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Dispatches from the Digital Revolution

Barnes & Noble in troubled waters

“It’s really scary for me that I covered the bankruptcy of a major book chain last year, and I’m kind of wondering if I might be doing the same thing next year, a couple years from now…” says paidContent reporter Laura Hazard Owen in a Digital Book World interview.

Though perhaps not encouraging, Owen’s words reflect the emerging financial reality of Barnes & Noble, which has announced plans to close 15-20 stores annually over the next several years. According to the Wall Street Journal:

“In 10 years we’ll have 450 to 500 stores,” said Mitchell Klipper, chief executive of Barnes & Noble’s retail group, in an interview last week. The company operated 689 retail stores as of Jan. 23, along with a separate chain of 674 college stores.

Just before Valentine’s Day, the company reported some less-than-sweet news that its Nook division would not be hitting its projected sales targets: the Nook loss in fiscal year 2013 will be greater than that of 2012, and Nook Media will not reach its projected sales goal of $3 billion for the fiscal year.

The actual figures, released Thursday, February 28, confirmed the early February teaser. According to Publisher’s Weekly,  Nook Media sales dropped by a quarter (-26%) over last year, and the estimated loss (before tax) on the Nook business more than doubled,  reaching $190 million net loss at the end of the quarter ending January 31. The decrease in sales in the Nook Media division is attributed to lower device sales; the tiny silver lining to this story is that content sales–the stuff customers are reading on their Nook devices–rose 6.8% this quarter.

The Nook division is expected to continue to have significant losses over fiscal year 2013, but Barnes & Noble executives seem optimistic that the division will, in the long run, start making money. For the short term, CEO William Lynch has announced that the company will undergo a cost restructuring project for the Nook division and that it’s recalibrating its expenses for the program. According to PW, this will include initiatives to sell through device inventory.

Perhaps all this means is that, while technology companies are leaping into the book world with alacrity, maybe it’s not a two-way street. As a recent Medill Reports article on the future of the Nook quotes Barclays Bank analyst Alan Rifkin:

“Going forward, we continue to believe that the Nook will have difficulty competing with the likes of Apple, Amazon, and Google, all which have more diversified product portfolios and stronger balance sheets to compete in the capital intensive product development cycle.”

But that just brings us back to that same frustrating question: what can booksellers do to stay vital in an increasingly digital world? Digital Book World has some suggestions, a la Scott Shui of www.saveborders.com (and its derivative savebarnesandnoble.com),  in an article posted shortly after Barnes & Noble’s early February announcement. Shui’s suggestions are primarily based on improving management-employee communication and shared experience (there’s reference to Toyota’s employee input practices), which, while pleasant to think about in a stick-it-to-the-man kind of way, don’t seem to be the real key here. Barnes & Noble isn’t suffering from a lack of understanding its customers; it’s suffering from competitive disruption that is changing the traditional bookstore model.

That said, some of Shui’s suggestions are valuable–namely, hosting community events to give customers an excuse to come to the store. This harmonizes with some of DBW’s earlier commentary in the article, characterizing Barnes & Noble’s future as “becoming less of a bookstore and more of a cultural department store.”

What is a cultural department store? Well, it sounds cool, for one. To me, it’s a sort of intellectual community center–a place to gather and share ideas, explore new things, and come together around big thoughts. How can you monetize that? Therein lies the question–and that’s what Barnes & Noble, along with all of the indie bookstores joining the fight for survival, have been painfully experimenting to find out.

About Leah Thompson

Writing and publishing professional in the Boston area.

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This entry was posted on March 5, 2013 by in News and tagged , , , .

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