Apple vs. Barnes & Noble: Game Not Over

| Analysis

Both Apple and Barnes & Noble have retail stores. Both have desirable hard goods. Both have stores that are pleasant to be in. With the headlong rush into digital books, how can B&N leverage its brick and mortar stores the way Apple has?

In 2011, consumers made a distinct move to digital books on their iPads, Kindles and Nooks. The satisfaction of having a digital book in a few seconds compared to driving to a store or waiting a few days for the paper edition to arrive in the mail is hard to resist. And yet, the simplistic assumption that all bookstores are doomed may be premature.

Of course, it hasn’t gone unnoticed that many small bookstores plus Borders are no more. In the case of Borders, the company’s demise may have been due to a series of missteps and clueless senior management. As a result, the question still remains: is it possible that there still exists a market for an integrated, hybrid bookstore? By that I mean one that has a storefront, like Apple, creates a great buying experience, sells tablets, sells both paper and electronic books, creates a community watering hole, has comfortable sofas for browsing, does Saturday morning children readings, has a small bakery and hosts authors and book signings so that people can meet people who meet authors. That’s  a considerable portfolio.

Figuring Out the Customer

I started down this path when I first saw the new Nook Digital Shop at a local Barnes & Noble (Park Meadows Mall, Lone Tree, Colorado.) There, I saw in person the new centerpiece of the store, an almost Apple-like experience. It’s a circular area, right in the middle of the store and impossible to miss. There are tables with light colored hardwood, stools, various Nooks on display, backlit display panels, racks of peripherals and cases, and even a few paper magazines as enticement to the world of digital magazines. One of the keys was the openness: you could navigate to any section of the store by walking right through this centerpiece area, and thereby become exposed to this new Nook Digital Shop. This all looked a lot like Apple’s retail store scheme. (I haven’t handled a Nook Tablet yet.)

Digital Shop

Nook Digital Shop (Photos by the author)

Clearly, Barnes & Noble feels that the idea of being able to walk into a bookstore, buy a Nook, get buying assistance, be able to come back and ask for help is important. (There is no Nook Genius Bar — yet — but you get the idea.)

While Amazon sold the Kindles at major consumer electronics outlets, like Best Buy, over the holidays, it’s just not the same when you go back and ask for help. Best Buy sales people will have limited ability to consult with you. Indeed, a small fraction of people who were frustrated with their Kindle Fire, packed it up and sent it back. What if they could have taken it back to a store, browsed for more books, bought a cookie, and asked for help? That’s an experience, without the cookies, that Apple cultivates. It’s why Apple opened those stores in the first place.

Motivating the Customer

Even with the advantages of being around books in a quiet, academic atmosphere, a lot of people are preferring to buy digital books. Who hasn’t been exposed to a paper book in a bookstore, taken a photo or used a special app, then bought the same digital book from Amazon? And who wants to lug heavy books around when moving? Or carry them around on campus?

But paper books have their advantages as well. I’ve noticed that some of the books I’ve bought recently for the Kindle app on my iPad have either missing or botched diagrams and photos compared to the paper edition. Also, one time, I was in the physics section of Borders and saw a fellow seriously looking at Brian Greene’s The Hidden Reality. We struck up an interesting conversation about physics. If learning and community are fostered by human interaction, then the question is, how can Barnes & Noble leverage and promote that? It isn’t going to be easy.

These days, it takes a lot of money and presence to get the customer’s attention. Barnes & Noble has about 700 retail outlets, far more than Apple. For the quarter ending Oct 29, 2011, retail sales saw a decline of just one percent compared to the year before. But that was offset by Nook sales. Total Nook sales for this recent holiday quarter almost doubled. So B&N seems to be holding the fort. One profitable part of the business is the B&N college bookstores, but those could soon come under assault as EPUB 3 on the iPad allows a better representation of interactive textbooks. All in all, B&N lost some money in the quarter preceeding the holidays, but less than the same quarter last year. I surmise B&N is not in serious financial trouble, but is also at a tipping point. (The company’s annual revenue is about US$7B compared to Apple’s, roughly, $120B, and it doesn’t have equivalent cash on hand or buying power for expensive initiatives.)

Fear of the future can drive lesser CEO’s into distraction.

Then what’s the challenge? Amazon found a weakness in Apple’s strategy with the $199, 7-inch, easy to hold, Kindle Fire. Is there a similar weakness in Apple’s iPad iBookstore strategy? I think it remains for B&N to not only put the physical pieces into place, but also make a stronger case for their retail stores to customers and publishers. It’s not necessarily just about selling a tablet and books electronically and augmenting with the storefront. It’s about marketing, enthusiasm and community. It’s about loyalty. It’s about quality of product. Can B&N condition the customer to realize what the advantages are of both e-sales but also a storefront? What motivates people to shop in person is a mindset worth exploring.

Nook Tablet

Nook Tablet w/ HD video

I remember when I was visiting my parents a few years ago, and I was in their local B&N on the day after Thanksgiving. My wife and I had picked out about $150 worth of books, but when we got the checkout lanes, the line was enormous. Picking out the books was easy, but we were faced with perhaps 30 minutes to check out. We put the books down on a table and left. Getting people into the store is pointless without a great buying experience.

At Park Meadows Mall, the B&N store is in a small, cramped parking lot away from the mall. It takes a special effort to get there. Is that worth the lower rent? On the other hand, the Apple store in the mall is incredibly easy to get to, brimming with energy. Out of sight is out of mind. (Of course, Apple stores have a high sales density in $/sqft/mo. That pays the rent.)

Apple makes it worthwhile to come into their stores, and the hardware is amazing. But B&N stores are amazing as well. When you’re in the Apple store, you’re thinking about how to pay. In the B&N stores, you’re thinking about what you want to learn*. In the Apple stores, it’s often shoulder to shoulder and all standing. Noise abounds. In the B&N stores, one can sit and reflect. It’s fairly quiet. And you can buy chocolate.

There are lots of elements here besides the convenience of an electronic download. There’s the location of the store front, the fun of physically shopping** for something you can easily afford and has value, the buying experience itself, getting help from real people with your Nook tablet, the opportunity to browse, perhaps even meet people. Saturday morning readings for children can’t yet be duplicated on an iPad, although I’m sure someone will try to develop an app for that.

Everything will depend on the continued success in conveying to the public that coming to their stores is a complete and pleasurable experience, worth having, and an adjunct to their digital life.  It’s a mindset that needs continuous cultivating these days. I think of the challenge like a popular activity in chess. Sometimes, at a club, an expert or master will see a club player in a losing position and offer to take over. He can often turn the game around and win or draw from a losing position. Similarly, what would Apple do if it were in B&N’s shoes? Is the position truly lost? Or can B&N pull off a draw?

Succumb or Flourish?

The consensus seems to be that B&N will eventually succumb to the same fate as Borders. Yet, B&N has smart management and understands the challenges. If they do everything right, will it result in survival? Or will it simply be a case of hanging on by a thread, postponing the inevitable? The verdict is out.

There is room for maneuvering. Amazon found a weakness in Apple’s product lineup this holiday season and is also making it easier for authors to work with them instead of Apple. But Amazon doesn’t have the retail stores. Barnes & Noble does. What B&N makes of that, how it probles for weakness in the competition, how imaginative it is and how it makes the storefront case to the customer will surely determine the fate of this hybrid business. And whether Apple and Amazon simply back into victory by default.

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* Steve Jobs once said, “You watch television to turn your brain off, and you work on your computer when you want to turn your brain on.” Bookstores also turn your brain on.

** Not to mention getting out of the sofa, up and around, burning calories.

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Author note: Barnes & Noble responded to my e-mail during the preparation of this article. I had some questions that, however, went unanswered. Instead, I was pointed to publicly available information and a page of product photos for media.

 

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Comments

mrmwebmax

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Excellent article as always, John. If I could ask a slightly off-topic question: How was the 3D fighting ring graphic made? It’s very well-done.

As for the future of bookstores, every Christmas shopping season I’d go to the Borders in a nearby mall and look for a good “coffee-table” book for my mom. Some featured pictorials of far away places, some of wildlife, etc. While I have yet to try any form of eBook, and while I see tremendous advantages to them, I don’t think they can duplicate the experience of a good coffee-table book, with pages much larger than an iPad screen, high-quality paper, and excellent photo reproductions. That’s the one category of book I see still needing the “dead tree” version, and especially needing a brick-and-mortar bookstore in which to buy it, where the shopper can casually flip through numerous such books before making a purchasing decision.

Of course, I couldn’t do that this year, as Borders is no more. And while I miss the book-browsing experience, I certainly don’t miss the lines I had to endure each Christmas season, which were much like those you and your wife endured, then abandoned, just after Thanksgiving at a B&N.

John Martellaro

mrmgraohics:  Great point about those larger format books.  Maps too!

I don’t want to give away any secrets, but the fighting ring graphic owes big time credit to the magical minds of our own Jeff Gamet and Bryan Chaffin.

Constable Odo

That’s what Wall Street doesn’t get about Apple.  All WS talks about is every Apple product being commoditized by some cheaper product.  It’s like the people on WS don’t shop in stores or need customer service.  WS just goes on and on about Apple being replaced by some cheaper service.  They don’t seem to understand that shoppers get fed up with cheap and crappy customer service where nobody seem to know where anything is or be able to help you.  Wall Street never sees the human side that makes Apple special and rather unique.  Wall Street wants to commoditize the social end of the sales business.  A customer being able to checkout a product anywhere in the store is a terrific idea that Apple uses.  Self checkout in places like Home Depot or supermarkets works well yet it’s still rather rare in most retail businesses.

Wall Street just loves to discount everything that Apple does because things cost a bit more.  Yeah, everything that Apple does or makes it going to be replaced by something a lot cheaper.  Why the hell would Wall Street even want something like that?  Aren’t those investors consumers, too.  Do they really want crappy customer service for themselves and others?  They’re stupid if that’s what they’re hoping for.  I don’t think it works that way or Porsche and BMW are probably going out of business to be completely replaced by Toyotas and Nissans.

mrmwebmax

+

mrmgraohics:? Great point about those larger format books.? Maps too!

I don?t want to give away any secrets, but the fighting ring graphic owes big time credit to the magical minds of our own Jeff Gamet and Bryan Chaffin.

While we agree that the large-format book will work best in paper form, I have to wonder about maps. It seems maps lend themselves to interactive functionality (thus an iPad) far more than large format books, especially with features such as geo-location, direction generation, etc. (And a digital map never needs folded back up!) Large format books are more like art pieces, where even the feel of the paper is important.

As for keeping your graphic techniques secret, understood. Kudos to Jeff and Bryan, though. It really jumps out.

skipaq

The digital media tide will keep pushing back the sand of old media formats. This is unstoppable. I live in Maine and can tell you that this change has led to the closing of a number of paper mills. Up to now almost all of my book reading has been in print media. I read 10-12 books a year and have only read two in digital formats on my iPhone. But that will change when the iPad3 is released.

My work also requires the use of a professional library. I used to love going to the store that specialized in the books I needed. I have sold or given away 95% of those printed volumes. I now have all of that and more in digital format. It costs a third or less and almost all of it has been hyperlinked. I don’t miss the printed volumes in the least.

I don’t believe B&N can compete with Amazon in the long term. Amazon has a more integrated approach; even more so than Apple when it comes to content. Add to that the constant chipping away of its’ printed media market and the cost of all those stores will become prohibitive.

FlipFriddle

A friend of mine just quit B&N as the long-time manager of the biggest store in the area; given what she said about the corporate culture and why she left, I might take issue with the statement that they have “smart management.” Anecdotal for sure, but I wouldn’t give them too much credit yet.
I’m curious if the Nook color is any good; I tried a Kindle Fire over Christmas and it wasn’t.

ibuck

I’d rather keep local bookstores than big corporate chains. We have a really good local chain, with 6 or so stores in communities within an hour or so drive. They are well-organized and laid out, have great author events (Chris Moore does his comic commentary without actually reading from his books!), good customer service, and their checkout lines move quickly. And their people are friendly, knowledgeable and well-read, often getting pre-release copies, so they make good recommendations, etc.

I’d prefer that authors and publishers find a way to sell both their digital books and paper books through these local bookstores, which are wonderful local resources, also offering non-book gifts, gift-wrap, friendly service and recommendations. With a standard e-book format, wouldn’t it be possible to get similar prices, better service, and browsing without the dominance of B&N, Amazon or even Apple?

Gareth Harris

You mentioned the answer, John. People go to bookstores for the social experience - to have a cup of coffee, browse, meet someone over a cuppa. B&N won’t beat Amazon selling books. The answer is right before them. They need to find a way to develop the social setting and make it pay.

Lee Dronick

You mentioned the answer, John. People go to bookstores for the social experience - to have a cup of coffee, browse, meet someone over a cuppa. B&N won?t beat Amazon selling books. The answer is right before them. They need to find a way to develop the social setting and make it pay.

Our local Barnes & Nobles has a Starbucks inside and the chairs in the cafe are usually full of college students doing homework. I don’t know how many of them purchase a book from the store, most have a coffee and use the free WiFi.

As you say it is a social setting. I often walk up to there as part of my exercise routine. I will browse the books and may make a purchase. They used to have poetry readings and sometimes live music, they were fun, but were discontinued. They still occasionally have book signings, but not often enough in my opinion to draw regular visitors.

Anyway, they do need a way to compete with Amazon, particularly on prices. That may change now that California will start taxing online purchases.

Terrin

I?m curious if the Nook color is any good; I tried a Kindle Fire over Christmas and it wasn?t.

I have tried both. I would take neither over the iPad. However, I would take the Nook Touch over the Fire. The OS seems more fluid and thought out with the Nook. I also like the hardware design better. Both seem cheaply made compared to the iPad.

I was in a Barnes and Noble’s store recently right after Christmas. There were a lot of people playing with the Nooks. I also saw quite a few people who had bought them come in the store to ask questions about issues they were having. There was no dedicated person to answer the questions, but a few employees seemed to know a bit about the product.

If you go into a Target or Walmart, non-Apple tablets are displayed better. They are out in the open where they can be touched. The iPad is locked behind a plastic cube. So, you will see people playing with the various Android based tablets, but not the iPad.

ME

While I like my macs better than PC’s I firmly believe Apple and Microsoft and all the other tech firms have prevented and slowed truly momentous tech advances because they are unsure how to get money from it.

iJack

From the get-go, I have thought of Apple stores as cool, but I don’t think I’ve ever considered them “pleasant to be in.”  The all-hard-surfaces amplify the noise, and you often have to queue just to look at the latest Macbook Air, or whatever.

B&N on the other hand, offer a wide open, carpeted space, and usually a place to sit comfortably, sip a coffee and read, or just take a break from dreary suburban malldom.

Not sure I would have made the comparison in the first place, but since you did, I know which store appeals to me more.  I also think it would be very, very sad if Apple or anyone else drives B&N under. 

Actually, I think it would make me very very angry.  I have loved all my Apple gear starting in 1984, but I love books, and the idea of books even more.

Lee Dronick

I just returned from a walk up to Barnes & Noble. It wasn’t too busy, but it is midweek and the nearby community college doesn’t start until next week.

A few months ago they renovated the store and added the big central Nook section. They also converted the music and video section to a kids section. I took a cruise through there and in addition to children’s books they have a lot of arts and crafts, activity stuff, and toys so maybe those can be store saver; Our local Toys R Us became a Babies R Us.

I also played with the Nooks. As far as I am concerned the only thing they have over the iPad is their lighter weight. It was okay for text, kind of like a one page iPad when it is in landscape mode. However, when I tried the National Geographic with its photos and illustrations I can see the advantage of the larger iPad. That being said maybe there is truth to the rumor of an iPad Nano.

Well friends, I need to finish this glass of Port and go to bed. Chat with you tomorrow.

aardman

First up, kudos Constable Odo for using “commoditize” (turn into a commodity) instead of “commodify” (which by its construction really means turn into a commode, the snooty person’s word for toilet).

Yes, the local Barnes & Noble needs to get rid of those long checkout lines.

Barnes & Noble also needs to capitalize on “you can return merchandise purchased online at any B&N store”.  I once bought a book online for $7.99, decided I didn’t want to keep it and returned it in the local B&N.  They gave me back $13.99.  I told the clerk that was more than I bought it for, she said management told them to process the returns anyway.  Their accounting and POS system couldn’t deal with the discrepancy.  I then ordered 10,000 copies of said book online and returned them to the same local store.  I kid.

I so desperately want B&N to survive because as soon as they die, we all know what will happen with Amazon’s book prices.

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