Is There Hope for Barnes & Noble Redux

Last week I offered the suggestion that Barnes & Noble (B&N) consider getting out of the brick-and-mortar end of the business and instead franchise its name and cut deals with indie bookstores to promote its Nooks and ebooks. The reception was varied, with some commenters thinking this was a great idea and others thinking it was a lousy idea, and yet a third group thinking it was -- at least -- an idea. Yet the overall tenor running through all the comments was that B&N will be steamrolled by the Amazon juggernaut no matter what it does.

That gave me pause and made me think some more about B&N and its relationship with its customers.

My relationship with B&N goes back a great many years. Even when I worked for Borders, I shopped at B&N. I have been a member of the B&N club for many years and I even have a B&N Mastercard. Until this past year, my wife and I generally visited the local B&N store at least twice a month and I spent thousands of dollars a year at the local B&N as well as at B&N online.

Yet as I sit at my desk and think about my long-term relationship with B&N, I realize that the flame has gone out. The more I think about it, the more I realize that B&N began spritzing the flame when it released the Nook; changed the spritzing to a more forceful watering when it firmly adopted its own DRM and refused to give members any member advantage over nonmembers when it came to either the Nook or ebooks; and has finally doused the flame with its newest changes to its membership plan. Try as I might, and although I will continue to buy from B&N rather than Amazon so as to do my part to keep competition alive, the reality is that B&N has consistently spurned me, and the changes in my book buying (and the amount I spend at B&N) reflect that spurning.

As you may recall, I was unhappy when B&N came out with the Nook (the original one I thought was poorly designed; the new Touch is very nice but not nice enough to make me replace either my working 1-year-old Sony 950 or my working 4-year-old Sony 505 with it) and wouldn't give me my 10% member's discount -- even though I was prepared at the time to buy two Nooks at $249 each! B&N's rationale was that at $249 it was already losing money on the device; my rationale was that as a relatively big book buyer ((I spent thousands of dollars a year at B&N on books, very few of which were the heavily discounted "bestsellers"), B&N should be willing to give me a small incentive to remain a B&N book buyer -- especially when its primary competition was selling for less. It wasn't the money so much -- afterall, I spent more on my Sonys than I would have on the Nooks -- as much as I wanted to feel that this was a partnership.

If B&N was losing money at $249 it must be shooting itself in the head with a machine gun every time it sells a Nook for $99. More importantly, because it chose to save $25 -- a shortsightedness that Jeff Bezos would not tolerate at Amazon -- it lost me as an ebook customer. True, if you look at my Nook library you'll find I have purchased more than 125 ebooks from B&N, but if you look at the prices paid, with the exception of a very few, the purchase prices were "free." And to add a nail to the coffin, nearly all those that I did pay for, I paid for with B&N's own money -- the gift cards I earned from using the B&N Mastercard.

More importantly for B&N is that in the last year my purchases at the local B&N have been few. We went from visiting the store (and buying at each visit) at least twice a month to visiting once every three or four months and sometimes not buying at all. (For the first time in six months I bought a book at the local B&N last week.) For the most part, my wife and I have become ebookers and most of the ebooks we read are purchased from Smashwords or Sony, not B&N.

I recently discussed with my wife making more visits to the local B&N. It would be easy to do as the B&N is in the same mall as our grocery store. But then came the news that the terms of the membership were changing. The discount remains unusable for ebooks but instead of a 20% discount in the store on all adult hardcovers and 40% on bestsellers, the discount is changing to 10% and 40%. As we rarely buy the "bestsellers," B&N is simply cutting our discount. Not much of an incentive to buy at the local B&N. (Interestingly, as a general rule the books available at B&N online are much more steeply discounted than at the local store even with the membership card -- and it has been quite a while since the membership did anything but give you free shipping online.)

The point of all this is to say that maybe B&N is on a suicide path and without hope for long-term survival. It is losing sight of the fact that 75%+ of the book market remains pbooks. eBooks are important, and the area of greatest growth, but ebooks are still in the childhood stage. Although they cannot be neglected, they cannot be focused on to the exclusion of the dominant portion of the market. To remain viable, B&N has to dually focus on both ebooks and pbooks. Sadly, it is becoming dangerously myopic when it comes to pbooks.

It has taken no steps to encourage those core readers, the ones who read several books a month and who are B&N members, to be active buyers of its ebooks or pbooks. Whatever it has done, it has done with the broad market in mind. Many months ago I argued that this was a mistake, that B&N really needed to cultivate that core group of book buyers who could be the proselytizers for its future. I said months ago when the Nook was introduced that B&N needed to reward its members for being members and not treat members like everyone else or B&N would ultimately be sorry.

I'm sorry to say, but perhaps there is no real hope for B&N. Whoever does their strategic thinking is spending too little time thinking and too much time doing harmful things to B&N's future. I looked at a Nook Touch last week. The free-Touch-with-a-New-York-Times-subscription offer tempted me. But I can get the New York Times for the same price on my Sony 950 so that wasn't much of an incentive. In the end, I was peeved over the change in membership terms and simply decided to pass on the offer. B&N really doesn't want me; B&N has successfully extinguished the last of the embers.

The sad thing is that putting out my fire, and the fire of other B&N members, B&N may be also be putting closed on its door.

18 Comments on Is There Hope for Barnes & Noble Redux

  1. I have always enjoyed B&N. Their staff was helpful, could offer suggestions on books, and actually seemed like they cared. So I have no problem going to buy from them when I go to a bookstore.

    But I buy far more online than I do in a bookstore. It’s 30 minutes to the nearest one for me. And B&N has shot themselves in the foot there too many times for me to count. If I buy from Amazon, the book will be here in two days (Prime member as a student). I’ve bought from B&N several times in the last year, and you have no idea when they’ll be here. The ship date on the site was wrong. The time in transit was wrong. On one book, it took almost three weeks to get to me, even though it showed “Ships immediately” on the site. I’m outside of Washington, DC, not on the north slopes of Alaska.

    I’ll continue to shop at B&N stores, but never again on their site.

  2. Full disclosure- I prefer, and have always preferred, small local bookstores. Preferably poorly lit and disorganized. Disinterested staff a plus.

    Back when we had a Waldenbooks in the area I used to shop there 2-3 times a month. I still bought most of my books from a few small bookshops. When Waldens closed and Borders came to town I switched to Borders for my big box book store needs. Borders had a lot of employees that had worked at some of the smaller booksellers in the area. I liked Borders and the employees seemed to like working there. As more and more independents closed, my buying at Borders only increased. Now with borders gone a couple of independents have opened back up. So in my area we have come full circle.

    B&N has always been my least favorite bookstore. They are too big and seem to stock books almost reluctantly. When they first opened they were a little better. I probably browsed them once every other month, but now I only use them to cut through the mall to my causal part-time job. I’ve become very adept at scanning the discount shelves as I fly buy. So far I’ve bought one book. The employees don’t appear happy. They are obviously understaffed. This is where Borders excelled-plenty of help and happy employees that left you alone if that’s what you wanted but bent over backwards if you needed help. B&N feels like Target only lacking clothing and housewares isles.

  3. I’m confused. You’re mad at BN for not offering a Membership discount on NOOK products, but then mad at them when they change the Membership to offer a discount on NOOK products? Seems… odd?

  4. I love my First Edition Nook. I have been singularly unimpressed with any e-reader B&N has come out with since. The Nook Color and the Nook Tablet both have the same problem–short battery life. The Nook Touch, while small, portable and possessed of a long battery life, is great but it lacks one critical feature: The ability to play audio books. (Come on, now. I check audio books out from my library All The Time.)

  5. What’s really obnoxious is how hard they make it to cancel the membership. My mom joined, thinking she’d buy enough books to justify it financially, and then she decided to stop because she didn’t. So she went to the store to do it, and they told her she had to call them to do it. Just why have a store if they are not going to be able to fully service memberships?

    IIRC, in more recent times they have offered discount coupons on the Nook to members, though.

  6. It amazes me how short-sighted B&N has been with their member program.

    Why haven’t they offered a discount on the renewal fee (still $25) for members who have been with the program for, oh, I dunno? Five years or more? ::shrug::

    Heck, there are folks who still call it ‘Reader’s Advantage’. Why not throw those loyal customers a bone with an uptick in their percentage discount? Or maybe they reach a certain amount in purchases over the duration of their membership year and…*voila*! They’ll now receive 20% with their card, until its expiration date.

    Now, in regards to Nook, it’s just odd that B&N only offers a $$ discount on the device with the member card (at purchase), but on NONE of the accessories. Not. A single. One. What value does the card have to a customer who goes “all-in” on the Nook and its ‘walled-garden’? Even a little as 10%, might be just the thing to encourage someone to buy a cover or a second charger.

    I’m just left stumped.

    • BN is currently field testing Membership discounts on NOOK accessories at the Tribeca Store in New York.

      Given that a Membership is functionally free when you buy a NOOK Color or Tablet, it doesn’t really matter one way or the other, though.

  7. My biggest two beefs with B&N come from online shopping, which is how I do most of my book shopping. First, their shipping takes FOREVER. When I need something fast, I HAVE to go to Amazon because usually I can get it within a week even with free shipping; with B&N, it won’t even be SHIPPED within a week. The other problem is customer service. You can’t cancel orders (which I could understand if they were doing immediate shipping the way Amazon does, but they don’t, so it makes no sense) and other issues have come up consistently on the B&N site. I have huge issues with Amazon as an author, but I’m repeatedly forced to use them because B&N’s online service is pretty much crap.

    I have no issues with the brick and mortar stores, except maybe space continually being reduced from books to…other stuff. Unfortunately, most of the time, the store won’t have what I want, so I’m back to buying online anyway. I’ve never joined the member program because, in all honesty, don’t buy enough to make up the cost, and the online issues make me buy even less at B&N. So, why bother with even a 20% discount when it won’t even make up the fee?

  8. Rich, if you buy “thousands of dollars” worth of pbooks every year, you are in the 1%. B&N ought to recognize your buying habits with an appropriate loyalty program.

    It is true that this fight is B&N’s to lose: it has a strong brand, good store presence, a complete end-to-end infrastructure, and is really only lacking one thing. The ability to demonstrate relevance and value to the customer. It needs to implement, quickly, a strategy which allows it to meet changing customer demand AND make a decent profit. One option might be to open more stores — of the 5000 sq ft variety — as the continue to renegotiate existing leases for megastores to downsize to make those money spinners.

    And it may well be their best step is to sell off the Nook, keeping a piece of the online action as residuals, as they use that cash to refocus on their core business.

  9. Barnes and Nobles return policy is also crap compared to Amazon., even if it’s their fault! for instance, they will refund you one time only. Let’s say you’ve used that up and you see a book online and the books description is all in English. Nothing on their own listing says its in Spanish, did you know you are just sol? They will not refund for you because you had one already.

    Amazon has a 7 day return policy lazy I looked on ebooks. I totally understand wanting to support Barnes and noble to keep with competition, but at the cost of screwing yourself? They seriously need to change up their policies or I think they will be in trouble.

  10. I believe they lowered the member discounts because they have been offering discount coupons by email to customers. These can be used in addition to your membership discount. An additional 15-30% off can bring the price down considerably.

    And the Agency publishers don’t permit membership discounts.

  11. Why doesn’t B&N have a mobile shopping app (for print books and whatever other hard goods they want to sell)? And yes, improve fulfillment of online orders in general. They could retain customers and get new ones, while being able to close unprofitable stores. Mobile platforms are becoming more crucial for successful online business.

    • Because they’re B&N, not Amazon.
      They don’t think in the same terms as Amazon and they don’t arrive at the same solutions, even when they choose to follow their lead.
      Companies have distinct cultures and they do not easily change their ways.
      Some times its a good thing, other times…
      (shrug)

      • B&N has a mobile store. If you want, you can add a link to it directly on your smartphone.

        I’m not part of the “app generation”, though. If you want me to install software, you have to add some real value.

  12. As a traditionally published and ebook author, I can only sing the praises of Barnes & Noble both in pbooks and nook books.

  13. As a former Barnes & Noble.com employee (I was laid off last year), I don’t dispute most of the negative comments I’ve been reading here. The only apologia I can offer for B&N is that they’re struggling to make money in a business that’s in turmoil, with the most dedicated book buyers (those who read genre fiction, such as romance, mystery, thrillers, and sci-fi) having long since switched to ebooks and those who don’t — those whose interest remains focused on printed books — doing more of their shopping online … and doing it on Amazon. It’s an open question whether the big box bookstore remains a viable means of selling books, and that, unfortunately, is why B&N is scaling back on books and loading up on higher-margin toys, games, and home & gift items. (In doing so, of course, it risks losing its identity along with its book customers.) It’s easy to say B&N’s senior management is clueless about this approach, but it should be noted that the brick-and-mortar side of the company is far better run than Borders ever was, which is why Borders finally succumbed.

    It’s also relevant that B&N’s CEO, William Lynch, comes from tech (he used to work at Palm — remember them?) and began as president of Barnes & Noble.com before assuming total control of the company. I’ve often wondered where Lynch would land if he decided to spin off Nook. Would he remain B&N CEO or leave to become CEO of Nook? I’m pretty sure I know the answer to *that* question. The next one would be: who’s going to take on the chore of running a Nook-free B&N? I admit Nate’s idea of franchising the B&N name has a certain appeal, but if you strongly suspect, as I do, that location-based bookselling has become a cutthroat business with minuscule margins and that Amazon will continue to do what it does best — manage its supply chain and fulfillment for maximum efficiency and customer satisfaction — it isn’t clear how many entrepreneurs would sign up as franchisees. And even if they did, those minuscule book margins would assure that your local franchised Barnes & Noble would be forced to stock plenty of annoying higher-margin nonbook stuff.

    This is a longwinded way of saying that were we to audit B&N and look for ways of improving the bottom line we’d probably agree to doing most of the customer-unfriendly things the company has been doing in recent years. Meanwhile Jeff Bezos gladly pursues market share at the expense of his bottom line — and for reasons I’ve never fully understood his shareholders have gone along with this strategy for nearly as long as the company has been in business. And now that the Justice Dept. is reining in Agency pricing Amazon will go back to making ebooks extremely attractive loss leaders … and may well ultimately deliver the death knell to Barnes & Noble. Which I’m guessing is not what the DOJ had in mind.

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