Barnes & Noble CEO Leonard Riggio, discussing BN’s problems during yesterday’s Earnings Call:
Leonard Riggio
Hey, thank you, Al. I’d like to spend a few minutes this morning talking about sales. In the past several days and weeks, there has been a lot of coverage in the press about the decline in retail. Some basically think they see retail going away. I don’t. However, for the past eight or 10 years, I’ve predicted and we are witnessing a major shift in the way retail works and the type of stores that need to be opened, and the shifting demographics of retail and the shift in traffic patterns. So I’m not alone in concerns about the retail world, and we certainly are not alone as a retailer as we experience what has been happening of late.
Let me talk to some long-term trends. In the first place, we all know the effect of ecommerce since its start about 20 years ago. This is a long-term effect that affects retailers, continues to affect us, but the effect of ecommerce and the major bite ecommerce has taken has abated somewhat. So I don’t think that what we’re experiencing today is any shift or any major event which leads sales to go down. It’s part of a long-term trend that we’ve long experienced.
In the first place, obviously ecommerce affects sales at Barnes & Noble to the extent that we lose sales to our huge ecommerce competitor, but I’d like to suggest that this is not a zero sum game. It’s very clear that people visit our stores, and in visiting our stores we become a showroom which in effect creates online sales. At the same time, a visit to a website, either ours or others, has the effect of stimulating store traffic. Someone could be doing a search and a book pops up, the book could pop up at another ecommerce retailer or us, and the customer’s reaction would be, I’d like to go to the store and take a look at it. So ecommerce also helps our store sales. Now, whether it’s more negative or positive is something that needs to be considered, but it’s not a zero sum game.
Now, we also have to look at the drop in retail traffic, and our sales are suffering because of traffic declines, some due to the fact that people are not coming to us, but we think more due to the fact that there are less cars in the lot, there are less pedestrians walking by, our retail co-tenants have had sales declines and traffic declines, so that where years ago one retailer’s traffic would–or traffic increases would be the benefit of the others, what we are experiencing today is that the decline of one increases the decline or causes the decline in others.
Now in our particular case, there is a long-term effect of the so-called digital revolution. Had we made a prediction of where retail book selling was going four years ago, it was pretty clear that if the sale of devices and the sale of ebooks continued to escalate as it was, there would be no future in retail book selling. We also know that that increase in sale of digital products has abated and possibly, very possibly might be abating. We know this by our numbers and we know it anecdotally as we speak to people, many, many customers who have come back to books because they prefer reading books and also owning books, as opposed to owning just a dot on their site.
There are demographic shifts that we can talk about, and the retail analysts who are on this call are aware of those. We have shifts from the suburbs back to main street back to the inner cities. The population is shifting. Retailers like us are aware of it, we’re adjusting our store models, we’re adjusting our location selections and even our offerings on the basis of those demographic shifts. There are some good long-term components in our mix here, and that is the strength in children’s reading. We continue to have good performance in our juvies. Kids are reading, parents are buying books for kids. There’s still a buoyant teen reading market, and senior citizens continue to be strong in terms of our traffic count and their book purchases.
Now, I’d like to talk to something that’s in the air, and I have to first preface this by saying I’m not looking to and we are not looking to make any excuses here for our decline in sales. Nevertheless, we have to identify what the causes are before we take action. About eight or nine months ago, I was the first, we were the first retailers to talk about the effect of the election, this particular unprecedented election cycle and post-election goings-on. There is a profound effect of media on book sales. Many, many books get their start in the media, the newspapers and on television. There are precedents for this throughout the course of our history, when the media becomes preoccupied over a sustained period.
The book authors and the book subjects stop appearing on the evening news programs, certainly the commentator programs, great shows like CBS Sunday Morning, and even one of the biggest drivers of book sales, which is the morning news shows, the morning entertainment shows. All the talk now is about politics, and books have been starved of any presence there. We see cookbooks and health books and fashion and dieting – so, so many books become explosive as a result of their exposure on TV and in the newspapers. That has all but dried up.
Now in addition to that, there has been a measurable effect of this election that we noticed some time ago, and I’ve charted this over a long period of time. I was one to think that this would go away after the election, and it did just a little bit and our sales started to look like they were righting themselves and it seemed like people were going back to their normal lives. Then we had the inauguration and it started again, and even more fiercely than we had experienced before. So what we’re looking at, and I’m sure other retailers are though I haven’t seen much reporting on it, what we’re looking at is a major difference between our sales in the daytime and our sales at night. The conclusion that we could come to and we believe is the case is that people are spending their time at night watching–there’s no question that the viewership of Fox News and CNN and MSNBC’s of the world is way, way up again, subscription to the Times, as you know, way, way up. People are all engaged in this new government and all of the controversies that come with this and the war between the parties.
We all know about this, but in terms of our numbers, there’s almost a 4% to 5% difference between our night time comps and our day time comps, and I submit that it’s due to the fact that people are spending time at home–you know, rushing home, eating takeout food at home, and they’re watching the various events. So when we isolate some of those events, obviously like the debates, debates in the past would get 20 million viewers. Debates today get 90 million viewers, certainly in this cycle, so people are home watching the debates, and for all of these kind of news hits that we get, major announcements by the president, all these controversies that come up, our sales are suffering in the evening hours.
Also of interest is our sales are suffering in the weekdays as compared to the weekends, so our weekday sales are also 3% to 4% different than they are on the weekends. These factors have been measured by us; the question is, can we do anything about it, and I guess the attendant question is, how long will it last? I would assume at some point here, Americans go back to living their lives, that this ongoing no-end debate either will finally subside. I was wrong, however, in expecting that the debate would subside soon after the November election – it didn’t, and I thought it would subside five days after the inauguration. It has not. I expect us to be coming out of this slump, as it were, but I can’t predict the day or the month, the week or the month that this would happen.
So I just wanted to make sure that people were aware, I believe other retailers have talked about this, were aware of this effect on our sales. Again, I’m not submitting this as an excuse, but the question of what to do about the lack of traffic in the parking lot, the lack of traffic in the stores, there’s no easy answer to it. Remember that advertising is costly and the short-term effects of advertising never pay for themselves.
The last thing I want to talk about is expenses. As Al said, there are opportunities in expenses in the future; however, we are going after areas of expenses that we think we have major opportunities, but we’re not going to cut store service. That would be a disaster for us and is completely unacceptable, so we’re trying to do so by reducing the tasks in the stores, by being smarter managers, but we’re not going to take our important sales people off the floor. We’re going to win in the long range here and prosper in the long range by giving the service to which customers have long expected.
Link to the rest at Seeking Alpha
So Riggio thinks it’s Trump’s fault.
PG notes that, in discussing all the things that customers were doing other than shopping at Barnes & Noble, he didn’t mention spending time with social media or other online activity. Everybody seems to be watching TV in Riggio’s world.
PG suggests this is a suboptimal guy to be trying to lead BN in the world of Amazon, ebooks and ecommerce.
B&N has no more than two years left. So get those last few gift cards spent and your library of Nook books downloaded and stored.
It’s suicide by managerial incompetence, basically. In 2013, B&N had a fat 30% chunk of the ebook market, which was already exploding, as well as two built-in advantages Amazon never had: the best-known bookstore brand and hundreds of well-placed physical stores to showcase the synergy between print and digital.
But all the advantages in the world can’t save a business from its own idiotic mis-execution.
>But all the advantages in the world can’t save a business from its own idiotic mis-execution.
True dat.
What did the buggy whip stores do that caused their collapse?
Not transitioning to car parts stores. 😉
They could’ve started with chocks and starter cranks. Maybe spare tires.
The surest way to end up with no options is to not look for options.
Or I suppose they could have stocked puzzles and games, and opened restaurants.
Am I the only indie writer who will mourn B & N’s passing? I know they fumbled the ball and were slow on the uptake and the Nook and Nook store are horrible, so they deserve what their fate. But I get about a third of my income from Nook press and will be very sorry to see that B & N’s mismanagement will bring the house down. Because I don’t think that third will come back or will be replace by super extra sales on amazon.
Probably.
It’s hard to feel sympathy for a company that:
1- is dying of self-inflicted wounds
2- is dragging out the melodrama unnecessarily
3- is trying to poison the well for the rest of the industry
B&N burned all their goodwill ages ago.
Even more interesting will be the effect on the publishers. The promotion that depends on bookstores affects far more then just bookstore sales.
I’ll mourn them too. Where am I suppose to pick up hot, intellectual girls now? Best Buy? But I guess Riggio says they are all hurrying home after work to watch TV alone anyway.
I believe that function has also been digitally disrupted. It’s called match.com 🙂
“We also know that that increase in sale of digital products has abated and possibly, very possibly might be abating. We know this by our numbers and we know it anecdotally as we speak to people, many, many customers who have come back to books because they prefer reading books and also owning books, as opposed to owning just a dot on their site.”
What a load of bollocks.
1. You are losing customers. They are not coming back. Look at your figures.
2. Digital products abating? Perhaps you are right, but that does not translate to people with digital products with which to read e-books is abating. E-readers last for ever, so we don’t replace them when a new model comes out. Tablets last for ever, ask Apple. Everyone has a smartphone. All perfectly good reading devices. Heck, I even read on my laptop which I have had for 5 years. We don’t buy as many ebooks from the BPH because of their pricing and we don’t buy ebooks through BN because, well, we just don’t. We buy our e-books through other sources and we buy plenty of them.
I would just love a CEO to admit that there are real issues with their model and would make some real changes. Not just hope that it will all come good again when we stop watching the news.
Staying in denial will just keep the business in its downward trajectory
I really enjoyed this bit:
“We also know that that increase in sale of digital products has abated and possibly, very possibly might be abating. We know this by our numbers and we know it anecdotally as we speak to people, many, many customers who have come back to books because they prefer reading books and also owning books, as opposed to owning just a dot on their site.”
I ran it through Google translate and I came back as: “the ebook fad is over and we know it because our ebook sales have totally evaporated.”
Liberty was the last company to seriously consider buying B&N. All he can do it talk it up and hope someone bites.
<“the ebook fad is over and we know it because our ebook sales have totally evaporated.”
If they repeat it long enough, it will come true, right? That nasty old ebook thing is going to be so over, just you wait.
Remember this, from last month?
http://www.thepassivevoice.com/2017/02/balancing-the-books-how-waterstones-came-back-from-the-dead/
“With a mixture of tough love and an unshakeable belief in the power of the physical book, which seemed quixotic in the era of e-readers and online discounting, Daunt began to turn things around. He closed underperforming stores and fired 200 booksellers, at the same time as declaring that his managers would be given back responsibility for their own stock, because what sold in Hampstead might not go down well in the Highlands. One of his boldest moves was to inform publishers that he would no longer do business through sales reps and they could no longer buy window space – which meant turning his back on £27m a year.
Instead, a small team of buyers – in close consultation with Daunt himself – would select titles to feature as books of the month across all the stores, while individual managers were free to tailor much of their stock to their customers’ tastes.”
Less payola, more customer focus, better inventory management.
No magic bullet, just managers actually managing their own stores.
Waterstones is also looking into smaller stores, closer in scope to a newstand than a warehouse.
No Amazon whining at Waterstones…
I worked for BOOKSTOP here in North Texas in the late 80s and early 90s before the company was sold to Barnes and Noble and ruined because, according to Riggio, “we didn’t know how to sell books.” Riggio always has been a suboptimal guy. He had no clue then about anything and certainly does not now.
OMG, We had a BOOKSTOP here in FL when I was a kid. I loved that store. My mother would take us a couple of times a year as a treat. Any 5 books we wanted.
Since they closed down, we don’t really shop at the BN. Or Books A Million. Because I can never find anything I want to read there.
Used to buy a book or three a week from BookStop, and in both the BookStops I haunted there was an EaZy’s next door to munch after hunting for books. (SA & CC in TX)
They closed and my book buying dropped way off.
I feel like the contrarian on TPV when I say that I prefer paper books. But even as a paper aficionado, B&N rarely gets my business.
1.) I’d very much prefer Amazon delivering a physical book to my door than driving all the way out to the B&N store.
2.) The majority of the books I get are gifts. The Amazon Wishlist has vastly improved my Christmas shopping experience, making it so easy for my family members to peruse and pick me out a book, video game, movie, or household good all in one spot.
3.) I’m so far behind in my reading list that my local (and closer) library usually has a free copy readily available.
4.) Price. Obviously.
Hmmm, maybe if you had those … books I think they’re called, the ones that people actually want to read — not the NYTs’ excuse for a best seller list, and the earlier books in a series (I will not be buying book 3 if I can’t get 1 & 2); oh, and for a price I like and printed in a size I can easily read.
Though an ebook would be even easier for me to carry — too bad you website doesn’t seem to want me to buy there …
(And I’m not one of those glued to the boob tube, nor has Trump changed my buying reading habits in any way.)
+1000
Yeah, this idiot thinks subscriptions to the New York Times are way, way up.
My TV viewing is way, way down. I do not watch CNN, MSNBC, ABC news, NBC news, CBS news, or FOX news. I watch live streams of Trump’s speeches and other events and reach my own conclusions. (FWIW I was nervous about Trump as president but day by day I feel better. I still oppose building a wall along the Mexican border, though. There are cheaper ways to manage that issue. And I have memories of the Berlin Wall.)
For entertainment, I pick and choose. There are YouTube channels I watch routinely — The Great War, Jas. Townsend and Son, Inc., and Food Wishes among others. On TV, well, that’s the wife’s domain. She likes talk shows. Talk, talk, talk, talk, talk. Sometimes I watch Hawaii Five-O, The Big Bang Theory, or Blue Bloods. I watch movies and VOD about twice a month.
What’s the difference? I can comment and receive feedback on the YouTube channels. Cannot do that with TV shows.
What happens to the BPHs when B&N goes under?
(I hear the Randy Penguin is gonna pay a $60,000,000 advance for Barry’s memoirs. Good luck with that. Somebody has to make the Hard Choices. 😉 )
Politics of it aside, there is a difference in the walls. While I was only 2 years old when the Berlin Wall fell, it should be noted that it was constructed to keep people in. The new wall is being proposed to keep people out.
I have no doubt that right now Riggio has at least one proposal on his desk to find a way to build walls in their store to keep their customers in.
Strictly speaking, walls *control* movement.
No wall, no control. People move around at will.
And B&N has no way to wall in their customer base.
Not in the stores, not on Nook. Nook readers even have a big neon sign labeled “EXIT”. (Generic epub compatibility.)
Dexter von Dexterdorf,
I remember the Berlin Wall going up and I remember the Berlin Wall coming down. My girlfriend at the time flew to Berlin to dance on the Wall and hammer it down. She had a chunk of it in her baggage and the airline lost her bag. Upset she was. BTW she was Mexican-American and very brown. (Let’s keep this between us. My wife doesn’t know about her and I’m a happier man for that.)
I apologize for bringing politics into the discussion. I long for the days of my youth when politics was a sometimes thing rather than an endless, tedious drone, but maybe my memory is colored by wishful thinking.
As to whether the Wall is meant to keep people out or in I think depends on which side of it you find yourself. President Eisenhower had the same issue, and he managed it without a wall.
Can we prevent all illegal immigration? No. Hell, I’ve know illegal immigrants from Switzerland, ferchrissake. Over stayed his VISA. Did the INS bash down his door with a no-knock warrant? No. He had not transgressed any other law, and they had higher priorities. And I grew up on a ranch in cattle country. I ate cabrito with illegal ranch hands. Junior provided two families mobile homes and they worked his dairy farm for years. They were decent people and I was proud to know them. And I don’t know but I’m willing to bet that a good number of Mark’s King Ranch cowboys are illegals.
I favor a return to the braceros program to give these people lawful entry. The rest of it, we can talk about to find agreed solutions. But as always, the devil is in the details.
Who will bell the cat?
Look to the story of PC industry pioneer Philippe Kahn.
Illegal immigrant, overstayed a tourist Visa, started a software company eventually worth billions out of a kitchen with baggies, floppies, and a tiny ad in BYTE MAGAZINE. Pkus a piece of useful software he wrote to fill a market need.
The entire PC software industry rose up out of a need that the established software companies had no interest in. Companies focused on licensing mainframe software for millions of dollars a year had no interest in selling utility software to hackers at $20 a pop. Yet a decade later the PC companies were buying up the remants of the mainframers both on the hardware and software side.
This has happened before; it will happen again.
The world changes. Some companies adapt, some don’t.
Waterstones is adapting. B&N isn’t.
Subscriptions to the NYT are actually way up having doubled in 2016: http://thehill.com/media/317531-ny-times-subscriptions-doubled-in-2016
No. The number of new digital subscribers doubled. The story says nothing about their print subscription rate. Nor does it say anything about the total number of subscribers.
For all we can tell from the article, every single one of the Times’ existing subscribers might have cancelled their subscription, and the new ‘digital subscriptions’ are the only ones they have. We know this is not actually the case, but not because of that article.
If you look at the actual press release, you will notice that total revenue for the Times is down, with advertising revenue down 9.7 percent year over year. For 2016 as a whole, print advertising was down 15.8%, digital advertising up 5.9% from a smaller base. In the ‘outlook’ section, they frankly admit that they expect the trend to continue this year.
Carrying on into the footnotes, we find that this year they redefined ‘digital subscriptions’ to include those who only subscribe to the crosswords. It seems safe to guess that the average price of those subscriptions is well below the price of a print subscription.
At the very end of the release is a disclaimer saying that some of these reported figures are ‘non-GAAP’, and should not be used as a substitute for GAAP data.
In short, there’s a lot less here than meets the eye.
In the fourth quarter, they added 276,000 digital subscribers and 25,000 print subscribers. The tweet the NYT sent out states that they now have 3 million total subscribers (print and digital combined) which they claim is double the number from the year before and is also the highest number ever:
http://money.cnn.com/2017/02/02/media/new-york-times-subscribers-trump/
Those are surprisingly good signs in the current environment for newspapers. And the point I was making is that Riggio said subscriptions are way up for the NYT, and in that statement he was correct. He was not making an observation about their overall revenue.
I suspect Tom is more than half-right. The increase in digital subscribers could simply be a redefinition of what a digital subscriber is. If it isn’t reflected in increased revenue it’s meaningless. If everyone is only checking out the crossword puzzle, and profits continue to fall, that’s not a good sign.
Circulation nunbers are meaningless, anyway.
One of the local newspapers is supporting its circulation numbers by printing a daily free edition for fast food restaurants and hotels. They are hardly unique. There are hordes of suburban community newspapers operating solely that way.
Lots of specialized trade publications boast large subscription and circulation numbers out of free subscriptions that let them capture enough specialized ads to prosper. At the height of the PC revolution into the late 80’s, weekly newspapers like PC WEEK and INFOWORLD boasted circulation in the tens of millions with hardly any newsstand presence. Anybody with a corporate mail address that merely used a PC could sign up for a free subscription. There was substantial editorial content of great value and even the ads were useful. It was all ad-supported.
Mostly gone now.
The same function is served by free websites like ZDNET.COM and Cnet. No need for massive amounts of dead treepulp. Bragging about subscription numbers is replaced by bragging about number of unique visitors.
Same game, different venue.
Only about 10% of the new digital subscribers are crossword only subscribers…and they still are paying for the privilege. So crossword puzzle users do not alone explain how they doubled their combined print and digital subscribers in one year. And print subscription numbers also rose in the fourth quarter, so the new digital subscribers are also not all former print subscribers, and they more than replaced any who did switch to digital only.
To say circulation numbers are meaningless and use examples where the publications are using free subscriptions to pad their numbers is not relevant when the NYT only offers paid subscriptions and is getting over half of its income from subscriptions to the tune of 880 million dollars a year. Clearly any newspaper is swimming upstream these days with so much free content on the web, but that just makes it more impressive that they were able to double their paid subscriptions in one year.
And again, Riggio was correct in claiming that currently subscriptions are way up…no matter how good or bad the long term prospects of the newspaper business happen to be.
Not exactly.
NYT has free, limited, accounts.
(I have one from way back.)
They also give free digital subscriptions to print subscribers.
https://www.nytimes.com/content/help/account/purchases/subscriptions-and-purchases.html
They can easily be counting them twice; one of each.
Common practice.
The figures quoted were for digital-only subscriptions which suggests they are not counting print subscriptions twice. Also the figures were for paid subscriptions, so even if they also offer free subscriptions, it seems likely that those also would not have been included in the figures they released.
I’m not saying they count print subscribers twice: not every print subscriber activates the free digital subscription.
Rather they count the activated digital ones and add them to the print subscription, without factoring in double dippers. As I said, that is common puffery.
Someone who activates a digital subscription off of their print subscription would not be a digital-only subscriber. So if they are doing what you describe, then yes it would be puffery to call them a digital-only subscriber.
The New York Times is also providing stacks of free print newspapers to most universities in most classroom buildings. They count them as subscriptions, along with the free digital subscriptions.
Smoke and mirrors. (Although presumably the advertisers are benefited.)
90% of people entering a brick and mortar bookstore are looking for something from the Times’ bestseller list or some event book that’s the topic at the water cooler. Any bookstore that doesn’t stock those books at the front of the store won’t last very long.
Oftentimes, those are the only books customers look at. That is why they are the only thing stocked at newstands and airport bookstores.
B&M bookselling is a pareto-like business.
Newstands know it.
Amazon knows it.
Waterstones knows it.
B&N knows it, too. They just don’t act on that knowledge.
B&N was built around that reality that, if you wanted something new to read, you *had* to choose something from their shelves. If you wanted a new story, you had to take one of their books, even if it was a compromise. Maybe it didn’t quite speak to you, but, having exhausted the library, that’s all there was if you wanted something new.
Now, it’s a new day in America. (And Canada, and the Uk, and….) Jeff Bezos is a billionaire because he figured out that readers wanted vast choice at a good price, and delivered. B&N still seems a bit confused about this.
Exactly right. B&N is trying to do business as usual, but the business has moved on. The company is falling on its a**, and still can’t see there is nothing there to catch them.
They could have been a strong competitor to Amazon. Indies begged to be allowed on their site. Begged. And were brushed off because no one could see the future. Bezos did. It’s not his fault others wouldn’t look.
I’m not thrilled that Amazon is basically going to be the place for books. Not at all. But when no one else can or will step up, it’s what we’re left with.
Tchotchkes aren’t going to save them. Restaurants and bars and coffee houses won’t save them.
The company is falling on its a**, and still can’t see there is nothing there to catch them.
Their behavior in trying to sell themselves for the last ten years indicates they see very well.