Tag Archives: Barnes & Noble

Barnes & Noble as “the last bookstore chain standing”

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Here is a look at the dwindling fortunes of Barnes & Noble:

In an interview with the Wall Street Journal, Mitchell Klipper, chief executive of Barnes & Noble’s retail group, said that, over the next decade, the chain will reduce its outlets by about twenty a year to reach a figure of about 450-to-500 consumer stores, down from a peak of 726 in 2008. A separate chain of 674 college bookstores (which thrive on tchotchkes and their exclusive franchises) is not part of that calculation. Even with so many fewer consumer stores, Klipper said, “It’s a good business model. You have to adjust your overhead and get smart with smart systems. Is it what it used to be when you were opening 80 stores a year and dropping stores everywhere? Probably not. It’s different. But every business evolves.” Klipper disputes the notion that bookstores will be unable to hold their own in the digital era, despite the chain’s need to downsize where rents or locations are hurting the prospect of acceptable profitability. Only a handful of the stores–fewer than twenty–are actually losing money, he told the Wall Street Journal’s Jeffrey Trachtenberg. But the company’s revenues have been significantly impacted by its commitment to build the Nook franchise.

While holding on to ownership of nearly 80 percent of its Nook division, a $300 million investment in Nook from Microsoft last fall, followed by an $89.5 million commitment from Pearson, which sees value in the growing electronic textbook market, are signs that Barnes & Noble can forge a way to secure enough of the digital business to offset the problems it faces in traditional bookselling.

But the overall impression of Barnes & Noble’s situation in the book industry is not nearly as positive as its owners and investors would like to portray. Publisher’s Weekly reported last week that Barnes & Noble is in the midst of contentious negotiations over terms with Simon & Schuster. “Although the exact nature of the disagreement is not yet clear,” Publisher’s Weekly reported, “Barnes &Noble has significantly reduced its orders from S&S. The main reason for the cutback seems to be, according to sources, Barnes & Noble’s lack of support from S&S.” (One way or another, this means a dispute over the size of discounts and advertising.) Another factor for concern is the impending merger of Random House and Penguin, which is expected to give this corporate behemoth the ability to deal with Google’s Android ecosystem, and Apple’s consumer cachet as well as Amazon’s dominant position in online retailing. There was an initial belief that Borders’ bankruptcy would bring a substantial portion of its in-store business to Barnes & Noble, but that has not turned out to be the case.

“Barnes & Noble is the last bookstore chain standing,” Wharton management professor Steve Kobrin, who is also the publisher of Wharton Digital Press, told the Knowledge@Wharton newsletter. “There’s still a niche there, but it may go to small independent bookstores.”

As I’ve watched these stories over the last few years, here are a few thoughts:

1. There still is a lot of irony in people lamenting the loss of Barnes & Noble today when not too long ago they were lamenting the rise of big box bookstores in general.

2. We could have a larger conversation about reading in society in general. Is this just about Amazon and online retailers taking away business or are less Americans reading in general? (Book sales were down 2.5% in 2011.) This extends to libraries as well: do people go there for books or DVDs?

3. There is room for interesting conversations about the goals bookstores meet in society or the function they play. Are they supposed to be more like “third places,” commercial learning centers where the average citizen can encounter a world of knowledge (commercial versions of a library), or retailers looking to make money? If bookstores are lost, what is really lost? If people aren’t going to bookstores, what are they doing instead?

Acquire the bookstore chain to get the digital reading device

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With the recent bankruptcy of Borders (see some reaction here), who knows how long Barnes & Noble might be able to hold on (and the news wasn’t good last August). But at least one businessman thinks B&N would make for a worthwhile purchase:

Barnes & Noble is well-situated to get a piece of the action: the company claims that the Nook already accounts for one-quarter of the e-book market. (Amazon’s rival Kindle product accounts for over 70 percent, although neither company discloses actual sales figures.)

Candidly, the Nook’s success is important, because more competition in the space will help keep prices in check and spur innovation. Sony also has a credible market entrant with its Reader product.

Malone’s company Liberty Media offered $17 per share Thursday — or about $1 billion — for a 70 percent stake in Barnes & Noble, a 20 percent premium over the Thursday closing price. Investors greeted the news warmly, pushing Barnes & Noble shares up over 30 percent — yes that’s higher than Malone’s bid! — in midday market action Friday. As a result, Malone will likely have to sweeten his offer to at least $20 per share.

In a statement announcing the offer, Liberty described Barnes & Noble as being at the “forefront of the transition to digital.”

While there is a lot of talk about how all of this affects bookstores and reading, I would love to see more about what this might mean for all brick-and-mortar businesses. The saving grace for Barnes & Noble is this particular digital reader which is well-positioned in a burgeoning market. In the near future, the B&N stores might disappear even as corporate name goes on through this device.

More broadly, how many other companies are actually creating digital content or devices rather than simply putting a Facebook page together and slapping the Facebook logo on all of their commercials?

How to respond to the demise of Borders

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With negative business news about the bookstore Borders, a number of commentators have weighed in with opinions about how to respond. On one hand, Borders is a big box bookstore that helped push independent and smaller bookstores out of business. On the other hand, the demise of Borders suggests that bookstores in general are on the way out in favor of online retailers.

Chicago Tribune columnist Mary Schmich writes about how the closing of the Borders store on Michigan Avenue in Chicago affects the shopping district:

By Saturday, Borders’ marquee Chicago store, at 830 N. Michigan Ave., will be closed for good. And — here’s what I think is the real news — the city’s premier shopping street will be without any bookstore for the first time in decades…

Borders was hardly a landmark on par with the old limestone Water Tower that stands just outside the store’s windowed walls. It had occupied its prime corner for only 16 years, barely a blip in Chicago history.

But 16 years is half an eternity in retail time, and Borders had come to seem as basic to the street as traffic.

Back in 1995, when it opened, spinning through its revolving doors was like stepping into a literary Oz, a unique place that, even though part of a chain, pulsed with ideas, people, cappuccino.

Even people who sniffled that it was killing smaller bookstores — most memorably the cozy shop just up the street run by the legendary Stuart Brent — came for the books and the buzz.

I myself have spent a good amount of time in this store, browsing books and music. This location was a nice change of pace from the typical retail store (clothing, in particular), a place to get out of the heat or the cold, watch people go by on Michigan Avenue, and enjoy browsing.

Instapundit provides a different perspective. After some comments about how Borders leftist leanings might have driven some customers away, Instapundit quotes an email from a reader who cites the irony of people lamenting the end of Borders:

Is this — like much of the newspaper industry — a case of the leftist 20% of the populace chasing a way a lot of potential customers over politics? Or is it mostly just technology and convenience?

STILL MORE: Reader Gary Rice has thoughts on the sudden onslaught of Borders-nostalgia:

Re; Borders…. Wasn’t it just a few years ago that Borders and Barnes & Noble were the bad guys? Corporate behemoths destroying the local independent bookstore with their Wal Mart like pricing models ? Wasn’t there even a Tom Hanks romance movie about this exact subject?

So Amazon comes along with a better pricing model and now we are all supposed to mourn liberal Borders’ demise? It is a wonder these people remember how to read, because they sure can’t remember anything else….

Heh.

A good point: can we lament the end of Borders today after criticizing it for over a decade? Perhaps we can: bookstores could be considered “third places,” a middle location between home and work where citizens could gather to read the news, talk to each other, and shop. I suspect there will always be people who like going to bookstores (I will still enjoy it though I’m not sure I would go out of my way to go there) but perhaps they simply can’t survive on the scale and size of a Borders or Barnes & Noble.

These sorts of strange juxtapositions may one major marker of our globalized and fast-paced economy. Do we want any bookstore or a big box bookstore or an online bookstore or an independent bookstore? People vote with their dollars and visits and within twenty years, the entire landscape can change.

But I doubt we would see the same kind of mourning if Walmart suddenly went out of business in favor of online retailers. There is something unique here about bookstores.