While Simon & Schuster and Penguin are celebrating record profits for 2006 and Amazon’s stock is being upgraded from hold to buy, Barnes and Noble is struck with a 11.4% decrease in stock value due to disturbing reports of a depressed 2007 sales season. According to BN, profits were down for 2006 due to member loyalty prices and that 2007 looked grim because BN’s discount for the 7th and final Harry Potter book will net the company virtually no profit. Borders had similar weak expectations due to the costs of its own customer loyalty program. (of which I am a member).
Obviously the brick and mortar stores are trying new ideas such as Borders’ Gather community and Borders Rewards and Barnes and Noble Member program to increase customer loyalty and boost profits. It appears that those attempts are meeting with mixed success because members are only members to take advantage of the savings. Once those savings disappear, the members are likely to disappear too. Increasing reliance on internet purchases and alternative sources of purchase could lead to the Barnes and Noble/Borders merger that some have been discussing within the finance world. Last year, Borders was the subject to buy out rumors from private equity companies. Unfortunately, the publishing industry does appear that its moving toward consolidation (witness the purchase of Random House UK of Virgin Books).