How can Barnes & Noble compete in 2014 and beyond?
As we look toward 2014, the major question to be answered is the future of Barnes & Noble. If you think that the publishing world would be just fine without Barnes & Noble, you’d be wrong. When Borders closed its doors, there was a decline in overall sales of books that was not recaptured by either digital sales, online sales or physical retailers. Borders was only the fraction of the size of Barnes & Noble so you can imagine the shrinkage that would occur should Barnes & Noble disappear from the retail landscape.
In an article earlier this week, the Wall Street Journal noted that B&N’s stock value had declined nearly 70% since 2006. Conversely, Amazon’s stock is at its zenith. The problem with comparing Amazon to Barnes & Noble, however, is that Amazon isn’t merely selling books. Its selling electronics, home goods, and web services. Vine, Instagram (before its sale to Facebook), Netflix, just to name a few, are hosted via Amazon Web Services.
But when Barnes & Noble competes head to head with Amazon it often comes up short. While nearly every other digital retailer (save Sony) matches discounts, B&N does not. The NYTimes looked at the resurgence of Best Buy and one of the key points was Best Buy’s commitment to price matching.
Like many ideas that seem brilliant in hindsight, “the strategy is very simple,” Mr. Joly said in 2012, soon after he took the job. “We believe that price-competitiveness is table stakes. The way we want to win is around the advice, convenience, service.”
By matching the lowest price and enhancing service, he was determined to make sure that a customer who came to Best Buy as a showroom had no reason to buy anywhere else.
Price matching isn’t just for electronics retailers. At Nordstrom’s, they have a publicly stated price matching policy and more retailers are quietly accepting customer’s requests for price matching. Barnes & Noble is not one of those companies. Certainly Best Buy’s renewed commitment to low prices has helped the retailer regain its vigor in the marketplace, but I know that there are some who would argue that to try to compete with Amazon on price is a fool’s errand.
If B&N will not compete on price (or cannot) what can it compete on? A true luxury brand relies on exclusivity, rarity and the Veblen effect. The Veblen effect says that a reduced price reduces the status of the product. (There is some Veblen effect occurring for readers at the 99c price point). A purveyor of mass marketed goods can almost by definition not be a luxury brand.
In the Best Buy article, the new CEO says that they are trying to eliminate price as an obstacle for purchasing. This weekend at Barnes & Noble, the lines were enormous. People love buying books for other people but I also was with someone who wanted to buy a particular book for a friend and it wasn’t in stock. The exact conversation went like this.
BN: We can order it for you.
Person: It’s $16 here and $12 on Amazon. Why don’t I just order it myself?
The aforementioned conversation is what Best Buy wants to avoid. A brick and mortar retail store that can’t compete on price or selection has to offer something else. What else can Barnes & Noble offer? Better service? Perhaps they need to move to the Apple retail model where there is an employee every 4 square feet. Best Buy has embraced the showroom feel, similar to Apple, where customers can touch and feel all the devices from tablets to headphones to televisions. Barnes & Noble’s retail space was supposed to present the Nook with an advantage over Amazon but Amazon countered by sending out its Kindle devices to Target, Staples, Best Buy and other retailers. Plus Nook’s closed ecosystem which didn’t allow users to easily add movies, games, and music cratered its tablet endeavors. B&N over estimated the eink devices popularity and has failed to launch internationally like it promised.
I don’t have many answers for B&N. I do think that they should do a better job of bringing readers in by hosting author events. One way they could do this is to partner with Lightning Source or Lulu.com to create deals with indie author signings where thousands of fans show up to buy print books from their favorite authors. Another thing is to start aggressively price matching so that Nook users don’t feel punished by being Nook users. If a book is not in stock, Barnes & Noble should offer to price match any online price for those who are BN members (along with free in home shipping). Barnes & Noble should be leading in offering reader recommendations rather than leaving that to Goodreads (now owned by Amazon) or any other of the reading communities.
There are a whole host of things that B&N could do by leveraging its existing status in the community and marketplace, but I don’t see it happening. B&N feels like an old school retailer in a new world and I don’t see it innovating fast enough. Maybe new blood at the head of the company will change the course, like it has for Best Buy. I hope so. We need Barnes & Noble to expand the marketplace of books.