Sunday, October 28, 2012

Whither Barnes & Noble?

Last week I analyzed how Barnes & Noble and Amazon priced one particular book: Coulter’s Backfire. It got me thinking about what B&N will need to do to compete in the future.

I need to make sure everyone understands up front that I am not a stock analyst, and anything I say is not intended to be any kind of a security recommendation. Okay, now with the legal safeguards out of the way, here are my opinions.

B&N has three product segments: bookstores, online books, electronic readers. Each has separate competitors, but one key differentiation B&N has over some of its competitors is that it has all three. Amazon does not have its own stores. Many tablet manufacturers don’t sell books.

Earlier this year, B&N announced a deal to partner with Microsoft on its Nooks. This introduces needed financing for B&N and provides Microsoft with stores where it can sell its products (an attempt to compete with Apple stores).

Prediction #1: dedicated e-readers will go the way of cars without A/C. While migrating from my northern home to southern this year I either left my Nook inside the house or (what I suspect) I put it on top of the car as I was loading the dog into the car, and it’s lying somewhere along the side the road. I liked my Nook a lot, but with a few free apps a tablet can do just about everything a Nook can, plus it can do a whole lot more.

Jim's Tablet with Kindle and Nook apps
Jan received a Kindle Fire tablet for Christmas and uses that as a reader plus. My son also has a tablet. Based on their experiences, I decided I would be better off with a tablet than repurchasing a Nook. I bought a Google Nexus 7 because I like reading in bed and a 7” screen is better than a larger tablet for my purposes. I’m delighted. I recently showed it to my mother who has an old Kindle and an older Nook; now she wants a tablet.

The Amazon Kindle makes you download third-party software in order to get a Nook app. If B&N opens up its operating system to make it easy to read Kindle books (and other formats as well) it will have a key selling point against the Fire. If it keeps a closed architecture, I predict it will go the way of the dodo. B&N should brand the Nook as THE device to use if you are a serious reader, regardless of reading platform, and they should allow an open operating system so users have unlimited app alternatives.

Prediction 2: B&N bookstores will ALSO sell books. Retail space is all about turnover, and bookshelves are terrible when compared to other things related to books. B&N has already eliminated shelf space to put in cafes and areas where dedicated Nook specialists assist you in choosing your Nook and helping you with technology issues. I suspect this will be expanded to other Microsoft tablets with staff similar to Best Buy’s Geek Squad to help buyers sort through the possibilities. In short, if B&N is to succeed they will need to add customer service as a buying differentiator to Amazon’s Kindle.

Apple, of course, already has stores to sell the iPad. The B&N difference can be to provide an open architecture rather than being locked into the Apple (or Amazon) brand. (Not that the Apple brand won’t continue to do well, but across the world, more people will look favorably at Android and Windows 8 operating systems and companies who do not limit how you can use your electronic device.)

Prediction 3: Unless B&N improves its online experience, it will become increasingly irrelevant in the book business. B&N failed where Amazon succeeded in becoming a shopping portal. However, it could still succeed by providing focused positive experiences to readers and authors. To compete with Amazon they need to provide something better than what is currently offered. On Amazon it is fairly easy for an author to add book reviews, additional information, cross-link books, etc. Not so on B&N. However, Amazon is not perfect. For example, it is difficult for authors to link books written under different names. Currently at B&N I can’t even get them to upload an image for my bridge book. (The “problem” they claim is that it is published by the world’s largest publishing company for bridge books, which happens to be in Canada.)

Amazon’s whole approach is to be the low-price provider. If two organizations try to play the same low-price game one goes bankrupt. Amazon has the far-deeper pockets, trying to beat them on price will not work for B&N. Instead, B&N could make its website the “go to” place for learning about authors and find ways to differentiate itself by providing additional content.

While I think the path is clear for B&N to succeed, here’s my final prediction: By 2020, B&N will no longer be selling books. The electronics division will be spun off and subsequently purchased by another tablet manufacturer.

What’s your crystal ball say?

~ Jim



7 comments:

  1. I certainly hope you're wrong about Barnes & Noble not selling real books anymore. Just seeing all the people browsing the book rooms at Bouchercon and Malice, I know there is a real market for print books out there.

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  2. Gloria,

    I'm not predicting, as others do, that print books will disappear. I'm suggesting that in a few years' time you won't be going to your local Barnes & Noble store to buy them.

    ~ Jim

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  3. My crystal ball has similarly dire predictions for Barnes and Noble. This does not make me happy, but they seem unable to learn how to adapt to the current market.

    I have an older nook, the one with the small color screen at the bottom of it. I love reading on my nook, but the deficiencies in the B&N online experience are enough to make one cry. I'm one of those who, when she's looking for a book and doesn't remember the exact title or the author, goes directly to Amazon to find it, then goes back to the B&N site to buy it for my nook. They HIDE the forum boards where you can find out the Free Friday books and get user support for issues you're having. (Hint: Go to Customer Service, then Book Clubs to find the link to them. Not intuitive!)

    I've emailed them about improvements they should make to their site, but either get no answer or a canned response.

    Also sell books? Then there's a definite problem in their marketing strategy. What they should be doing is focusing on their core business (books) and hiring knowledgeable booksellers to relate to the customers in the stores. I've only been to my local B&N a few times in the last year and never buy anything because they have too many games and toys and gewgaws and not enough books for my taste. And it's been a long time since I was approached by a salesperson who talked to me about books. They also need to make the bookstore price identical with the online price, which it isn't now. I see a book online, check that it's at the store, then go to look at the book, wanting to buy it, but it's significantly more expensive in the store. I leave pretty quickly.

    I think you're spot on about tablets replacing dedicated ereaders. Because of my disappointment with B&N, I was thinking that I'd replace my nook with a Kindle in the near future. However, I do have a large investment in nook books. A tablet would let me install apps for both nook and Kindle. In addition, I think we'll be seeing more enhanced ebooks with links, video content, etc. in the future. A tablet is definitely the way to go for these.

    I won't be buying that tablet in the near future both because I'm not sure what I want and because of the expense. It won't be the Surface. I thoroughly dislike Microsoft and Windows since 98. I've become an Apple fangirl in the last couple of years, adding a MacBook Pro and iPhone to my old iPod Touch, but even the price of the new iPad mini is too steep for me. An Android tablet might be the answer, but I seriously have to think about it. And, before putting out the big bucks, I want to see what competition among booksellers does as far as continuing to provide ereader apps for all the platforms. I'd hate to buy a Surface, only to see Amazon not support an app for it because it competes with their Fire, for example.

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  4. I think that most print books will disappear. Except for those reference books that are better viewed in paper, such as photography or maps, few other paper books will survive. Libraries maybe the only source of paper books, and they maybe required to keep them in case of electrical emergency--sort of like a reservoir or the Library of Congress, for posterity.

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  5. I wish B&N luck. I believe someone will be selling books in a brick and mortar store. I'm not at all certain what the business model will be.

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  6. I think B & N as a retailer is comparable to a dinosaur trying to get into a space ship. The stores I have been to recently are staffed with people who are not customer oriented, or even very friendly. I don't think books will go away, but I believe that indie bookstores have a good shot at upstaging any B & N around them by focusing on the customer and having a quicker response time. Locally we have a small chain called Hastings which carries new and used and is happy to stock local authors and small press authors. I prefer shopping there any day. And, as an added bonus, they stock used books, take books in on trade as well as sell new books. I think there will be ebooks and print books together for a very long time, but the face of the retailer will change away from the big store B & N.

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  7. I agree that B & N is stocking far fewer books. It seems that the store is overtaken with toys even more than the Nook. Very possibly no one is buying the standby series, as the available volumes for one I was looking at had not changed much, except for one or two fewer books over three months. I ordered the one I was looking for.

    I have a touch Kindle, and one problem with a notebook is the screen. My older eyes wear out with my computer, but the screne of the Kindle is better for me. (We tried a notebook first, but it was too complicated for we old folks.)

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