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?