

5 Responses to " Does Barnes and Noble WANT To Kill the Bookstore? "

  1. Anonymous says:

    Carly,  although it’s possible that B&N is doing it simply to get back at Amazon, I wonder if it’s a little more complex than that.  There is a larger concern that many have raised about Amazon acting as both a publisher AND a retailer and the long term implications of holding the whole process from beginning to end.  It just screams potential monopoly.  It is possible that B&N is simply trying to bring a little publicity and visibility to the problem so that folks can at least see what Amazon has quietly been building and decide what they do (or don’t) want to do about it.

    I do agree that it hurts B&N as much (or more) than it does Amazon, but I’m glad it makes the larger issue more visible than before.  I definitely have concerns about the behemoth that Amazon is becoming and what it means for retail in general when all the competitors are gone… 

  2. gous says:

    There seems to be some misunderstanding here, I mean you do realise that Amazon will have exclusive ebook rights to their own published authors? So this is pretty much a return volley by B&N. The rationale for this move has been well laid out by a commenter at another site so I will just reproduce it here… it pretty much sums up the thinking of B&M management running bookshops.

    ‘Not carrying the Amazon titles in stores, is the right business decision, if you remove any emotion from the equation.

    In e-tailing, there is no inventory cost or associated risk, and an infinite inventory is possible. So it is typically cutting-off-your-nose-to-spite-your-face to avoid selling a product for any reason. That’s why BKS is still carrying the Amazon books on its website.

    But with traditional retailing- an infinite selection is not possible, and the store must make a cash investment in every single product it chooses to keep in stock. Therefore, stores can only afford to keep in stock products they have a good reason to believe will sell well. With bookstores this is particularly true because there are literally millions of books to choose from and nowhere near that many spots.

    And Barnes and Noble has no particular reason to believe the Amazon books will sell well. For one thing, books in general aren’t selling that well- they want to diversify into other products. But even for the book-dedicated shelf space that remains- these books would be particularly hard to sell in BKS stores than others because they are associated with Amazon- meaning people would be even more likely than usual to buy them at Amazon rather than elsewhere- and because there would be no nook version available.

    If Barnes and Noble knew for sure that one of the titles would be a red-hot seller than they could make an exception- they’ve already said they would carry Harry Potter books no matter what the digital availability is. The problem is that there’s no surefire way to predict what books will sell best in advance, and Amazon has not demonstrated a dramatically above-average ability as a traditional publisher. Thus, Barnes and Noble’s best bet is to simply stick with stocking books from suppliers who don’t place them at a obvious disadvantage when trying to move product.

    That’s probably the key to understanding why this move is a slam dunk good call for BKS- they simply have too many better options for the shelf space and can’t do both.’

  3. Julie says:

    Barnes and Noble is killing itself mostly because of their refusal to do much in terms of sales or clearance racks. I know Borders did too many, but not doing enough encourages people to just go to Amazon. They need to do a few more sales along with changing the clearance aisles every now and then. I bought the Peanuts Treasury for $10 from BN once, went back a few months later wanting more comic strips and lo and behold, they still had Peanuts Treasury and a few C&H which I’ve already got. So when I decided to beef up my comic strip collection 98% came from Amazon. I am not paying $150 for the Complete Calvin and Hobbes and then $75 for Peanuts 60th Anniversary not when I can get both for $150 on Amazon.

    • Carly Z says:

      I agree about regular books on sale, but bargain books are a funny one. Assuming B&N buys them like Borders did, often they are bought in bulk and shipped as a random assortment. Stores often get what sells better if possible (like cookbooks and comics) but they don’t have the same level of inventory and special order control that they have with regular titles.
      Bargain and remainders (the stuff on the clearance racks in the foyer and stuff) are often not marked down by the bookstore. They are books that were returned to the publisher or distributer and then repackaged as remainders. Once B&N puts them in a store, they are there until they sell. There’s no place to send them back to, so it’s either discount them until they sell or let them rot on the shelf.
      That’s why it is so tough to go to a B&N and intend to find specific bargain/remainder titles, and why they limit how many each store has.

    • Carly Z says:

      I agree about regular books on sale, but bargain books are a funny one. Assuming B&N buys them like Borders did, often they are bought in bulk and shipped as a random assortment. Stores often get what sells better if possible (like cookbooks and comics) but they don’t have the same level of inventory and special order control that they have with regular titles.
      Bargain and remainders (the stuff on the clearance racks in the foyer and stuff) are often not marked down by the bookstore. They are books that were returned to the publisher or distributer and then repackaged as remainders. Once B&N puts them in a store, they are there until they sell. There’s no place to send them back to, so it’s either discount them until they sell or let them rot on the shelf.
      That’s why it is so tough to go to a B&N and intend to find specific bargain/remainder titles, and why they limit how many each store has.

Leave a Reply