From Seeking Alpha:
- Takeover of Barnes & Noble highlights the importance of technology change in media retailing.
- Lessons from Borders and Blockbuster bankruptcies are still relevant.
- Loyal customer base supports ongoing Barnes & Noble mall presence.
Barnes & Noble, largest US book retailer with a total of 620 stores, announced plans this month to be acquired by Elliott Management (a $34 billion New York private equity hedge fund) for $683 million (including transfer of debt),
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The important benefit of this takeover for Barnes & Noble shareholders (as well as Barnes & Noble’s landlords, the Retail REITs) is that this is a takeover in anticipation of a turnaround. Elliott Management also owns UK book retailer Waterstones and plans to put Waterstones successful CEO, John Daunt, in charge of both companies. It appears that Barnes & Noble has found a good home.
With 627 Barnes & Noble stores in the US and 280 Waterstones locations in UK, Elliott Management is facing off against Amazon, online juggernaut that is believed to sell as much as 50% of all new hard copy books as well as a large share of e-books and used books. Barnes & Noble has a successful website allowing loyal customers to purchase books, movies, music, toys, and games, but cannot compete with Amazon in size or selection, customer history or ability to take advantage of cross-selling and financing opportunities.
Still, Barnes & Noble knows their customer base well, having used loyalty programs to reach out to their frequent shoppers and should be able to take advantage of their friendly environment for book lovers at well-established stores. I think we won’t see many Barnes & Noble stores close, at least not at first; we are far more likely to see discounting and special offers at Barnes & Noble. Customers should feel upgraded.
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Although the greatest threat to Barnes & Noble’s future remains Amazon (both for online sales of hard copy books and e-books sold on Nook), I think the true threat is technology change, as we have seen over the past 12 years of change in the way media is delivered and consumed by today’s shoppers. These 2 retail failures – Blockbuster Video and Borders – still have something to tell us about current retail challenges.
Link to the rest at Seeking Alpha