Jan 20 2011
After the Christmas holiday here in the U.S., Barnes and Noble issued a press release revealing that it had its strongest nine week holiday sales in over a decade. Why was this? According to the press release:
The company significantly exceeded both online and in-store sales forecasts, led by strong consumer demand for Barnes & Noble's NOOK brand of eReading products. The company sold virtually its entire inventory of NOOKcolor and E Ink devices during the holiday season while exceeding its sales plan for accessories associated with the NOOK product line.
In a previous press release, BN announced that its online retail site was selling more digital books than physical books.
Barnes & Noble also announced that it now sells more digital books than its large and growing physical book business on BN.com, the world's second largest online bookstore. With its growth across device and NOOKbookâ„¢ sales over the critical holiday selling season, Barnes & Noble has successfully established itself as a leader in digital reading.
When your primary money making product is a device that delivers digital content, the need for a large physical retail space declines. BN knows this and has been systematically not renewing leases, even at landmark locations like Fisherman’s Wharf in San Francisco or Lincoln Center location in Manhattan. Frex:
- End of an Era for Barnes & Noble in Hoboken
- Save the Lakeland Barnes & Noble!
- Barnes & Noble to close store in Fort Worth
- Barnes And Nobles Closing Lincoln Center Store
- Poplar Plaza Bookstar to close at the end of January (store owned by BN)
According to this article on CNN, the leases on 400 BN stores will come up for renewal by April 2014. The same article notes that BN believes that retail locations are necessary for the sale of the Nook. Not the sale of physical books, but the sale of the Nook and digital books.
So I guess it should come as no surprise that Barnes&Noble is shifting resources from the physical retail side to the digital side but it comes at a cost. BN has laid off the vice president of merchandising, Bob Weitrak, and many of the buyers. Merchandising, I’ve been told, is the profit center of a retail store. The merchandising department decides how books are displayed (end caps, new release shelves, front of the store shelves, table tops – which are all paid placements by the publishers), organized, and promoted within the store and managing physical inventory. The buyers, who reported to Weitrak, are responsible for ordering physical inventory from the publishers. Most of the names of the buyers laid off were in the non fiction category, but one, a mystery buyer, is purportedly laid off as well. The reports are the lay offs number in excess of forty.
A reduced footprint for a retail bookstore that makes most of its money off of non book items like toys, games, and a digital reading device will result in far fewer actual books being stocked. This, in turn, will reduce the print run size of books which reduces the advances of authors. Eventually, I think we will see a phasing out of the mass market book and instead see more trade paperbacks and hardcovers. The margin for a digital mass market is fairly good under today’s pricing scheme by the big publishers. At $7.99 per digital book, the publisher is seeing a 40% increase in revenue per unit sale (or more) so long as it can continue to obtain 70% of the proceeds of each sale (which it does under it’s “Agency” model).
One thing I haven’t seen yet but think must be coming is digital first arms of these traditional publishers much like Carina Press is the digital first arm of Harlequin.
I used to think 2020 was going to be the tipping point where ebooks overtake digital books but now I’m thinking it is more like 2012 as some estimate that there will be 35 million Kindles in circulation in 2012. As was quoted in the last paragraph of the preceding linked article, “Last week, the e-book outsold the print version for 18 of the top 50 books on USA TODAY’s Best-Selling Books list, including all three Stieg Larsson novels. The week before, 19 had higher e-book than print sales. That was the first time the top 50 list has had more than two titles in which the e-version outsold print.”