This holiday season could seal Barnes & Noble’s fate

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From CNBC:

This could be the most crucial holiday season in Barnes & Noble’s history.

Its sales have been in a decline for six years as the bookseller cedes market share to Amazon and consumers turn to their phones or portable tablets instead of books. There’s been a revolving door in the retailer’s C-suite, and activist investors have piled on. Now, Barnes & Noble is considering a sale of its business after receiving interest from a handful of parties, including its founder and executive chairman, Leonard Riggio, and reportedly, U.K. retailer W.H. Smith.

Barnes & Noble must prove it can deliver sales growth in its core book business this holiday season. The retail industry as a whole is expected to benefit from strong consumer spending, with the average American household expected to spend $1,536 through the holidays, according to a survey by Deloitte. That’s up 25 percent from a year ago. If Barnes & Noble can’t grow sales against such a healthy, economic backdrop, the company could ultimately head down the same path as its former rival Borders, or shuttered Toys R Us or Sears, which is in bankruptcy court.

All things considered, Barnes & Noble still has high hopes ahead of the holidays.

“We’ve done a lot of things this year to try to put ourselves on the right track and to get our comp-store sales number to head in the positive direction,” Riggio told CNBC. “And we are hoping that that comes — we are planning for it to come — during this holiday season.”

. . . .

Last holiday season, the bookseller’s sales tumbled more than 6 percent, with e-commerce sales also in the red. After the dismal results, the company slashed its staff.

Now, it has a new plan in place for this year. In a new ad campaign that’s being rolled out this week in movie theaters and on cable television, Barnes & Noble touts its more than 20,000 current employees, along with their knowledge of books, as reasons why its stores are unique. “Nobody Knows Books Like We Do” is the message of the campaign, which will run though the middle of January.

Barnes & Noble also will be testing roughly 10 to 15 store layouts during the holidays, featuring different spreads of merchandise, to see what sticks.

“We have a lot of things out there in test form,” Riggio said. “Retail is all about that. … If you’re smart, you conduct tests during the holiday season, and that informs you how to run the next holiday.”

. . . .

Within just the past five years, Barnes & Noble has lost more than $1 billion in market value. Its shares have fallen about 4 percent from a year ago, having spiked more recently on deal speculation, and now trade under $7.

“To have a company with a small market cap is somewhat problematic,” Riggio said. “Our market cap is an indicator that we should be a private business.”

. . . .

Amazon all the while has managed to take almost 50 percent of new book sales, according to Codex Group, a book audience research firm. While it doesn’t break out Barnes & Noble’s share, Codex says Walmart has about 4.2 percent of the new book market, tied with the category of independent booksellers, which after a period of decline are staging a comeback.

. . . .

More recently, however, analysts say Barnes & Noble has struggled from perhaps innovating too much. It’s tested restaurants called “The Kitchen,” but the concept proved too expensive to grow at scale. It still has just five of these eateries, offering $12 avocado toast and $16 brisket burgers. “The top line on our restaurants is good. The bottom line is awful,” Riggio said on a recent earnings call.

America’s independent book chains, meanwhile, are gaining their footing again by sticking to what’s simple and what they know best — selling books. There are still more than 2,300 independent book stores in the U.S., according to the American Booksellers Association.

. . . .

“This is a very fragile industry now,” Codex Group CEO Peter Hildick-Smith said. “Our data is suggesting a lot of the books business today is behind the Amazon curtain.” He said more than two-thirds of all books sold on a unit basis are now transacted online.

Taking note of this trend, Riggio has said investments online will be the company’s next priority. Still, he explained, “the magnitude of what the Amazons and the Apples and the Googles can achieve in terms of technology is so far beyond that which we could achieve, we’ve really got to carve out a space for ourselves. … We can’t do it all.”

Link to the rest at CNBC

76 thoughts on “This holiday season could seal Barnes & Noble’s fate”

  1. In short, unless a miracle happens (or the Head of the Federal Reserve drops ten million dollars from a helicopter*), B&N is going to collapse into bankruptcy.

    *When I took macroeconomics, every problem began, “The Head of the Federal Reserve drops $100,000 from a helicopter. At [certain percentage interest], calculate…”

    • I’m a little surprised it hasn’t happened yet. I was in the local B&N last night. I had a coupon I wanted to use. I noticed two things.

      1) The amount of floor space not being used by books seems to have increased again.

      2) I was looking for something in the SF section. Didn’t see a thing that interested me enough to shell out cash. I ended up buying some magazines and a mystery.

      I really don’t want to see B&N close here. There are no other bookstores other than a couple of religious bookstores. Even all the used bookstores are gone. And there is a major university in this town.

      B&N here is at the mall. And a Cheesecake Factory just went in between B&N and the road, blocking visibility and making parking a real pain.

      • The one up here as well. I was a bit nonplussed to collide with the end of the new “reading socks and hats” display between me and the books.

        There are two religious book stores (three if you count the Catholic Super Store, and yes, that is its name), and some of the antique shops sell some used books. The closest used book shop either 1) was sold or 2) was raided by the Feds and closed. Stories vary. B&N is the only non-Walmart that sells new secular books.

        • The library basement is devoted to the Friends of the Library book sale once a quarter. I can usually find something there. By something I mean at least one or two bags full. One of the comic shops in town carries used paperbacks, but I’ve pretty much picked their inventory clean. Other than Goodwill and a few booths in antique stores, that’s about it here. We’ve lost at least half a dozen used bookstores in the nine years I’ve lived here.

          • Many savvy used book sellers experiment with placing their inventory online, only to find that their online sales outstrip their B&M sales. I often see articles about B&M used book sellers shutting down that say they will continue to sell online, moving their inventory into cheaper digs.

            abebooks.com. stop looking for ‘something’ and start buying what you want.

  2. “Riggio has said investments online will be the company’s next priority.”

    And they don’t need the old bookstores to do it – ‘if’ they do it …

  3. I wonder how many people are actually prepared for a B&N implosion.

    For all that they keep losing money year after year, they are still moving $3.5M in merchandise a year. That is going to make a really big hole in the distribution channel and all the people who depend on casual shoppers meandering the aisles for a cover that might catch their eye are going to lose a lot of their visibility.

    Authors of everywhere books might even come out ahead if each lost B&N is replaced by two newsstands or small stores but everybody else is going to lose a major portion of their shelf space.

    Again: $3.5billion headed for limbo.

  4. “…consumers turn to their phones or portable tablets instead of books.”

    Incorrect. More people are reading more books than any time in the history of the world. The fact that Barnes and Noble can’t figure out how to make money on this is bewildering only to people who don’t love books.

    They’ve had every opportunity to turn this around and it’s clear (to me at least) they have no interest in saving the company, just riding it to the bottom.

    • What could they have done that would have kept consumers from shifting so much market share from B&N to Amazon?

      • Commit to online.
        Almost two thirds of pbooks are being sold online.
        If B&N had integrated online and B&M they wouldn’t be outsold 5 to 1 online.

        See above. Riggio wants to make online a priority in 2019, not 1999 or even 2009.
        They set up B&N.com 20 years ago.
        Their friends in the media actually thought they had the upper hand on Amazon. That is not news here.

        • Brick and mortar retailers were doing Ship-to-store/In-store pickup for internet orders as far back as 1998. It was hardly a stroke of genius as Sears and other catalog stores were doing in-store catalog sales decades earlier.
          By 2011, right around the Borders implosion, Walmart was bragging how ship to store not only gave them an online edge for faster delivery, but it also drawing gave them the chance for added “drive-by” sales.

          http://business.time.com/2011/03/11/why-retailers-prefer-ship-to-store-over-plain-old-shipping-to-the-customers-home/

          Willful ignorance is no virtue.
          Cluelessly ignoring what has been going on in B&M retailing for decades doesn’t make you a helpless victim of evil Amazon. It marks you as incompetent.

        • Commit to online.

          That would have made B&N an online specialty store where investment in online benefited only a single line with limited revenue potential.

          Amazon enjoyed a huge advantage in online investment. Their dollars benefited book sales as well as all their other lines. B&N would have to spend a dollar to achieve a given level of online performance that was just for books. With Amazon, books could ride along and benefit along with every other product line. Dollars that benefited Amazon’s book line could never be justified if only books benefited.

          As Amazon’s other product lines grew, books became just another product line. Nothing special.

          B&N didn’t have the money to compete online, and that money could never have achieved an ROI that met a lender’s demands.

          Nor could B&N have meet a price challenge from Amazon for paper. The external environment was stacked against B&N.

      • One thing that probably would have helped would have been actually playing to the advantages of brick and mortar retail, instead of treating their product and employees like interchangeable widgets.
        If you don’t believe me, consider who the company let go during that massive round of layoffs. It was primarily their experienced people, because they cost more. Never mind the fact that they probably knew more.

        • Treat each store as a separate business catering to its customers’ needs. Hardly a new concept.
          It worked for Waterstones in the UK and Indigo in Canada.
          It worked for a lot of other retailers in the US.
          Most of the roadkill prefer to blame online over admitting they were overleveraged, overextended, or just plain mismanaged.

          All they had to do was watch what other “widget vendors” were doing, no actual genius required.

          • Overlevereged firms should extend their leverage to spend more money online?

            It’s perfectly reasonable to acknowledge technology and migration to online drastically changed the external environment in which a firm operated. It’s also reasonable to acknowledge the advantage the general merchandise online vendor had over specialty stores due to huge economies of scale.

            We might also recognize that the product doesn’t always define the business. Amazon and B&N are in very different businesses but share a single product line. The struggle between Amazon and B&N wasn’t between two firms in the same businesses competing for market share. It was between two very different businesses competing for the same consumers.

            That all makes for a very unfavorable environment in which the firm has to navigate. Even if B&N had been managed by independent authors who know more that any publisher, retailer, or economist, B&N was doomed.

        • >consider who the company let go

          I have a suspicion that was the sign that they knew this plane was going into the ground like a lawn dart. “Here, if we cut these people, we’ll get four more months and can make it to the Christmas season.”

    • Quite a few of those people are reading books on their phones. Take a gander at the comments in this reddit topic…

      https://www.reddit.com/r/books/comments/56hf1u/does_anyone_here_primarily_read_books_on_their/

      .

      Consider something about ebook sales numbers.

      1. It’s generally accepted that Amazon sells about 1/2 of all the paper books sold in the US.

      2. For many years, Amazon has said that they sell more Kindle books than they do paper books.

      If you accept both of these statements, then it stands to follow that Amazon’s share of the ebook market alone is at least 1/2 the size of the entire US paper book market. Add in Apple and others and the size of the ebook market could be close to 60% of the paper market.

      Many other sources peg ebook market share around 20%. Could they be wrong – and how?

      • “Many other sources peg ebook market share around 20%. Could they be wrong – and how?”

        Yes – and because they don’t want to know the right numbers.

        Anyone believing ABA and friends don’t want to admit that Amazon is selling many books – and no non-trad-pub ebooks. As trad-pub has mostly priced their ebooks not to sell the 20% may be close to the mark they want to pretend is ‘all ebook sales’.

        MYMV

      • If the only e-books you count are from the Big 5, and you exclude textbooks, I could see e-books shrinking in percentage. Since only the ‘Zon (and DataGuy) know exactly how many small-press, micro-press, and purely independent e-books are sold on Amazon, the difference in numbers makes some sense.

        And what exactly is an e-book versus a print-book? Are coloring books and comic books print books?

      • Are you talking unit sales or revenue, and if the latter is it the retail sales or the publishers receipts? I suspect that some of what you quote is one thing and some the other.

        • It also matters if you’re talking retail trade books or total publishing dollars. Total US publishing is close to $30 Billion a year. With a B.;)

          The BPHs combined make up around $9Billion and the entire trade book business runs $14-$19Billion depending on the definition of trade books.

          The 20% figure generally comes from the BPHs and it refers to their dollar share, not unit sales, of their individual sales. That peaked at 25% circa 2014 before Agency Part Deux. The total market is something they have no way of seeing.

      • In our rural public library system, something has changed in the pattern of eBook reading. Up until about 2 years ago, our overall circulation was increasing, but paper book circulation was flat or declining. EBooks were taking up the slack in paper circulation.

        Now, the trend seems to be for eBook circulation to continue to rise steadily, and paper circulation has begun to rise also.

        Guessing at reasons is just guessing, but I attribute the rise in paper to the prejudice against reading from screens that seems to be ascendant, at least in tech circles. Demographics may account for the overall rise– our population is increasing– but not for the increase in paper lending.

        • The increase in paper at libraries most likely is a reaction to the price of tradpub ebooks. Remember, they went up from around $10 to around $13.

          How are the waiting lists on print vs digital?

          • I don’t have holds numbers at hand, but they are hard to compare because our acquisition strategies are different for digital and paper. We tend to acquire digital books that we know will be high initial lend rate, for paper we tend more toward high value books that we know will have a long active shelf life but a lower initial lend rate.

            We would like to acquire more eBooks because they are popular, but they are quite a bit more expensive per lend than paper so they are not cost-effective. EBooks are licensed in blocks of consecutive (not concurrent) lends, usually around 15 or 20, I think, before the license expires and has to be repurchased. A block of 20 digital lends is in the $80 range, or $4 per lend. A well-bound paper book can be lent hundreds of times, so a paper book that costs $50 to put on the shelf can be lent for pennies a lend, if the public continues to want to read it. Even though paper occupies valuable shelf space and has to be trucked between branches, it is still much cheaper.

            If we wanted our library to put as many books as possible in front of our patrons for as little cost as possible, we should not acquire digital books at all. However, it is not a pure cost equation: we want to deliver what our patrons want, and that is both print and digital books.

            Which galls me because the real cost of digital is much less than paper.

            • Which galls me because the real cost of digital is much less than paper.

              I think a paper book only costs about $2.00 from the printer. Add another dollar for shipping and the digital/paper difference is only $3. Add another dollar for a beefed up library edition. That’s $4. And the library pays $50?

              Perhaps the real cost is somewhere other than printing?

              • Part of that cost is on the library side I expect; cataloging, processing, getting into the database, etc. Similar things are either non-existent or automated through the ebook distributors libraries use.

                • Correct. Remember too, that I am talking about a well edited, important books in durable bindings, not just physical production costs.

                  Libraries buy a lot of books that are nowhere near best-sellers, but we circulate them for years and our patrons appreciate them. For example, $50 for a reference book on foreign language Oscar nominees and winners is realistic, and that does not include processing.

                  Actually, distributors like Baker & Taylor minimize what we have to do. For example, they will pack books in Dewey Decimal order, which saves hours, but processing costs are still high.

            • Sounds about what I expected.

              Have your folks looked into PD ebooks?
              Those are free so you could offer them for download off your own servers or on disk, at minimal cost and they include a lot of schoolwork-assigned reading.

              • Good suggestion. We have looked into them. We don’t have an adequate IT staff and resources to maintain our own servers and our collections staff is stretched thin. We’re not large– we serve about 220,000 population and will circulate a little under 2 million items this year. I think we do circulate some PD eBooks on physical disks.

                • You don’t necessarily need an IT staff to run an ebook depository. These days a hosting service can do most of it for you at very low cost.
                  Might be worth talking to somebody at AWS, DROPBOX, or MICROSOFT. Or one of the horde of small business offering hosting services. The library’s role would be to decide on your trade dress, provide a disk with the files, and write a check once a year.

                  You wouldn’t need more than 10GB of space and a tiny database to feed out the ebooks. People have been known to roll tbeir own off RASPBERRY PIs so hosting costs might only be a few hundred a year.

                  Check this:

                  https://www.pcmag.com/article2/0,2817,2424725,00.asp

                  Remember, many Indie authors have their own websites with sales and download capabilities. As Jerry Pournelle used to say, “if you don’t know how to do something, pay someone who does”. To which I’d add “…especially if it’s cheap to get it done right.” 😉

                  Simple website hosting is really cheap these days.

                • You are right: hosting is cheap. We already use cloud services for most of our compute resource. Our Integrated Library Service (sort of library ERP) is SaaS and our web site is on a hosted service. The problem is staff, not hardware.

                • Staff is part of the service at the Cloud suppliers.
                  And for a file repository it’s a one time expense.
                  Just a suggestion: things are changing very fast in the online space.

      • By the way, it is hardly impossible that ebook *sales* at Amazon have declined. Not because of people returning to print but because of the people moving to KU buying less books.

        A second reason for declining sales is people moving away from hoarding to just-in-time buying.

      • For years I swore I would never do any serious reading on my phone. I read at the gym, and I used to bring both my phone and my Kindle. One day I forgot the Kindle at home and had to make do with the phone. Put it in landscape mode, enlarged the print and…it wasn’t that bad. It’ll never be my primary reader but in certain situations it allows me to lug around one less device.

  5. As I do every year, I will give B&N gift certificates to the siblings’ kids and my closest friends. I may also suggest they spend them without delay, just to be on the safe side.

    • An Amazon gift card might be safer – and a wider selection of things they can get.

      (As you have no idea if B&N will have anything they’d want to spend/waste your gift card on – and there’s the risk that you’re just throwing your money away.)

      Good luck, and May Your Mileage Vary!

      • My entire family are bookaholics. They’ll find something. As to Amazon, I’ve despised it for many years because of the way it has treated authors and publishers, and I’ve never spent a penny there if I could avoid it.

          • Yeah, Amazon does that right now, but a smart writer realizes that Amazon can destroy your income with the casual mistake of a computer algorithm. This happens all the time. You and your books are just a series of identification numbers to them, and they don’t give a sh*t about you or your books. They’ve casually wiped out small publishers over the years because they could, and they’ve driven down percentage rates of what the writer or publisher gets. Back in ancient times, before Amazon, I got 75% per ebook sale without having to sign away my life to one book aggregator. Anyone who thinks Amazon is their friend isn’t paying attention.

            • and they’ve driven down percentage rates of what the writer or publisher gets.

              Amazon pays 70%. What was it before Amazon drove it down?

              Who had their income destroyed with the casual mistake of a computer algorithm?

              There is no reason at all to think Amazon is a friend. Who says that? They are a big company that opened incredible opportunity for authors. Who cares why they did it?

    • @Marilynn. Whatever your feelings about Amazon, don’t cut off your nose to spite your face. Giving B&N gift cards is like playing Russian Roulette with your money. I and the other sceptics may be wrong, but I think there is a very good chance that B&N is not going to be in a position to honour these vouchers when your family members and friends are ready to redeem them. I don’t at all agree with you on Amazon, but it simply doesn’t matter. From what I can see B&B isn’t even trying to save itself. Certain insiders seem to have joined the circling vultures and are seeking the opportunity to be first to feast on the carcass. If you are really that prejudiced against Amazon, perhaps a Walmart voucher would be a better bet, at least this year. Or even Kobo if the option of physical books is not required. Even a local Indie store. But please not B&N. Cutting off your nose to spite your face doesn’t give your friends and loved ones any reading material.

      • I started using Apple Macs in 1983. For most of those years, I kept reading articles about how Apple was DOOMED and would go belly up any day now. I kept buying Macs. I am typing at one right now. Need I mention that Apple is now the biggest tech company in the world. My only regret is that I didn’t buy stock at the same time because I would be stinking rich.

        I have been reading about B&N’s doom for years, and it’s still here, too. Every time I pass the local store, the parking lot is over half full or better. I have to wait in line when I buy books there. I’m under no illusion that B&N will blossom like Apple, but you’ll pardon me if I roll my eyes at your certainty it will die tomorrow.

        • FWIW, Apple was in fact imploding. They were months or even weeks from chapter 11.

          What saved them was Microsoft investing hundreds of millions and settling their lawsuit.

          https://www.wired.com/2009/08/dayintech-0806/

          It boosted their stock and kept them afloat long enough for the fruity colored Macs to save the company. The iPod and iPhone came much later.

          Somebody might still step up to prop up B&N (as I pointed out, they still move $3.6Billion in books, even if it costs them $3.8B to do so) but the trends of the market and the behavior of their management aren’t good omens.

          No Steve Jobs over there.

        • Not certainty, Marilynn. Just a high likelihood based on the information currently available. At least all your friends and relatives stand to lose is the value of a gift voucher. Good luck to you. I must admit, however, to hoping that you are not going to go out and buy B&N shares. That would be true optimism!

  6. Commit to online.

    That would have made B&N an online specialty store where investment in online benefited only a single line with limited revenue potential.

    Amazon enjoyed a huge advantage in online investment. Their dollars benefited book sales as well as all their other lines. B&N would have to spend a dollar to achieve a given level of online performance that was just for books. With Amazon, books could ride along and benefit along with every other product line. Dollars that benefited Amazon’s book line could never be justified if only books benefited.

    As Amazon’s other product lines grew, books became just another product line. Nothing special.

    B&N didn’t have the money to compete online, and that money could never have achieved an ROI that met a lender’s demands.

    Nor could B&N have meet a price challenge from Amazon for paper. The external environment was stacked against B&N.

    • Jeeze.
      “Commit to online” doesn’t mean dropping brick and mortar.

      Did BestBuy close their stores? Walmart? Target?
      What they did is commit to make their online business an equal, integral part of the business, to do it as well as possible, not make it some separate half-baked side project. They do ship to store, they do return to store, they do unified pricing; they use online to support their stores and their stores support online. There is but one Target, one WalMart, one Best Buy, one Nordstrom’s, etc. But there are two B&N’s, separate and working at cross purposes.

      B&N isn’t dying from Amazon competition, they’re dying out of incompetence. They saw the threat coming, they even did most of the right things–set up an online store, sell ebooks, sell an ereader, etc–they just did all of it in a half-hearted thoroughly incompetent way.

      Why defend them?
      Their endless mistakes are all publicly documented.
      And, last I looked neither BAM nor Half-Price nor Hudson nor any of the hundreds/thousands of well-run independent bookstores selling online are on the verge of collapse.

      They were not doomed to failure by outside forces.
      When they do fall it will be a matter of record that they did it to themselves.

      • Why defend them?
        Their endless mistakes are all publicly documented.

        I recognize the economic and market situation, external and internal environment, and look at the advantages of each company on net balance.

        The external environment is favorable to Amazon, and unfavorable to B&N.

        The internal environments that must navigate the external is favorable to Amazon and unfavorable to B&N.

        Making online business an equal,integral part of the B&N business would change nothing because each firm would still be in different businesses, and B&N would remain in a highly unfavorable position, while Amazon was in a highly favorable position.

        The problem for B&N isn’t internal. It’s the external environment. Nothing could have been done to make the internal environment favorable in meeting the challenge from a firm in a completely different business.

        And the record? It’s written by advocates, not analysts.

        • Which analysts?
          The ones that think Amazon should buy B&N?
          (That sounds like pump-n-dump to me.)

          And online and B&M are different businesses? Really?
          Tell that to Target:

          https://www.youtube.com/watch?v=g8JbzLWSRog

          Hint: PRIMEDAY was their best (pre-black friday) sales day all year. Maybe all year.

          90% of their online sales were fulfilled from their stores.
          That is how you integrate online and B&M.

          • And online and B&M are different businesses? Really?

            B&M and online are not sufficient to define different businesses. But a firm that sells a zillion product lines online is in a different business than a firm that has a single line, regardless of its B&M or online presence.

            Target also sells lots of books, and it is also in a different business than B&N. Doesn’t matter if B&M and online are integrated or not. Target knows that.

            • Yes. Amazon is certainly a very different and far more diversified business. But it does not at all follow that there was nothing that B&N could have done except passively accept its doom. In fact, if this was true then the mismanagement is even more monumental. It could be argued that the BPH are taking this view of the future and are pursuing a much more rational policy of making hay while the sun shines whilst managing a transition to simple royalty farming in the longer term.

              B&N started from a dominant position in this industry and proceeded to surrender it without a fight. The Nook was and still is regarded by some as a wonderful reader. Their online store is something that they apparently never got right (I have never been a customer so have no firsthand knowledge of this). They were never going to vanquish Amazon, but they could have been a good and worthy competitor.

              • It could be argued that the BPH are taking this view of the future and are pursuing a much more rational policy of making hay while the sun shines whilst managing a transition to simple royalty farming in the longer term.

                That’s exactly what B&N is doing. They have been making hay as fast as they can. However the owners don’t have that huge backlist to farm.

                There’s lots of stuff B&N could have done, but nothing they could have done would have changed the fundamental fact that its customers were moving to an entirely different business because they preferred it. You can’t compete with an opponent who can use your entire product line as a loss leader.

                • But Amazon was not using B&N’s entire line as a loss leader, as is apparent from the Price Fixing litigation. Had it actually been doing so it may well have had its own anti-trust problems.

                  We will never have a definitive answer, of course, but I agree with Felix on this one. My inexpert opinion is that B&N did many of the right things very badly, and that their coming demise is a result of extremely poor management.

                  Even a better designed website and some real effort with the Nook could well have left them a strong online competitor today.

                • But Amazon was not using B&N’s entire line as a loss leader, as is apparent from the Price Fixing litigation.

                  They didn’t? Maybe not the entire line, but what’s KDP? Independent authors heaped coffin nails on B&N. Let me put it in different terms.

                  Amazon hosts zillions of products. It can price any of those products to promote other products. It’s reasonable for them to price Good-A at a point where they break even if they can steer consumers to Good-B. In this case, lost profit on Good-A is less than increased profit on Good-B. That’s a powerful tool.

                  B&N, however, only has Good-A. They don’t have some other good to use in pushing consumers to Good-A. That’s a weakness.

                  Amazon can also easily navigate through a drop in consumer demand for Good-A because they have a zillion-minus-one other goods to make money. B&N can’t. (Note the rending of garments from independent authors when B&N puts Good-B on the shelf.)

                  They are in different businesses.

  7. These two seem to be the money quotes.

    Amazon all the while has managed to take almost 50 percent of new book sales, according to Codex Group, a book audience research firm.

    And

    “This is a very fragile industry now,” Codex Group CEO Peter Hildick-Smith said. “Our data is suggesting a lot of the books business today is behind the Amazon curtain.” He said more than two-thirds of all books sold on a unit basis are now transacted online.

    Amazon accounts for almost 50% of new book sales.

    More than two-thirds of unit sales online. More than 66%!

    • They’ve been gifted with singularly inept “competitors” and are to a large extent working in a vacuum.

      • I agree about the vacuum, but not the inept competitors. In terms of books, the behavior of Apple and Google is not competitive. That’s a choice. It looks like their book operations are placeholders in case they decide they need them someday.

        Many would like to see competition for Amazon in books, but a potential competitor has to have a reason to invest in books rather than some other venture.

        Ratuken is much smaller than Amazon, does very well in Japan, and is venturing out. But there is little reason for their Canadian arm to challenge Amazon in books.

        Ali Baba is the elephant in the room. It’s an Asian giant spreading out to the rest of the world, while Amazon is an American giant doing the same. Each holds firm market positions, and they are getting closer and closer to each other. And inept doesn’t fit either.

        • I wonder how Walmart will figure into this now that it has partnered with Kobo/Rakuten. Their site isn’t as nice for books as Amazon’s is. But it seems they’d be able to offer some competition if they just got their online act a bit more together.

          • That will be fun. Walmart and Amazon are both general retail operations where books are just one product line. The competition is on a much wider front than just books.

            I’m beginning to think the key to online book success is the data base of metadata for the book collection. Search engines are not that hard to build. But they have to have something to search.

  8. I too would like to see Amazon have some competition. Not because of what they are currently doing, but because of what they may be able to do in the future if none materialises. So far as retail pricing of books and ebooks is concerned Amazon is currently pricing as if it did have substantial, healthy and competent retail competition, though it largely does not. This is what so frustrates those calling for anti-trust action against them. This is why Apple and Google are not bothering at the moment, though they are of course keeping their options open for the future as you say.

    So far as competition for supply from authors and publishers is concerned, Amazon seems to offer very fair arrangements and much better remuneration for the vast majority than offered by most traditional publishers. Where Amazon is trouble for authors it seems largely to relate to inflexibility of some of its policies in an attempt to prevent scams, and its KU subscription service, which cannibalises actual sales, though it still does allow many authors to make a reasonable return.

    • Acting as if you have competent competitors is part of the Bezos “DAY ONE” mantra. It has the side effect of scaring off would-be serious competitors, who would rather go find their own wounded gazelles than mess with an alert lion.

  9. I’d love to see the data on KU subscribers. In the 12 months after joining KU, did they spend more or less at Amazon than they did in the 12 months prior to joining KU? Did they buy fewer books yet buy more other stuff?

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