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Barnes & Noble’s Nook Falls Behind

1 March 2013

We had a brief item about Barnes & Noble’s disastrous earnings report yesterday. Here’s one with more analysis

From The Wall Street Journal:

Losses ballooned at Barnes & Noble Inc.’s Nook digital business in the latest quarter, the clearest signal yet that it is falling behind larger technology companies such as Amazon.com Inc.  and Apple Inc. in the tablet wars.

Nook revenue plunged 26% to $316 million for the fiscal third quarter ended Jan. 26. The Nook segment, which includes e-readers, tablets and e-books, posted a loss of $190 million, measured before interest, taxes, depreciation and amortization, compared with a loss on the same basis of $83 million a year earlier. As a result, Barnes & Noble itself posted a small net loss, despite improved profits from its retail stores business.

“This is in the worse-than-we-thought category,” said James McQuivey, an analyst with Forrester Research Inc. “What went wrong is that Apple’s iPad Mini went right. Barnes & Noble’s business depends on selling the devices in the Christmas quarter to drive content sales all year round.

. . . .

Speaking on a conference call with analysts Thursday, Mr. Lynch said, “We are committed to the tablet and e-reader market, but we have to address some of the perceived consumer shortfalls in our ecosystem. We aren’t going to continue doing what we’re doing. We’re going to adjust quickly. ”

He gave few details, other than disclosing cost-cutting efforts and plans to enter into more partnerships so that the chain can build its e-book business—even without growth in device sales.

. . . .

Mr. McQuivey suggested that Barnes & Noble will now to have to bolster efforts to inform consumers that they can access Nook content on most other major devices, including the new iPad Mini. Barnes & Noble “can’t sell devices fast enough to sustain that business, so they need to take advantage of other company’s devices by winning customers for content purchases,” he said.

. . . .

In the quarter, revenue at Barnes & Noble’s consumer stores fell 10.3% to $1.5 billion, with sales at stores open at least a year, a key indicator known as same-store sales, down 7.3%. Excluding sales of Nook products, core same-store sales were down 2.2%.

Link to the rest at The Wall Street Journal (Link may expire)

It’s a tough job competing with tech companies in a growing market like tablets. And it’s an enormously different business than running a bunch of bookstores.

Nook has been trying to compete with Apple, Google, Samsung, Amazon and a growing list of other tech companies. To be fair to Barnes & Noble, it didn’t start out that way. Initially, the Nook was supposed to live in a proprietary world of dedicated ereaders and allow Barnes & Noble’s book customers to read ebooks they purchased from Barnes & Noble.

But ebooks would change the book world in ways Barnes & Noble did not envision.

The key competitive advantage of the Nook was its association with Barnes & Noble. When the Nook was released in October, 2009, Barnes & Noble was a dominating force in the book business, growing, fighting it out with Borders, destroying smaller chains.

The world has changed in the last three-plus years. Borders is gone. Barnes & Noble is shrinking and morphing into a gift shop as the physical book business declines. Consumers are becoming smarter (as they always do) and realize that there is nothing special about ebooks they purchase from Barnes & Noble that they can’t get by purchasing them anywhere else.

Bookstores, Nook

8 Comments to “Barnes & Noble’s Nook Falls Behind”

  1. I just had my worst month at BN since Oct. 2010 or whenever it was PubIt opened for so-called business. It’s done.

    • Me too. My BN sales in February tanked. I’ve never been a bestseller, but I was making the same nice little profit I was at Amazon. Not anymore. It was sudden and severe.

  2. My sales have been up at BN, but I have a sinking feeling that someday soon they’re going to stiff me on the payment.
    I couldn’t care less if the brick & mortar stores died off, but I really hope that someone takes Nook and makes it a worthy adversary to Amazon, the more competition the better.

  3. When it comes down to it folks …. there is little anyone can do in the face of downright incompetent management.

    • I was ranting about B&N’s online stuff earlier today, and decided the problem was…

      Well, let me back up. I was telling him that apparently we have the Last Good B&N store nearby. The size is good, the selection doesn’t seem to have shrunk drastically, the knickknacks haven’t taken over much more of the store, the Nook Kiosk chopped out a table’s worth for a while, and sprouted another table when the Glow came out, but they’ve still got plenty of tables with stuff, and the staff has always been minimum friendly and generally helpful.

      I was then saying that they should outsource all their customer support to our local store, when I realized…

      The online B&N store is run by the management layer. Not personally, but that’s the attitude. They only talk to two people: their minion stores, and the distributors. And for ages, B&N was The Evil Empire, because they were one of about two major book-sellers. (Hi, Borders!) They could screw the distributors just a tad, and they certainly didn’t have to make things easy for them. Likewise, they controlled the horizontal, vertical, and whatever stuff their minion-stores ran in computer stuff.

      And they’ve taken that attitude into the B&N e-store. They don’t have to tell a potential customer at the website, “Yeah, sounds like a bug; we’ll bump that to the programmers. Thanks for reporting it!” They don’t have to say, “Sorry about the weird stuff last week; we think we’ve cleared it up” to a self-pubbing author.

      They don’t have to interact with, y’know, people who get a choice about the interaction. They’re BARNES AND NOBLE, and THEY ORDER OTHER PEOPLE AROUND. What are these “customers who have money” you speak of? That is for petty minion-stores to worry about!

      It’s all of a piece.

      • Good points, ABeth. Most people don’t understand that talent and hard work are necessary to run customer support for tech products. It’s a good deal more work than doing customer support for book orders.

        • I’m going to wager that B&N doesn’t even have good customer support for book orders, except at the store level, where people are hired based on how well they interact with, y’know, customers.

          Because I’m a cynic.

  4. My sales at B&N are down a little; however, my Amazon sales are down a lot. For me at least, I attribute the difference in sales to genre. At B&N I sell romance and mystery (under two names, so no cross-over) and at Amazon humorous mystery. Romance seems to sell all year; but mystery sold big at Christmas at both stores, now not so much.

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