B&N’s College Bookstore Bid Faces More Problems Than Just Amazon
Barnes & Noble’s announcement on Thursday that they were spinning off their college bookstore division into its own company might be a good business move, but it’s not without its problems.
B&N currently operates 700 plus college bookstores under contract, and they plan to add more stores by convincing colleges and universities to outsource a store’s operation to B&N (or B&N Education, as the new company will be known after it is spun off).
That’s all well and good, but the fact is B&N Edu is investing in a shrinking market.
It’s not just that B&N is facing a new threat from Amazon, which already has deals with 3 US universities, but also that the college bookstore industry is in a state of flux right now. Many college bookstores are seeing declining revenues as students move to buying more stuff online, and this is inspiring the bookstores to look for new solutions.
UC Davis Stores, which has an affiliate deal with Amazon, saw its revenues drop from $22.9 million in fiscal year 2010-11 to $19.6 million in 2013-14. UMass Amherst, where Amazon now has a deal to operate a virtual textbook annex, saw its textbook sales decrease by 30% from 2009 to 2013, with used textbook sales decreasing by 62%.
What’s more, the reports of declining sales are borne out by B&N’s own annual reports. The retailer reported that revenues for its college bookstore division declined in two of the last 3 fiscal years (2012, 2013, 2014). This, while B&N was signing new contracts to operate additional stores.
And that’s not all. I also have an RFP (request for proposal) in front of me which shows that bookstore revenues are declining because students are buying less from the bookstore, and not due to other possible causes (decreasing enrollment, for example).
The University of Wisconsin Milwaukee is in the process of launching a "Virtual Course Materials Store". The bid process is ongoing, which means there’s currently little public info on who is bidding and how the virtual store will operate, but the RFP does lay out the bookstores financial state.
That bookstore generated $7.6 million in sales in FY2014, which was down about 15% from FY2010. Enrollment declined 7.2% in that time, which accounts for some of the loss, but sales of textbook and course materials declined even faster. Textbook sales dropped by 23% between FY2010 and FY2014. The RFP also tells us that the bookstore’s average sales per full time student was $324 in FY2014, down $29 (8.2%) since FY2010.
In short, folks, B&N may say that with 53% of college bookstores still being run by schools they have a great opportunity for expansion, but what they are leaving out is that B&N is looking to aggressively expand into a declining market.
Heck, this is a market which even the bookstores are looking to get out of.
The real reason Amazon has those deals with the college bookstores is that the bookstores themselves went out looking for potential online partners. UMass Amherst, for example, specifically went looking for a company to operate a virtual textbook annex (Amherst’s physical bookstore is run by Follette). Their bid process started in early 2014, and was concluded a year later.
Do you know my takeaway from this?
I’m getting the impression that Barnes & Noble is running the wrong type of college bookstore business
Also, that now would be a good time to get out of the business of running a physical college bookstore and concentrate on running a virtual college bookstore – something Amazon excels at.
In fact, I think that could be the very reason why B&N is spinning off the college bookstores division; they want to make the success or failure of that division someone else’s responsibility.
What do you think?
image by keone
Paul February 28, 2015 um 6:06 pm
And that might explain why Nook is thrown in the pot too.
Nate Hoffelder February 28, 2015 um 6:20 pm
The digital unit is being retained by the other part of B&N
fjtorres March 1, 2015 um 6:56 am
Come july, who knows?
Plus, the bookstores are getting Yuzu so they *will* have a digital arm and the PR release talks of added investment and new opportunities. Maybe, for once, it’s not just PR boilerplate and the spinoff will be followed by a fund-raising drive to go into the virtual bookstore business proper. After all, as Nook has shown, B&N is not shy about copying Amazon.
Even when it makes no sense. (Selling rugs on B&N.com, for example.)
Going into the virtual college store business won’t be hard; doing it well, however…
Nate Hoffelder March 1, 2015 um 8:07 am
The college bookstores already have websites, so they have a digital arm (just not a very useful one). And Yuzu is irrelevant; it’s a product no one wants.
fjtorres March 1, 2015 um 8:17 am
I was thinking in terms of staff, that they aren’t going into the fight totally unarmed.
Everybody has a website, but most are outsourced. To play the game these days you either roll your own or pay somebody to run it for you and in low margin businesses there isn’t enough margin to outsource.
Dr. M March 1, 2015 um 2:29 am
Maybe B&N, leveraging their continued control of BN.com, will end up competing with B&N Education (and Amazon) by also offering to run virtual stores for colleges and universities.
Nate Hoffelder March 1, 2015 um 7:13 pm
The problem with that is B&N isn’t terribly good at running its website, either. Their search is a joke.
Dr. M March 1, 2015 um 8:40 pm
A virtual college store would arrange and sell course materials by course, just as a bricks and mortar college stores do, so "search" is of little importance. It is more about adoption collection, turnaround, warehousing and delivery logistics, plus providing options such as used, rental, digital, buyback, and multiple payment plans for students. Amazon currently has the advantage there too over B&N, but it shouldn’t be insurmountable. Though if this is the future of collegiate book selling it would seem though that if B&N had kept their college stores that combined they would have been even better placed to enter this new market.
Airend March 1, 2015 um 5:01 pm
Virtual university bookstores will truly get a boost when an adequate e-reader for textbooks and PDF studies& articles will also hit the market. Students and professors alike need a big e-paper e-reader (10 to 13.inch) which is not strining the eyes. As long as nobody offers such a device the virtual bookstores will witness a slow development.
However, to invest in the digital age into physical bookstores, already a declining market, – instead of developing that sweet spot device – is a suicidal recipy. B&N is decidedly throwing a few more tens of millions dollar away before going forever bankrupt.
Nate Hoffelder March 1, 2015 um 7:17 pm
There is such a device. It’s called a tablet (a laptop makes a suitable alternative).
But I think you misunderstand my point about a virtual bookstore. We’re not talking about the sale of digital content but rather that students are shopping online and not in the campus bookstore. All these bookstores are reporting declining textbook sales because the students are getting the paper textbooks online, where the books are cheaper.
Airend March 2, 2015 um 1:22 am
I understood your point, but I don’t entirely agree with it. A tablet and/or a laptop are not suitable for reading an entire book or multiple chapters from more books, four to five PDF documents, each from 25 to over 50 pages long, or a textbook of 300 to 600 pages. Your attention gets rapidly distracted, the powerful light from the lcd screen tires your brain at a speedy rate, and you are literally destroying the health of your eyes. A 13.3 inch e-paper device for e-books, .pdfs, Word, Excel, PPT Office and other formats is the solution to counter the downsides of the lcd based laptops and tablets.
Actually, you cand write your papers, search for relevant literature, use some specialised software and keept contact with your colleagues on your laptop – that’s great. Nonetheless long reading sessions on laptops are out of question, and extensive reading is basic for learning.
As for tablets, let’s be serious, they are for entertainment only. Nobody uses them at the university.
The students might buy their paper textbooks online since it is usually cheaper and the tuition fees are expensive, but, as Mr. Richard noted below, ultimately the "interactive digital textbooks represent the future of the education book market".
Nate Hoffelder March 2, 2015 um 9:16 am
That 13.3″ screen is too expensive. E-ink is also too slow.
And when we’re talking about students, I think it’s wrong to look for a tool for "long reading sessions". Students need to study. That’s a complex activity which involves a lot of bouncing back and forth between works. A tablet or laptop is better because it lets you jump around faster.
Richard Dean Starr March 2, 2015 um 12:04 am
Clearly, your assertion is correct that physical bookstores on college campuses are, in essence, a dying business.
When we began planning for our future CollegeReads.com division at Ereading.com, that idea was at the forefront of our thinking. Hopefully, bringing textbook sales into a more cost-efficient and profitable online business model will help to reduce some of the costs of producing them, too. Although how much costs are driven by profit margin as opposed to their overall production costs is a matter of some debate.
Ultimately, I think interactive digital textbooks represent the future of the education book market. But there are quite a few challenges remaining until that becomes a fully-viable reality.
Nate Hoffelder March 2, 2015 um 9:18 am
Not at the college level, not unless you can make the textbooks for free. Students can’t afford them otherwise.
Richard Dean Starr March 3, 2015 um 12:14 pm
Hmm, I think we must agree to disagree on this point. Many colleges can subsidize or include tablets or other hardware as part of tuition. That eliminates (at least until the student loans come due) one high cost associated with digital textbooks.
For now, the more prominent barriers I see are clumsy interfaces and the lack of a cohesive system that links, say, digital "chalkboards" to a classroom full of students using the same content. In that way, for example, a professor’s notes could be added to the digital textbook in real-time and be referred to later during study time or shared with other students.
I could go on, but cutting out the enormous production and distribution cost of physical textbooks will lower the retail price of digital textbooks in the long-run.
In the meantime, I think we have several other issues involving standards and practices with digital textbooks that must be solved before they become relatively standard in colleges.
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