Should Barnes & Noble drop the Nook?

You read this post’s title and thought, “My god, Daven must be joking. How could he even suggest such a thing? Even the most die-hard paper book lovers can’t dispute that e-books are the main-volume product of the future.”

A “future” that is already slipping out of Barnes & Noble’s grasp:

Digital Book World: Barnes & Noble Bookstore Sales, Nook Sales Down Over Holiday Period

Nook Media sales declined 12.6% versus a year ago.

Forbes: Barnes & Noble’s Big Problem — and What to Do About It

– Nook is losing money
– Nook isn’t growing
– Nook is sinking when a rising tide is lifting all other boats

LA Times: Should we be crying for Barnes & Noble?

“You say you are closing a third of your physical bookstores over the next decade, all while admitting they are not unprofitable?” Petri writes. “Please listen to yourself.” Petri says she’s afraid Barnes & Noble will give up brick and mortar bookstore in the name of chasing e-book profits.

Chasing e-book profits would make much more sense if they were making e-book profits. 😈

LA Times: The incredible shrinking Barnes & Noble

Barnes & Noble’s retail stores do sell the Nook, but that’s not what Klipper points to as setting the chain apart. He told the Wall Street Journal that less than 3% of the company’s stores lose money — because they’re a destination for people in a way other retailers aren’t. “You go to Barnes & Noble to forget about your everyday issues, to stay awhile and relax,” he says.

So Barnes & Noble is closing profitable bookstore locations to divert the funds to the money-pit Edsel of e-readers? Not a good business model. We all know what happened when Borders outsourced their .com to Amazon. 😈

The strength of Barnes & Noble is that they are a brick and mortar retailer. Period.
The Atlantic: The Endangered Fate of Barnes & Noble

The same newsletter quotes Daniel Raff, a Wharton management professor, suggesting that the pessimism toward the bookseller may be overstated:
[He says that] Barnes & Noble was resourceful in devoting store space to the Nook and has assets that could be utilized. “When you talk ecosystems, it’s not just the digital stuff. . . . The comfortable majority of publisher profits are physical books, and they need distribution.” Indeed, Barnes & Noble’s biggest asset may be the reality that publishers need shelf space to sell books.” Ultimately, he and other observers have concluded that bundling print books with digital versions may be the next phase of bookselling and that would be a plus for Barnes & Noble.

When it comes to e-readers and digital content, Amazon has eaten B&N’s breakfast, lunch, dinner and they are now licking the last few crumbs of apple pie crust off of B&N’s dessert plate. The problem here is B&N’s myopic view from within:

Digital Book World: Revenues Increase for Nook in Second Quarter Even as Losses Mount

Internally, Barnes & Noble leadership is still optimistic about Nook’s long-term prospects.

“The Nook business will scale in 2013,” said Lynch on the call. Helping it scale will be its partnership with Microsoft, which will pay Nook $50 million a year for the next three years as an advance on profits (read: unless there are profits, it’s financing for Nook).

“We expect our two highly acclaimed new NOOK products, and our Microsoft partnership on Windows 8 to further fuel the growth of our digital business…”

If Windows 8 wasn’t laying a Vista-size turd in the marketplace and handing the tablet market to Apple on a silver platter, I might share a bit of their optimism. Having Microsoft throw money into your money-pit does nothing to solve the fundamental problem, indeed the only real guarantee B&N gets here is “three years of life support” for the Nook.

The most important sentence quoted above: Barnes & Noble’s biggest asset may be the reality that publishers need shelf space to sell books.
A considerable percentage of B&N physical shelf space is being occupied by Nooks.
Did the Kindle win the market via physical shelf space allocation?
No.
In fact, Kindle has much less shelf space now that Target and Wal-Mart have decided to stop selling it, but does anyone think this will be a major factor in Kindle’s future?
No.

Barnes & Noble is a brick & mortar retailer. It’s time for them to act like one. People go to B&N to browse printed books, not Nooks.

The root of the Kindle’s success is its online content environment.
Even if B&N wishes to burn through tons of money trying in vain to compete with Kindle continue to sell Nooks, the Nook belongs online.

For the stores, it’s time to replace the Nook space with book space.

Update 25 February 2013:
Barnes & Noble Chair wants to buy retail business

Barnes & Noble’s founder Leonard Riggio disclosed in a regulatory filing Monday that he wants to acquire the company’s stores and website, but not the business that makes the Nook e-reader or the company’s college bookstores.

N.Y. Times: B&N Vs.Simon & Schuster Dispute Said To Hurt Sales

Update May 2013: Yahoo Finance: Ten Brands That Will Disappear In 2014
(note what brand #2 is) 😈

Update June 2013: Forbes: Barnes & Noble Bows To Apple And Amazon; Exits Tablet Business

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14 Comments

  1. Ack! I hope not! ( normally do better on B&N sales than I do Kindle!

    • No surprise about the B&N sales, as the Nook is in a big hole and the Kindle isn’t. A lot of hardcore e-book readers will have both devices, but most people will choose only one e-reader. We know who’s all but won that war.

      The real point of my post is that if the Nook continues, its sales should all be done online and the shelf space in physical B&N locations should be given back to printed books.

  2. I personally could never live without my ebook reader. I have three Kindles loaded with different content. However, I am not the norm. Most people like BOOKS, why I don’t know. I guess they can’t wrap their heads walking around with a library at their disposal in their purse or briefcase. So if B&N take away Nook… too bad, just more for Amazon I guess. Take care, Emily

    • Most people like BOOKS
      Everyone at work just lit up when they first saw the printed copies of Vampire Syndrome!

      B&N could save themselves tons of money by ending the Nook, money they could focus on the physical stores and printed books.

      bundling print books with digital versions may be the next phase of bookselling and that would be a plus for Barnes & Noble.
      Those bundled digital versions could be .mobi files 😈

  3. Please note that this post is not a judgement about the quality of the Nook e-reader itself. The early Nook Color and the GlowLight were ahead of Kindle in technological terms, and Amazon didn’t really have a technological edge significant to customers until the Kindle Fire HD.

  4. The Barnes and Noble near my house, after 20 years, closed so that the liquor store next door could expand. It’s the beginning of the end….

  5. Hi Daven, I like Nook and I like Kindle Fire and each of these platforms can be downloaded for FREE into your desktop or laptop or tablet, thus eliminating the need for these devices, at all.
    Still, printed books will never go away. Bookstores like B&N and Tattered Cover need to be successful. Readers will always need them. But when I go into B&N, I see a kiosk-sized area for Nooks, which seems a tiny percentage of the shelf space in the store compared to the shelves dedicated to print books. Diversifying is a common business strategy. I hope the Nook doesn’t do B&N more harm than good. Time will tell.

    • I already know a few people who are reading Vampire Syndrome on their iPhones. Indeed, all the latest Microsoft/B&N hype is based on the bundling of the Nook reader with Windows 8. And how often is bundled software ignored and un-used? 😈

      a kiosk-sized area for Nooks
      Some B&N’s devote more space than that. And even a kiosk in each store is too much, if you ask me. Diversification can kill a company if they change their direction and throw money at a lost cause at the expense of profits, particularly if they divert capital expenditures from proven profitable operations to support “write-offs”.

      Great comment, Terry! Thanks. 🙂

  6. I became wildly angry at a Barnes & Noble recently. As soon as I walked in, I was faced with one table of books I could get at Walmart, an enormous Nook section featuring a bunch of kids playing Angry Birds, more toys to my right than at the local toy store, the cafe that encompasses a third of the store, and it literally took me 10 minutes to find Sci Fi. When I got there I could touch all the shelves of it without moving. A book store should be just that. Sorry. God I get pissed about book stores.
    –Julie

    • When you walk into Denver’s most famous bookstore, The Tattered Cover, you see books. More specifically, staff-selected hardcovers, new releases, an indie publisher rack and a local authors display. 😀 Their cafés are more separate from the main sales floor than in B&N.

      The recently-shuttered B&N in my suburb had the whole center of the store devoted to Nooks, so it was like distant bookshelves orbiting a Nook store. 👿

      I must admit that the Downtown Denver B&N is much better in this respect (this is the store Terry Wright was referring to), a Nook table and an accessories table on the first floor near the cashiers.

  7. Now that I’ve been paying close attention to the publishing business, I feel most of it is reactionary vs. revolutionary. B&N didn’t create the e-reader. They copied it. Now, they are hell bent on chasing this model even though the Nook is taking on more water than profit, why? Because e-books are the future! Why are e-books the future? Because places like Barnes and Noble are making it impossible to walk into a bookstore and fall in love with a good book. Like Julie said, too much floor space is dedicated to things that aren’t books. When I drive 30 minutes to my nearest B&N, frequently they tell me they need to order my book for me. I can do that at home. I wanted to support the actual brick and mortar business and the people who work there by buying at the store. I miss Borders desperately. I wish Barnes and Noble would concentrate on selling books, books on table, and maybe have a kiosk that you can load your e-reader at. But I want BOOKS in a BOOKSTORE. That’s what they do. Don’t chase what works for something else. Perfect what works for you.

    Kristen

    • Not only do you see books when you first walk into The Tattered Cover, you see (90+%) books you can’t get at Wal-Mart. 😈

      At the Tattered Cover near me, the Rocky Mountain Authors rack is the first rack by the front door. And guess whose books will very soon be in that rack? 😀

  8. I’ve worked at a major bookseller for two years and what I experienced was anxiety from employees and customers. Anxieties about the future of print and brick-and-mortar bookstores topped the list. By the way, newspapers are experiencing the same dilemmas. I won’t delve into my long-winded thoughts on this now, but I will point out the following.

    Amazon and Barnes & Noble are not focusimg on e-readers like their e-ink machines as much as the Fire and Color. The latter are not readers anymore, they are tablets. Can you say iPad?

    And finally, I don’t think printed books are going to disappear anytime soon. See, it’s human nature to keep the familiar. Scrolls held their own for a very long time.

    • Fire and Color… are not readers anymore, they are tablets

      Excellent point that dovetails perfectly with what I said! Even Amazon is chasing Apple, but the iPad has a killer advantage as an e-reader: You can read Nook and Kindle books via apps!

      The big advantage of a basic e-reader is price. You don’t worry about a $69 Kindle the way you’d fret over a 64GB iPad. Last year, I dropped a Kindle on the garage floor and ran it over with my old wagon. 😯 An hour later, I had a new Kindle and all my books downloaded on it. :mrgreen:


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