Can This Bookstore Be Saved?
Updated: Jul 31
Since there has been a tremendous change in the way of selling books after the emergence of the internet, not only Barnes & Noble but also other brick-and-mortar book stores have been facing some major problems with the business. The market has been bleeding out since 1991, eleven major U.S. bookstore chains have been brought down to six, and nearly 3300 stores to just over 2200 in 2011. According to Wikipedia, as of August 1/2015, the company operates 647 retail stores in all 50 US states. In addition to that, Barns&Noble stands as America’s last remaining national bookstore chain. B&N was actually the one that kicked around the idea of selling books online with Trintex which was a 1980s Web-retail prototype and opened an online shop on AOL.
Before e-commerce reshaped the industry, since the barriers to entry to the marketplace was relatively high, B&N was able to keep the new entrants out of the competition and they were well ahead of regional chains and small independent bookstores, which were its major competitors back then, with the help of aggressive price tactics and unbeatable inventory. However, physical barriers disappeared and rules of the game changed dramatically with the emergence of Internet. For instance, when Amazon launched its first Web site which was initially an online bookstore, it was able to offer an inventory limited only by publisher availability, whereas B&N might be able to offer around 200,000 titles in its physical bookstore. In other words, Internet reduced the barriers to entry to the industry and let others get into the market easily.
B&N lunged many times to catch up with Amazon, however, its attempts were far behind the technology curve most of the time. For instance, when B&N launched its online music store in 1999, Amazon had already pioneered the concept a year ago. Moreover, B&N purchased Fictionwise, one of the biggest electronic book proprietors in North America, to launch its e-bookstore and Nook e-reader in October 2009, which was two months after the Fictionwise, it was again two years behind Amazon. Although B&N spent hundreds of millions of dollars to compete with Amazon and Apple in the market for tablets and e-readers, B&N continued to lose money on the Nook, as well as e-book market share. According to an article in CNNMoney titled as Can Barnes & Noble survive? indicated that, “Microsoft once had high hopes for the Nook. It invested in the business in 2012 but sold its stake back to Barnes & Noble last December.” In addition to that, according to a research that analysts conducted, while B&N controlled almost 27% of the U.S. digital book market, Amazon led with 60%.
New technologies always create new substitutes and in the case of Amazon it clearly exemplifies the customer behavior on price wars; if prices become too high, customers will look for a substitute. For instance, after B&N dropped the price of the Nook from $259 to $199 and released a WiFi-only model for $149, Amazon quickly countered by reducing the price of the Kindle to $189 eight hours later and released the WiFi-enabled 3G Kindle3 within a month, it was again at $10 below the Nook.
Even if B&N has many opponents like Amazon, it also has allies. Publishing companies have interest in B&N’s survival for several reasons. First of all, physical book retailers are vital for selling and marketing books. Selling books in a physical bookstore is one of the most valuable ways for communicating with customers. Other than selling books, brick-and-mortar bookstores are essential for creating traffic into malls, sales of e-books and audio books, and serve as social gathering places for people. Moreover, Amazon wants to cut out publishers and establish a platform for people to publish their books directly through the website. Editors, publicists, and other entities within the publishing business started to view Amazon as an enemy. With Amazon’s discounted price strategies, it would be difficult to maintain the business model for publishers in the long run. So Amazon wanted to decrease the power of suppliers in order to be able to decrease the prices even more.
B&N has been experimenting different strategies to survive in the market. For instance, there are plans to have minimized stores in malls. In addition to that, since B&N wants to increase the traffic in their stores, they offer promotions such as if someone connect to a Wi-Fi network in a B&N store with a Nook, they are able to get free extras in many games and games. They also expanded its store space for toys and games while reducing the range of book titles it stocks.
I personally believe that, in order to be successful and strengthen its market presence, B&N should find a giant ally such as Google which can provide the company a technologic edge. Once Mustafa Kemal Ataturk, who is the founder of the Republic of Turkey, said that “enemy of my enemy is my ally”. I do not see any reason for B&N to use the Google’s resources and vice versa to compete with Amazon. Google holds outstanding knowledge and experience which can be used for the improvement of the Nook to succeed as a digital company. Therefore, B&N should strengthen its digital side in order to increase its sales over tech titans. The importance of strategic allies can play a significant role on the survival of B&N.
Addition to that, since Amazon has not got any physical store, it is not able to provide any ambience for customers to read books while they drink their coffees. Although Amazon has powerful and effective recommendation algorithms to make its customers buy other products which are related to their taste, with the help of decent product placement and marketing in the brick-and-mortar stores of B&N, they can survive in the marketplace.
As a result, since B&N delayed to keep pace with the disruptive technology-Internet, Amazon took most of the market share from them. However, if B&N takes the right steps and enhance its capabilities on digital area with the help of a strategic ally such as Google, they can change back into their glittering form.
Essentials of MIS, Eleventh Edition-Kenneth C. Laudon, Jane P. Laudon / Business Problem-Solving Case-Chapter 3