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B&N didn’t have the culture or financing to compete with the likes of Amazon and Google

22 September 2017

From Publishers Weekly:

During its annual meeting held Tuesday morning at its flagship store in New York City, Barnes & Noble chairman Len Riggio supported its new CEO, Demos Parneros who was named to his current role in April.

During the meeting, Riggio called Parneros “the perfect fit” to help the company grow its top line and improve profits. Observing that Parneros “has brought lots of energy to the company,” Riggio said he is looking forward to watching the executive over the next few years, noting that Parneros shares his vision and will revive B&N “store by store.”

. . . .

Riggio also assured shareholders that B&N is no longer in the tech business. While the Nook e-reader and e-books will remain a part of the company’s offerings to customers, bricks and mortar stores will be its focus. Riggio explained that when e-book sales began exploding several years ago, B&N felt it had no choice but to enter the digital market. In retrospect, Riggio said, B&N didn’t have the culture or financing to compete with the likes of Amazon and Google.

Instead, according to Riggio, B&N will focus on its physical stores and will partner with technology companies to keep a presence in the digital space. “There is no business model in technology” for B&N, Riggio acknowledged.

Link to the rest at Publishers Weekly and thanks to Nate at The Digital Reader for the tip.

PG says the Nook business was doomed from its earliest days. The big reasons are:

Riggio didn’t want to pay for top online talent.

This was evident from the first time PG visited the Nook Store. Poorly designed and poorly executed. And it never really changed.

Real tech talent is rare and in great demand. In the beginning, for the right money, skilled tech people would have gone to work at Nook, but Barnes & Noble wanted to pay bookstore salaries.

PG has no idea if Nook tried to hire really good talent at the right price after it became clear that the Nook Store was a disaster. Unfortunately, by that time, serious tech talent wouldn’t have come regardless of salary because nobody wants to clean up someone else’s mess and a line mentioning the Nook Store would have been deadly on the résumé.

Besides, nobody would have believed Barnes & Noble stock options would ever make them rich at that point.

The Nook Store set ebook prices at a level designed to support the print book prices in its stores.

One of PG’s least favorite things to hear during a product planning meeting is, “We don’t want to cannibalize our existing business.”

The problem is that, if your business is cannibalizable by you, it’s cannibalizable by somebody else. Jeff Bezos has always been a happy cannibal.

Low ebook prices combined with instant availability fueled Amazon’s early dominance. Over time, by cultivating successful indie authors, in part by using Kindle Unlimited, Amazon has added tens of thousands of high quality titles that Riggio couldn’t sell if he wanted to.

Amazon vs. Big Bookstores and Big Publishing is going to be a classic business case used in MBA programs around the world for decades to come. Brains and speed beat money and size once again.

Bookstores, Disruptive Innovation, Ebooks

13 Comments to “B&N didn’t have the culture or financing to compete with the likes of Amazon and Google”

  1. There was a time in the 90s when the company I worked for was searching for a B&M company to partner with. We had some website, machine learning, and supply chain management technology that some folks thought we could combine into a dynamite B to C (business to customer) package. The idea was to make use of local inventories and B&M stores to distribute goods sold online using AI driven automated retailing software. (Sound familiar?)

    We’d supply the technology and a partner would supply locations and retail knowledge that we lacked. Our orientation was all B to B and we were pretty naive about C. Amazon was just getting moving and we felt we could take them out with the right chain of stores as a partner. Barnes and Noble was discussed as a logical choice. There were several other big names brought up. Those were salad days when we were vying with Microsoft for world’s largest software company.

    It went nowhere. B&N wasn’t interested. We found a few partners to work with, but they were SMBs who never could understand what we were talking about beyond investment of our dollars in their business. Maybe it was not possible and I am not sure what our technology was quite as powerful as we thought it was at the time, but I often think we might see a quite different retail landscape today if something had fallen into place. The B&M folks just had no idea of the potential of online sales. They could not imagine replacing a smart retail manager with an AI algorithm.

    • B&N’s problem was that they did their level best to replace smart retail managers with managers who would do as they were told by the central office. The fact is that an AI algorithm can’t outdo someone who actually knows what they’re doing and takes the initiative–it can, however, outdo micromanaging busybodies who never leave New York City.

      • I have a different slant on the algorithmic sales.

        Smart managers should be able to outdo an algorithm if they are working with a single store or group of stores, but for a mass market like Amazon works with, the problem changes. With a mass market, almost anything will boost sales and profits for some sub-group of the market and almost nothing will work with the entire market. The trick for Amazon is to, as we used to say, slice and dice the market to match the initiative rather than divine the perfect initiative for the entire market.

        Humans are great at discovering a successful way to manage their store, but not so great at matching 400 million products to a couple million customers a day as Amazon does. Algorithms don’t do it perfectly, but they do it better than humans. Humans feed the algorithm and the algorithms calculate the execution.

        That said, I am amazed that Amazon succeeds when their most astute buy suggestion is for whatever it is that I bought yesterday. If I buy a 12 pack of furnace filters in September for 5 years, you would think the algorithm would learn to hold off on pushing more filters until June instead of giving up in January. Their system obviously works, but it certainly seems dunderheaded sometimes.

  2. Tech people (I have two, possibly three tech kids) have the pleasure of being valuable and respected now, and rewarded with cash and opportunities.

    After the way most companies treated their IT department – geeks who somehow were necessary to keep the computers running, but otherwise an annoyance (the classic British sitcom IT) – it’s a welcome change.

  3. Missing “Link to the rest at Publishers Weekly”:
    https://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/74814-riggio-backs-parneros-at-b-n-annual-meeting.html

    Not much more there (four sentences). Mentions future store sizes will be smaller.

  4. Jeff Bezos has always been a happy cannibal.

    Best line I’ve heard this week, PG! 🙂

  5. Riggio also assured shareholders that B&N is no longer in the tech business.

    He can strike the word “tech” from that sentence and reuse it a year or two from now.

  6. B&N’s comments are astonishing, especially in light of the fact that digital sales are booming and high street sales are in long decline.

    This isn’t a business update, it’s a suicide note.

    • I don’t think you can claim that digital sales are still booming. If you look at bestselling titles, the numbers have dropped off dramatically from two years ago. If you want to say that ebook sales are increasing on more lesser known titles, that might be possible; not sure. They could also be increasing because of the sheer number of titles available, but on a per title basis, sales are no longer booming. I will have to ask the big hybrid authors that we’re dealing with if they see their ebook sales still booming on their self published books or if sales have leveled off or declined over the years.

  7. B&N is the very definition of Top-Down corporate culture.

    Riggio’s statement basically says “I’m old, I’m set in my ways, I don’t understand this whole internet thing, and nothing is going to change that. But we’re still going to do it the way I say.”

    If Amazon ends up with a monopoly stake in the ebook world (something they don’t want)it will be due to the incompetence of its competitors.

  8. It’s not as if a B&M chain can’t get this right. I’m moving soon and needed multiple rolls of vinyl shelf liner for the cabinets in my new place. After checking Amazon, I went to the Bed, Bath, and Beyond site, with the thought that I might order from them since I’ve bought other things there.

    Not only was the price cheaper than Amazon, the site told me the store closest to me had inventory available and allowed me to reserve it for later pickup. I got an email confirming my order was ready shortly thereafter. I went to the store and the clerk retrieved my order from a locker at the front. I paid the price I’d seen online and had my shelf liner within an hour of placing the order.

    Contrast to Barnes and Noble, where I ordered a book for in-store pickup several years ago. I waited a couple of hours to drive to the store (because they give you a vague estimate of when the book will be available), then waited in line at the register to pick up the book. When the clerk rang it up, the price was 50% higher than the online price. When I complained, he told me the store and the website were two different businesses and that if I wanted the online price, I’d have to order it from the website.

    Of course, you know the upshot of this was that I left B&N without the book and ordered it online. From Amazon.

  9. Ya know, take it back a business generation and the same divide was going on with the first corporate internet and intranet sites, before retail online was really an issue.

    It’s not easy to find a corporate decision maker in the Fortune 1000 crowd who can become a visionary (with inhouse permissions) when a tech partnership opportunity appears. There were a great many consulting businesses at the time (I was in several) who made a living explaining tech opportunities to corporations.

    What makes B&N, and publishing in general (excluding Amazon), so astonishing is that they’re so insular and so late to the party, at least a business generation later than everyone else, where the idiocy of their positions is so obvious to any observer.

    The “I don’t need no stinkin’ high-tech” position is long past its sell-by date. I doubt anyone in the tech world has wanted to touch such backward firms for 20 years, so they can’t get the help they need by hiring it even if they converted overnight — way too late for that.

    If a firm like B&N wanted to fix the online store issue (much less the Nook) at this late date, their only hope is acquisition or contract, and I suspect they’d smother any acquisition. So contract with Kobo or equivalent may actually be the most sensible move they can culturally make.

  10. Jeff the Jolly Cannibal – love it! 😀

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