“I don’t think Barnes & Noble has a prayer,” Hoch says. “The thing the company does have is 674 college bookstores. Those are different because Barnes & Noble has a captive audience and can sell memorabilia.”
Raff suggests, however, that it’s too early to write off the company. In fact, the pessimism directed toward the bookseller may be overdone, he says, noting that Barnes & Noble was resourceful in devoting store space to the Nook and has assets that could be utilized. “When you talk ecosystems, it’s not just the digital stuff,” Raff points out. “The comfortable majority of publisher profits are physical books, and they need distribution.”
Indeed, Barnes & Noble’s biggest asset may be the reality that publishers need shelf space to sell books; without Borders, there are few options. “The American publishing industry would be aghast at losing that shelf space” if Barnes & Noble went out of business, Raff says. As a result, the publishing industry could be more willing to cut deals with Barnes & Noble to offer digital rights bundles with hard-copy books, he adds.
The company could take advantage of this leverage, Whitehouse says, by offering combined paper and digital versions of the same book – assuming the chain could get publishers to agree. Comic book publishers are among those already experimenting with bundled digital and hard-copy sales. While an e-book offers many benefits, the printed edition still has some advantages, Whitehouse notes. “If I buy a book, I want to own it. That’s not the case with a digital asset. The digital version has a lot to offer, but if you want to own a book permanently, you need a paper object.”
Barnes & Noble clearly is dealing with “an extraordinary set of industry dynamics”, according to Wharton marketing professor Peter Fader. “Things usually don’t change that much in industries. Good customers stay good customers,” says Fader. “But the transformation from book to tablet and bookstore to app store has been unbelievable. I just didn’t think it would happen that quickly.”
The change presents opportunities for Barnes & Noble to grow its Nook footprint, but growing that business could cannibalise sales at its physical stores. “Barnes & Noble is in a tough situation with its assets,” Fader notes, adding that Best Buy faces a similar issue, but consumers still visit to check out an ongoing stream of new electronics. “If people are coming into the stores, you can get them to stick around and buy something. No one needs to come into a Barnes & Noble, so the risk is not having the traffic at all.”
People v products
One of Barnes & Noble’s core assets may be the people on its sales floor. “The more the retailer can provide service with a face on it and provide amenities, the better chance it has of surviving,” says Raff. “You can create a destination for merchandise and prices, but service and a response to your desires will get you ambiance.”
Merchandising and staff are critical to any rebound, Kahn points out, noting that the best retailers hire their own customers to be in-store staff. For instance, athletic shoe stores hire running enthusiasts who can advise shoppers on the best local trails. “If Barnes & Noble is just about buying books, customers can get that online. But what if it can also provide customers with insights from, and conversations with, people who understand the experience? Barnes & Noble has to figure out what makes it a good retailer and play to its strengths.”
