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.)
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 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.