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The REAL Reason Barnes & Noble is Failing

Posted By Joanna Cabot On January 5, 2013 @ 9:00 am In Around the World,Barnes & Noble | 26 Comments

[1]My esteemed editor, Dan, posed a question today [2], after processing B&N’s recent holiday sales stats: Why IS Barnes & Noble failing so badly? After reading their Christmas-season sales numbers, nobody can deny that their sales are not what they could be? Why?

With all due respect to Dan, who I think is a fabulous guy, I think the answer is a lot more straightforward than he might think. It’s not about sales metrics, or marketing techniques, or any complicated analysis I think he was seeking. The answer is simple: It’s because the world has more non-Americans than Americans, and Barnes & Noble has always been curiously hostile to the non-American.

I know that B&N, at last, launched a UK store last year. So, that’s … two countries they sell to now? Not to minimize the importance of my friends across the pond by any means, but that’s still a tiny fraction of the market. And it’s not just the e-books, either. They won’t even let you register a device with them—even if you swear not to try and buy books for it—unless you register an American credit card and an American address with them.

Think about that for a second. I, like many Canadians, live less than two hours from the U.S. border. The Beloved and I enjoy a little jaunt to Niagara Falls once in awhile. I think we went three times last year. And you know what? The folks on the American side were happy to see us. There was no pesky exchange rate to worry about; we have credit cards. And the Americans were more than pleased to accept them. We went out for breakfast. We bought T-shirts and shoes and video games. I bought a very nice cupcake at an adorable little shop on our way home. We had a grand ol’ time. And nobody ever suggested to us that we couldn’t wear the shoes again once we were back in Canada. Nobody ever told us we had to be American to eat the cupcakes…

Now, compare that to the Barnes & Noble experience. They are losing my business on two fronts. First, there is the loss leader issue—Amazon has all but admitted that it sells the Kindle pretty much at cost, because the company know that once you have one, you’ll want to buy books for it. Barnes & Noble has closed off that channel. Though even if I did want to live with that and side-load forever, I’d still find features locked out to me, because B&N won’t even let you run the machine unless you have that all-important U.S. (or UK) billing address.

And then they closed the Fictionwise store. My American sister had the option of transfering her books over to a Barnes & Noble account, and as a happy side effect, they even offered to convert them all to EPUB for her. She had some clunky PDB-format stuff that is now shiny new EPUB. And me—I’ve bought four times as many books as she has, and I get nothing but an email telling me to download and back up all my books by a certain date before I lose access to them forever.

And you’re wondering why they’re failing? Could it possibly be any clearer?

[3]When I wrote a few weeks ago about looking ahead to 2013, I predicted that this is finally going to be the year the international e-book market matures to its full potential. I think B&N’s abysmal holiday sales numbers prove my point. The book market is already a threatened one. It’s competing with music, movies, apps, video games. People have more entertainment options than ever before, and a good chunk of it can be accessed from their phones, tablets and computers. The last thing a threatened market needs to be doing is turning away people with credit cards and itchy ‘buy now’ fingers.

I guess the one good thing about B&N’s reluctance to take my money is that I have more of it to spend with other vendors. Anyone want to recommend a nice brunch place in Buffalo that would be happy to sell a nice breakfast to two lovely Canucks and their credit cards?


26 Comments (Open | Close)

26 Comments To "The REAL Reason Barnes & Noble is Failing"

#1 Comment By Elizabeth On January 5, 2013 @ 10:18 am

Perhaps the demise of Borders and other bookstores has affected B&N as well. It reduces the idea of casually popping into a bookstore and makes it more of a special purpose trip. In that case it is then just easier to purchase online.

Personally I preferred Borders over B&N. Borders had a more comfortable feel and encouraged you to browse. As a result I would find books by casual browsing. Borders would often host authors both local and as part of a book tour. The design/layout of B&N stores always gave me the feeling of “get in, get out” so I rarely go unless I know exactly what I want to purchase. Even the B&N cafes have an after-thought almost drive-thru feel to them.

#2 Comment By Juli Monroe On January 5, 2013 @ 10:40 am

I think you have an excellent point, but it’s only partly B&N’s fault. Territorial restrictions imposed by publishers are undoubtedly some of the reason B&N hasn’t expanded internationally.

However, I wrote an article yesterday on your sister site, Gadgetell, pointing out that B&N should have some pull with the big publishers since they are the last big brick and mortar store standing (at least in the US). I was advocating they use their pull for the removal of DRM. But they could also use it to change policies on territorial restrictions. B&N is in a position to affect change, but I’m not seeing any indication they want to use what they have.

Which, ultimately, I think will lead to them going the way of Borders. There’s ways to compete against Amazon. Too bad they aren’t using any of them effectively.

#3 Comment By Devini On January 5, 2013 @ 11:08 am

Territorial rights you say? Explain Amazon, Apple & Google. Joanna’s 100% right. The world is bigger than the USA. People want to buy; let them buy. Anything else is “stupidity”. And like Schiller said: ” Before stupidity the gods themselves struggle in vain”. Couldn’t be any clearer.

#4 Comment By Erik On January 5, 2013 @ 11:38 am

Hi,
I had the same problen with B&N. I tried to buy an ebook from them and could not,becouse my credit card is not an American based.

What I do now?I use Amazon american stor and their Kindle.
And I am from Slovakia.

#5 Comment By Juli Monroe On January 5, 2013 @ 12:10 pm

I completely agree with Joanna. I just think there’s a bit more to the story. Territorial rights are a concern. I recently recommended two books to a UK friend. She can’t buy them because they aren’t available in the UK Kindle store.

I agree that everyone should be able to buy what they want to buy. But even Amazon has restrictions, mostly imposed upon them by the publishers. And they should be eliminated. B&N has an opportunity here with the big publishers. They aren’t taking it, and I think that’s too bad, and ultimately, a future cause of their eventual demise.

#6 Comment By Bill Smith On January 5, 2013 @ 12:16 pm

The disturbing thing is that B&N’s results are based on their existing business (without any consideration at all of the world market) — sales are down at both their existing stores and in comparison to their existing Internet business.

And while I love my big bookstore, it’s not hard to understand why.

Bricks & Mortar:

Good gods, when you go into a B&N it feels like they want to sell you anything BUT a book these days. Lego sets, kids toys, games, tschotskies, Nook tablet, oh sure, we got those. A book you say? Let me check and see if we got any in the back.

B&N is a store that is supposed to be for book people. If you cut back on the product (half the inventory you used to have), why would you expect those people to keep on coming back instead of buying online.

Half the fun of the bookstore experience is the serendipity of browsing and discovery. It’s no fun when the selection is so much more limited than it used to be.

As for online, where do we begin to lament B&N’s sins:

Unfathomable, impossible to navigate online bookstore.

Minimal online community support, unlike the Amazon forums.

DRM, DRM on everything…or at least not telling us what doesn’t have DRM.

Look, B&N, you need to explain to publishers that if you go down, their print business goes down with you…so publishers need to work with B&N to keep each other going. That means taking off the DRM off ebooks so you can really compete online…because frankly, short of removing DRM, there is absolutely no freaking way you are ever going to compete with Amazon.

– Bill Smith

#7 Comment By Felix Torres On January 5, 2013 @ 12:35 pm

B&N’s problems go beyond Nook andd territorial restrictions
It isn’t about leaving ebook money on the table.
It is about B&N not being *competitive* within the US. It isn’t about them failing to grow; it is about their sales *shriking*. Less sales, less traffic in the stores. Less devices sold and barely any growth in digital once you factor in the added scope with video and apps on top of ebooks and magazines.
All that going international would do is, at best, mask the reality that they’re not performing along with the market. That they are losing customers and the customers they are keeping are spending less.
Going international would bring in money that might make up for the losses a home but until they do something about the reason for those losses, they will continue to have the same problems.
If their business is non-competitive in the US, taking it global will simply let them be non-competitive on a global scale.
After all, in the US they have the B&M stores and an established name brand that is *supposed* to be an asset. They don’t have that outside their home market. So how are people going to react when they are exposed to the famous customer service? Their app store? Their ebook return process? The locked down tablets, the kid books that will only open in the tablets but not the apps? The home page ads you can’t even pay to get rid of?

I seriously doubt Canadians or europeans are going to be all that tolerant of the same failings that are crippling them in the US.

Among the list of the things that have brought B&N to this state, lack of international presence is way down the list.

#8 Comment By Marilynn Byerly On January 5, 2013 @ 12:47 pm

Publishing expert and blogger Mike Shatzkin looks at this question and blames B&N’s emphasis on the Nook in their brick and mortars.

[4]

I certainly am not to blame for their bad performance at Christmas. I gave B&N gift cards to the niece and nephews and received them myself to feed my book habit.

#9 Comment By Felix Torres On January 5, 2013 @ 12:47 pm

BTW, before buying into the whole B&N is the last bookstore in the US handwringing, I ran a bit of a reality check online.
In the US there are something like 30,000 places to buy pbooks.
Starting with over a thousand indie bookstores (which according to the NYT reports had a good enough XMAS season, growing sales while B&N declined).
Then there’s another thousand newstands.
The supermarket chains, department store chains, drug store chains, convenience store chains. The used book store chains.
And of course, there’s the regional bookstore chains like Books-a-million and Half-price-books.
For the past few decades, B&N and Borders were busily putting independent bookstores out of business, dragging their business away from them. That is over; now it is B&N that is the market share donor. And if they went away, it wouldn’t be the end of the world. In fact, the reason their B&M business is hurting is because too many of their pbook sales are going elsewhere. And that elsewhere isn’t just online. It is the other 29,000-plus bookselling businesses.

#10 Comment By rashkae On January 5, 2013 @ 12:52 pm

Canadian like Kobo (probably because it’s the only company even trying. *Still* no paperwhite here, btw.) Believe me, we can tolerate *a lot.*

#11 Comment By Bryan Paul Sullo On January 5, 2013 @ 2:02 pm

I think there may be another reason, (though I don’t have the numbers to back it up). Take a look at any link to purchase a book on any blog or other site: I’ll betcha it leads to Amazon. Amazon has an easy-to-use affiliate program, through which its members can hock a lot more than just books. I love my Nook. I love my local B&N, I think I even have a bn.com affiliate account, but I use Amazon for affiliate links because I know that when I direct people there, there’s a chance they’re going to purchase a higher-ticket item than a couple of ebooks. That’s not possible with B&N, and they’re missing out on this marketing channel.
Every time a book store closes, it feels like the mortar of civilization is being chipped away, but if B&N isn’t serving its customers what they want, it needs to go, so another business (like an indie book store) can take its place.

#12 Comment By Robert T. On January 5, 2013 @ 2:21 pm

Add unbelievably bad customer service to the above mix and you have a recipe for failure.

#13 Comment By Bill Smith On January 5, 2013 @ 2:26 pm

@Felix Torres:

I generally agree with you, but suggesting that the hopelessly meager selection of book titles at the local WalMart, Target or grocery story (Maybe 200 titles) is at all equivalent to a decent bookstore is a stretch.

Yes, it is a sales outlet…for only a handful of major titles. I think book publishers would almost be better off not offering these titles to WalMart & Target since they can only sell a handful of titles to them.

These limited selections have drained away a LOT of sales for B&N/Borders stores…but probably not so much profitability since these books were often sold at a steep discount to get traffic and hopefully convince people to buy backlist while they were there).

The end of B&N is not the end of print publishing…but boy is it going to fragment the industry. I wonder if the end of B&N would make the industry look a lot more like the comic book industry — a couple of major distributors who wield incredible power and nothing but independent stores, with a constant cycle of existing stores closing and (often undercapitalized) new stores opening. I don’t think that’s going to be particularly good for publishing.

#14 Comment By Marilynn Byerly On January 5, 2013 @ 2:47 pm

Surprisingly, according to articles I’ve read in the trade press, it’s Costco that sells a majority of the bestsellers at non-bookstore outlets.

Places like Target and Walmart are fine for lead titles in most genre lines like romance, but they don’t have the selection even a small bookstore has, nor do they sell genres like science fiction, and they have peculiar tastes about what is and isn’t acceptable. Some romance publishers have had to change a cover they considered too racy while at the same time, they sell erotica like 5O SHADES.

Plus, these stores are only interested in what make the most profit with the least space. The day that books stop selling to their satisfaction, they are gone with as little fanfare as a towel color that is no longer popular.

And, it will be very easy for books not to make enough profit to satisfy them because books have a very small markup of around 3-5%.

When you consider that some furniture has a 1000% to 5000% markup which allows huge profits even with buyer-perceived bargains and other products have similar markup values, that 3-5% is pretty dang pathetic.

And in bookstores like B&N, that’s why you see so much space which offers novelties like games and other nonbook items because they do have such a high profit involved.

#15 Comment By Tom Semple On January 5, 2013 @ 4:12 pm

B&N should be able to be successful with only a US market (just as Kobo is successful in Canada). Given the fact that each new country requires its own business entity, has its own rules and regulations, and that rights of sale must be negotiated separately with publishers for each country, it is not a sure thing that it can be done profitably, and economies of scale will be elusive. Apple and Google, and to a large extent, Amazon, have a foot in the door in many locales and ebooks are just an extension of what they are already doing. B&N doesn’t have that. So I respectfully disagree with the premise of the article.
Why are they having problems? They don’t have the synergies and resources of Apple, Google, and Amazon. They have no appeal to people who aren’t B&N customers to begin with. B&N customers who wanted to make the move to digital have already done so, and so the pool of potential new customers is shrinking.

#16 Comment By Michael W. Perry On January 5, 2013 @ 4:52 pm

Wow! B&N’s woes stimulated a major response from Teleread fans.

I agree with those who pointed out that B&N’s limited international presence doesn’t explain its declining U.S. sales. I suspect the major factor there is that more people who buy books as gifts do so online and, when they think online, they think Amazon.

B&N also seems to be displaying a less-than-impressive enthusiasm for ebooks. In very early December, I published Hospital Gowns and Other Embarrassments: A Teen Girl’s Guide to Hospitals in both print and digital formats. The results are revealing.

Given the ebook directly, Amazon literally processed and released the digital version overnight, while Apple took about a week. The minor ebook distributors, Sony, Kobo, Diesel etc, download it from Smashwords within a week and sold it shortly thereafter.

B&N took almost a month to download the digital version from Smashwords (Dec. 28), and a week later it still isn’t available online, although the print version has long been there.

That sends a message to savvy ebook buyers. If you want to get an ebook quickly after its release, don’t buy a Nook.

#17 Comment By Felix Torres On January 5, 2013 @ 5:37 pm

A couple basic facts: even today, the bulk of publishing revenues come from the high-volume, casual reader driven “bestsellers”. (50 Shades, etc). Those are available everywhere, which is why they amass such a high sales volume.
The value of deep-catalog bookstores is highest for avid readers. They are the ones who are more likely to go to bookstores looking for “something good to read” and morelikely to pickup a midlist/backlist title whereas casual readers are more likely to go when they’re looking for something specific. Usually a word-of-mouth or acclaimed title.
We agree there?
The reason B&N has been reducing the floor space dedicated to books isn’t because they’re devoting less space to the bestsellers but because they are cutting back on the slow-moving midlist/backlist. In the process they are cutting their dependence on avid readers, which makes sense because avid readers are the ones that can appreciate indie bookstores and that benefit the most from ebooks. (Or online retail, with its gigantic inventory.) Of course, the side-effect is that they are also *increasing* their dependence on casual readers who can get their needs met pretty much anywhere.

That is why I expect that if B&N were to go away (I’m skeptical, BTW, they’re not *that* close to the edge) it wouldn’t be a really big deal except for the folks losing their jobs. Avid readers would find their books with indies or online and the casual readers would still get their bestsellers. And the BPHs would barely notice.

#18 Comment By Greg M. On January 5, 2013 @ 7:17 pm

Back in the early and mid 90s, before the Internet and Amazon, I worked for Border. At was a great bookstore: you could finds dozens dozens of uncommon books that sold maybe 1 or 2 copies every other year and people would drive for hours, coming from out of state. At the time it was the only Borders on the East Coast. It was the deep selection that brought the buying hoards and created long lines at the cash register. The B&N had the bestsellers and main backlist, but fewer customers.

The selection was the thing. It caused Crown Books (a discount chain store) to go out of business. But as Borders put store everywhere, the selection thinned, and sales went down. B&N thinned out an already thin selection and stocked more non-books.

Just before Borders went under, the selection was so poor I HAD to buy from Amazon to find the books I wanted. B&N was worse.

Why is B&N going to go out of business? Because I can finishing browsing in less than 15. Because they only want to sell books that can be stacked in many copies. Because I’m not going to drive to a B&N, find the book I want isn’t stocked, place a special order, wait two to four weeks, then drive back to pick up the book.

Why should anyone even bother with B&N?

#19 Comment By Dain Q Gore On January 6, 2013 @ 9:35 am

interesting, but that nativist parody “map” next to the article kind of doesn’t belong with arguing any sort of nuanced opinion, especially since we’ve elected and re-elected a Progressive into the office of President, and it wasn’t exactly close either time :)

#20 Comment By Mark On January 6, 2013 @ 11:52 am

Why am I shopping less and less at B&N, at least in-store?

Because the in-store prices are frequently higher than their on-line store is. I’m not talking about Amazon being cheaper, this is their own web presence.

Honor the same price in-store that you do online at the register, and I’ll buy more books in-store. I still browse in-store to find new things, because it’s not easy enough to do that online.

#21 Comment By Name (required) On January 7, 2013 @ 9:02 am

What do you mean they do not let me register the device?
The device is Nook Simple Touch, isn’t it?
I purchased one when I was in USA. Target had a Black Friday sale on Nook Simple Touch for $50.

I was *very* annoyed, because the device won’t even switch on for the first time without registering, but after I created a gmail account it let me register with no problem at all. The first thing after registering I rooted it ;-)
Now I can have many reading aplications on the NST, not just the one provided by manufacturer.

I consider it extremely rude from a manufacturer to hold your device *hostage* until they force you to register. This is one of reasons that I will not use their store. The other main reason for not using their store is that they do not let me use it because I do not have USA billing address.

#22 Comment By dr. james willingham On January 7, 2013 @ 1:07 pm

There is another reason why Barnes & Noble are failing, and that is there is a decline in readership. People are becoming more visual, due to the influence of television, movies, and the PC. In addition there is a decline in the wherewithal of schools to educate students to read. Whether planned or accidental due to a variety of factors, children in our public schools are not exactly noted for their ability to read and understand.

#23 Comment By dr. james willingham On January 7, 2013 @ 1:08 pm

Note error “are” should be “is failing

#24 Comment By Doug On January 8, 2013 @ 2:51 pm

Canada is a special case. The Investment Canada Act blocks bricks-and-mortar bookstores from operating in Canada without permission. In 1995, Canada told both Borders and B&N to stay out.

The Canadian Booksellers Association has repeatedly used the Investment Canada Act to try to get Ottawa to repel the barbarians. Companies like Amazon and Apple, whose mainline businesses aren’t running bookstores — or even the selling of books and other cultural media — have managed to get approval from the Honourable James Moore, Minister of Canadian Heritage and Official Languages. In Amazon’s case, they had to grease the wheels with $20 million.

And they probably had to agree not to call him the Honorable James Moore. :-) A good part of the justification for the Investment Canada Act is to keep American “culture” from corrupting Canadians (as one might infer from the ministry that enforces it).

#25 Comment By Rob Preece On January 9, 2013 @ 6:50 pm

I also don’t understand why B&N hasn’t been more active in marketing eBooks world-wide. Of course there are rights issues, but those issues are really the publishers’ problems, not theirs. Amazon certainly has gone after the world market, adding country after country to their Kindle store. I wish B&N would do the same. That said, there is something wrong with B&N even here in the US.

Considering that I did all of my in-store Christmas shopping at B&N (I did my online shopping at eBay and Amazon), I struggle with what, exactly, is wrong. They have a great selection of presents (full disclosure… I’m an early Nook Color owner), their stores are a nice environment for shopping, and you can get a cup of coffee and flip through that book on 1939 Soviet plans for invading Germany that you’d never actually buy. Losing Borders was a blow to US reading. Losing B&N would be a knock-out.

I’m also sad that they closed Fictionwise. A few years ago, FW was my biggest distributor, generating thousands of dollars. My last check from them was $51.80, so I understand their lack of enthusiasm for continuing the effort. Still, it did give them at least a bit of a world-wide presence… as well as ownership of two of the original eBookstores. I would have thought that they could brand a FW version of the Nook… which seemed to be their original idea in buying FW… remember the first Nooks supported eReader format, not ePub?

Anyway, they’ve got money from Microsoft. Time to spend some of it expanding worldwide… and doing a better job attracting people to their stores.

#26 Comment By Mark On January 10, 2013 @ 1:20 pm

Just copied from Kindle Fire HD sales copy: “To purchase, download, or stream movies and TV shows, you must be physically present in the U.S. and have a U.S. billing address.” The pesky territorial limitation troubling Canadians is therefore not unique to B-N.


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