Everyone Wants Barnes & Noble to Survive. Can It?

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From Jane Friedman:

It hasn’t been the best decade for Barnes & Noble, the biggest bookselling chain in the United States. As sales slowly eroded—and Amazon gained dominance—the position of CEO became one of the fastest revolving doors in the publishing industry. Each new leader trotted out a revised “concept store” to revive the fortunes of the bookseller, none succeeding.

. . . .

The Nook debuted in October 2009, two years after Amazon Kindle. At its peak, Nook enjoyed sales of nearly $1 billion a year. By summer 2019, in the last public earnings report from Barnes & Noble, Nook delivered less than $100 million in revenue per year, with negative profits.

In acknowledgment of Nook’s failure to compete against Amazon’s Kindle or even Apple’s iBooks, Barnes & Noble’s chairman at the time, Len Riggio, told investors in 2017, “There is no business model in technology” for the chain. 

. . . .

In a 2018 podcast from Knowledge@Wharton, a few marketing professors discussed what the future might hold for the beleaguered retailer. Wharton’s Peter Fader said, “They’ve tried lots of different things from devices to experiences to broadening the merchandise. Nothing’s working. At this point, they haven’t found that hook to save the business; nor have they found the vision or leadership to give people any confidence in it.” Wharton’s Barbara Kahn said that while the retailer probably does a good job overall, “The problem is they’re not the best at anything.”

. . . .

James Daunt is perhaps best known for spending the last eight years getting the venerable but once shaky Waterstones (with 283 stores) on its feet. 

. . . .

Early on, when Daunt was asked what he thought of Barnes & Noble on his last store visit, he said, “There were too many books,” by which he meant that featuring the right inventory is more important that stocking a big blur of titles. Back in 2015, he commented to Slate, “My faculties just shut down when I go in there.”

On Sept. 11 of this year, the Book Industry Study Group hosted a conversation and Q&A with Daunt, in which he stressed a local-first selling strategy. Daunt says that if you give booksellers the autonomy to choose and display and curate their stores (rather than making decisions on a corporate level), those booksellers will make sure the books that customers want to buy are in front of them. “Ultimately we will sell more, customers will come into the store more, and publishers will sell more. That is the happy outcome that should reconcile publishers to this [new model].”

However, because of the focus on local booksellers making their own stock decisions, there won’t be any co-op going forward. Co-op is the practice of publishers paying for title placement throughout the chain. It’s a reliable way for publishers to guarantee sales, but it’s also associated with high returns. Daunt said, “Co-op and promo and all of that doesn’t actually work with my way of running things, when one talks about giving stores the autonomy to do what they want. That’s not a form of words. That’s actually meant. Therefore you can’t take co-op.” Daunt said that no store would be required to stock even blockbuster titles like Rage by Bob Woodward (although it would be expected every bookseller would logically want some number of copies).

Furthermore, because of this local-first strategy, a number of longtime buyers for the chain (headquartered in New York City) have been let go. Some of these buyers, such as fiction buyer Sessalee Hensley—once profiled in The Wall Street Journal under the headline “So Many Books, So Much Power”—had been with the company for decades.

Link to the rest at Jane Friedman

PG says there are a million questions about the future of Barnes & Noble after the pandemic.

In retrospect, Len Riggio picked a pretty good time to sell his controlling interest in Barnes & Noble. The bookstore chain is now owned by Elliot Management. Elliot says the following about itself:

There are a number of elements of the firm’s investment and risk-management activities that Elliott believes are essential to its goal of generating a consistent return to its investors. These elements include an opportunistic trading approach, the creation – not just the identification – of value, effective liquidity management, and managing operational and counterparty risk. The firm employs a value-added global investment approach.

More perceptive readers than PG may be able to discern what Elliot is thinking about its investment in Barnes & Noble based upon that statement. PG cannot.

Some possibilities occur to PG:

  • Elliot’s other investments and businesses may have been so badly-damaged by the economic effects of widespread pandemic shutdowns that it has much more urgent issues to deal with than paying attention to or spending any money on Barnes & Noble. One possibility that comes to mind is that Elliot may have to sell itself to another company. Or divest itself of some of its major assets. (Note that this is pure speculation on PG’s part. He hasn’t done any research on Elliot and hasn’t any inside knowledge about what Elliot’s current financial circumstances are.)
  • Elliot may apply the greater fool theory and search for someone who will buy Barnes & Noble.
  • Elliot may give James Daunt some time to see if Daunt has any book magic left that might work to bring Barnes & Noble back from the dead.
  • Elliot may require a huge cutback in the number of stores Barnes & Noble operates, keeping only stores in the most wealthy and book-loving locations and dumping the rest. Choosing this alternative might involve taking Barnes & Noble through a Chapter 11 bankruptcy proceeding.

On what may be an even more important question – What’s happened to the Barnes & Noble employees that were staffing the stores prior to the shutdown?

  • How many experienced bookstore managers have retooled themselves or otherwise obtained other jobs? Other than an unknown number of managers who have been sitting around waiting for Barnes & Noble to reopen, how many managers will decide they like their new jobs more or feel more secure in their new jobs than their old jobs managing a Barnes & Noble store? Will those managers willing and able to return to Barnes & Noble be the best of Barnes & Noble’s managers, the worst or something in-between?
  • PG suspects that most of the peons working at Barnes & Noble stores prior to shutdown have found something else to do, maybe something that pays more than they earned at Barnes & Noble. At a minimum, the managers of reopened Barnes & Noble stores will have a big job hiring and training a bunch of newbie employees to avoid driving away early customers who venture into the reopened stores.

The next questions relate to Barnes & Noble customers:

Presumably, many regular purchasers of books who used to patronize Barnes & Noble and other physical book stores and who have not been subject to personal financial stress have continued to buy books.

Where have they purchased those books? Quite likely from Amazon.

PG suspects some percentage of those book buyers have become familiar with how to find books on Amazon, have enjoyed being able to order any book they like and having it delivered to them in one or two days. There may even be a small bit of satisfaction that arises from not having to pay the full retail price as they would if they had gone to a bookstore.

In its typical Amazonian fashion, the Big A has closely watched which books these new customers have purchased and started suggesting other books they might like. Perhaps the new Amazon customers have found some enjoyable new authors and their books via Amazon’s suggestions, including talented indie authors. Maybe Amazon’s suggestions have proven to be better than those they received when they asked a question of a clerk at Barnes & Noble.

One of Amazon’s largest competitive advantages over its online competitors is the extraordinary variety of ways that it helps its customers discover products they might like. There are lots of tools like Also Boughts and sub-sub-categories of books that let fans of Cowboy Science Fiction Romances find more of their favorite reads. Some book purchasers who have taken a deeper than normal dive into Amazon’s book section will become hooked. Amazon’s magic works for fishing lures, cooking utensils and leaf blowers. It also works for books.

Other questions that have occurred to PG include whether any of the Barnes & Noble landlords have gone broke and closed the malls or strip malls where Barnes & Noble stores formerly operated. And, for those landlords who have stayed open, has Barnes & Noble been able to keep up with lease obligations during this period of time or will the landlords be in a position to terminate Barnes & Noble leases and find other tenants?

16 thoughts on “Everyone Wants Barnes & Noble to Survive. Can It?”

    • James Daunt re B&N stores – “There were too many books,” – yah, right, THAT is what is wrong with B&N.

      I have said this before, and it bears repeating. Customers are hard to get and easy to lose – and getting them back once you have lost them is even harder. Like ex-lovers, customers tend to steer away from the furrow already plowed once.

      Shatzkin has been shilling for Ingram for years now. It’s what he does. However, his recent post points out that B&N has to find some way to get on even digital footing with Amazon.

      The inexorable shift of book sales to clicks is a bigger question than the merchants and the pricing. Temporarily accelerated by the pandemic, the movement of consumers to buy more and more online for home delivery — of just about anything but especially those things that don’t have to be tried on or tasted — is a trend that shows no sign of abating. It would seem to me that acknowledging that reality would be front and center thinking for any retail operation with a big physical footprint and a significant digital infrastructure.

      It is curious to me that none of this came up in an hour of Daunt explaining his view of B&N’s future. I would not be dashing out to buy shares if they were still available. The movement of book sales from stores to clicks will continue and, near as I can tell, B&N has no plan in place based on an understanding of that inevitability.


  1. I’m a fan of neither B&N nor Shatzkin… nor of hedge funds/”private capital” firms like Elliot. Were I still investigating things for the IG, I’d have to report up the chain that although my initial inquiries hadn’t resulted in documentation, the shapes of each set of transactions (and nontransactions, and recommendations for transactions/nontransactions in Shatzkin’s case) bear the stench of undisclosed conflicts of interest. And here, we’re getting into my professional expertise in logistics in a way not suitable for discussion at less than 5,000 words or thereabouts (excluding citations and the table of authorities).

    Specifically, in no particular order:

    (1) Anyone who holds forth Ingram as an inherently and generally superior alternative to any other distribution vendor has never had any contact with libraries’ efforts to acquire materials. There are certainly subareas in which Ingram is superior to many current and within-the-past-two-decades alternatives; but Ingram is not and cannot completely substitute for B&N’s current (or within-the-past-two-decades) structure or needs.

    (2) Claiming that “Waterstones proves x” requires substantial knowledge of how bookstores operate both comparably and noncomparably in the US and UK… and more to the point, the huge difference that it makes that the CEO of Waterstones can drive to any Waterstones store from his London office and back in a day (admittedly, parking once one gets there is a problem!), compared to what it takes for the NYC-based CEO of B&N to visit a store in Santa Barbara. What that means is simple: Daunt’s eyes-and-hands-on methods have substantial additional barriers when necessarily applied across a continent rather than up and down an island. That’s not to say that he can’t be successful; it’s to say that success won’t look like the pattern of reenergizing Waterstone’s.

    (3) All “private capital” firms operate on the greater-fool theory. It’s in their nature, both economically and legally. So any thought that Elliot will somehow be different (or that KKR will be different for Overdrive, etc.) is, umm, inappropriate. That said, unlike our Gracious Host, I suspect that Elliot probably will find a greater fool (or consortium of greater fools), because especially in the entertainment industry it’s really, really easy to find them (Exhibit A: AOL/Time-Warner).

  2. Regardless of his talent for the quotable comment, I don’t think Daunt has any magic sauce that will transform Barnes & Noble from a financial boat anchor into a successful business of any substantial magnitude.

    I haven’t been keeping up with what pandemic effects the British bookselling business is experiencing. My speculation is that, despite significant differences in culture, Covid is likely wreaking havoc on England’s pleasant pastures as well.

  3. I confess that I remain somewhat skeptical of any claim that Amazon’s recommendations serve a large segment of their population. Don’t get me wrong, I think the theory is sound:

    a. More data leads to better recommendations
    b. Better recommendations lead to more purchases

    It was proven initially by Netflix. They could even afford to run huge competitions each year to improve their algorithm to be able to say reliably “If you liked movie X, Y and Z and didn’t like U, V and W, then you might like movie A,B,C based on other people who watched U through Z and had similar ratings fo rthose ones”. Simple predictive algorithms initially, made complex with psychology, stats, advanced math, computations and the data we share.

    Except the model has broken. People are sharing their Netflix accounts, so they have offered sub-profiles which is partly convenience and partly to make the recommendations make sense. If little Bobby used Mommy Susie’s account to watch Elmo and the Muppets and liked them, then Mommy’s account is going to show recommendations for Curious George or Muppet sequels. So the predictive algorithm started to “break” because it was getting hybrid data rather than unitary data.

    Amazon has the same problem. Lots of people with Prime accounts order lots of things…some for themselves, some for their kids, some for their family, some on behalf of their family, etc. Garbage data in, garbage data out.

    My Amazon recommendations lost cohesion about 18m ago and are almost nonsensical at times now. Things that I have ZERO interest in, not even as gifts. Books aren’t quite as bad as other products, but even then, there are quite a few that hold NO attraction whatsoever.

    • I have two users on one Prime account. That does indeed lead to a situation where each user sees uninteresting recommendations. That doesn’t trigger me. I’m quite happy with the 50% of things targeted at me.

      For Netflix and Prime TV, there are two user profiles for each. Same with the YouTube account linked to the big TV. It all works very well.

      • My experience with Amazon has been a bit better. I’ve just compared recommendations for my wife and myself, as we have separate accounts but share the Prime membership, and in our case it’s clear that there is little overlap and that sharing Prime does not impact the recommendations (at least on the “M’s Amazon” page). I was actually surprised that the recommendations for me were so relevant (which still means that the chances of my buying the great majority of the items on the list are zero, but the offers are not obviously odd).

        I do actually try to “improve” my recommendations by going through occasionally and excluding everything that I’ve bought for other people, and most of the physical goods I’ve bought for myself. This seems to remove recommendations for presents I’ve already given to the kids and grandkids.

        Mind you I still get “Gift ideas inspired by your shopping history” and “Brands you’ve shopped with before” at the bottom of product pages and these seem totally useless, and to include items clearly inspired by past purchases that I’ve told Amazon to ignore for recommendations. Fortunately I rarely scroll that far down the page so these are not an annoyance. What does annoy me is the general inadequacies of book search and Amazon’s habit of including about 3 sponsored items (ie. books even less relevant to the search than the weird titles that it returns once you get past the first few results) per results page.

        The recommendations – if that is the right term – that work best are the “Customers who viewed this item also viewed” lists for military history books. These can have a nasty impact on my book buying budget!

  4. Hmm. NetFlix Mommy needs to learn how to set up different profiles. Five people in my household, with (mostly) different tastes – five different profiles. She especially needs to do so for NetFlix kiddy, and set up parental controls, before he/she is exposed to The Witcher – or Cuties.

    Now, Amazon – yes, we all use the Prime account that is under my name. So I do, when just going to the home page, see many things that I have no interest in whatsoever. Although that has come in handy when figuring out birthday and Christmas presents. The “Also Boughts” – at least when I am on a current book in KU – are pretty much well targeted. As much as they can be, considering that my tastes are rather wide but spotty in the SF/F genres, histories, etc.

    The only place that I really have to do some skull work is on our grocery store affinity card. I do have to sort out the target coupons that they keep sending me into who will actually use them, and the others in the family keep on buying the strangest things… We have just the one account there, because who can make the most use of the gasoline discount varies from month to month.

    • We use our own Amazon accounts and Prime Family Membership so don’t have your problem with recommendations getting “mixed up”. However, e-books are another matter as the family library did not exist when we started out and all e-books are on my account. Recommendations therefore tend to be somewhat unspecific, but I find the “also bought” and “also viewed” lists much more useful anyway.

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