Should We Save Barnes & Noble?

David Leonart, a New York Times op-ed columnist and economist by trade, wrote an article earlier this week in the NY Times entitled “Save Barnes & Noble.”

The article makes the case that Amazon has successfully “won” the books category by discounting books to such a level that competing booksellers, with brick & mortar locations (hence, rent, utilities to keep the lights on, and employees to stack shelves, recommend books, and check-out customers) must either reduce their prices to an unsustainable level, or risk outright extinction. By “winning” the bookselling segment, Amazon has organically created a monopoly within the books category (rather than artificially via mergers & acquisitions, the typical driver of antitrust complaints). Victims of their own success in the segment, the author argues that Amazon should be regulated, and subject to price controls / other mechanisms to level the playing field for the lowly Barnes & Noble.

I take no pleasure in Barnes & Noble’s continued struggles, though I do bemoan the manner with which they decided to dismiss many of their longtime, loyal employees, and replace them with seasonal and part time workers. As I’ve explained in previous posts, I’m a strong proponent for the vibrancy, viability, and long-term health of physical bookstores, and continue to invest my own time and money in bookstores. However, I think that the narrative of Barnes & Noble as a sympathetic figure in this saga is undeserved, and serves to undersell the continued disservice that Barnes & Noble has done to the book consumer through their slow adoption of changing consumer trends, longtime confusion around their core value proposition and customer experience, and their continued leadership churn and a resulting lack of a coherent corporate strategy that doesn’t involve dedicating 50% of their square footage to a restaurant.

It’s important to remember that Barnes & Noble was at one point the behemoth incumbent, along with the now-shuttered Borders, and Amazon was the upstart, David-fighting-Goliath. In a recent interview with the CEO Mathias Döpfner of German media company Axel Springer, Jeff Bezos discusses his history in the bookselling trade, and Amazon’s humble origins (believe it or not).

In one particularly illuminating point in the conversation, Bezos recounts the precarious position of in 1997, upon the launch of (2 years after the Amazon’s founding):

We had 125 employees and $60 million a year in annual sales — $60 million with an “M.” And Barnes & Noble at that time had 30,000 employees and about $3 billion in sales. So they were giant; we were tiny. And we had limited resources, and the headlines were very negative about Amazon. The one that was most memorable was just: “Amazon. toast.”

Suddenly, the context changes, and the perception of sympathy for Barnes & Noble evaporates. The initial refusal, and subsequent late entry of Barnes & Noble into the e-commerce space is well documented, but it’s important not to understate just how sizable this advantage was, even two years after Amazon: Barnes & Noble had established relationships with all of the key publishers, authors, agents, and any other players in the publishing ecosystem, while Amazon had 125 employees.

I’m running the risk of mythologizing here, but I can only imagine the sense of imminent doom that must have loomed over the company. However, as iconically documented in Amazon’s 1997 annual letter to shareholders (and enshrined in every yearly missive since), Bezos sought to leverage Amazon’s technological know-how and vast inventory to continue to focus on the costumer, rather than focus on what they weren’t (a billion-dollar bookseller). He continues:

Look, you know, it’s OK to be afraid, but don’t be afraid of our competitors, because they’re never going to send us any money. Be afraid of our customers. And if we just stay focused on them, instead of obsessing over this big competitor that we just got, we’ll be fine.

Again, one could claim hindsight or survivor bias, but it’s all written there in the 1997 annual letter: Bezos was staring the behemoths of book retailing head-on by focusing on the book-loving customer. By “delighting” the consumer with a vast selection and incomparable prices, he developed a level of loyalty with the Amazon consumer that persists to date.

On the other hand, I don’t necessarily agree with Leonart’s assessment of the inevitability of Amazon’s continued and future dominance in the bookselling industry. While I am fully aware that Amazon has, and will continue to create significant disruption in the publishing ecosystem (too many to list entirely, but a shortlist includes: devaluing the medium through the Kindle Unlimited subscription service, radically shifting the sci-fi, fantasy, and romance genres through its Kindle Direct Publishing self-publishing platform, and allowing for “dumping” of titles via third-party sales), Amazon’s shift away from books presents an opportunity as well. Amazon’s continued global expansion, as well as its entrance into the supermarket, smart home, generic brands, content production, and music (and video) streaming markets (and I’m sure there are plenty others to come) creates an opportunity for the book-focused Barnes & Nobles and Waterstones (the UK B&N) of the world, as well as the upstarts to come.

While I believe that any successful bookstore must have a strong e-commerce platform to compete with Amazon, the future bookseller (B&N or others) shouldn’t necessarily emphasize pricing and logistics as their primary value propositions, just like Amazon didn’t cite their knowledgeable staff, author events, or shopping experience when it was faced with Barnes & Noble’s entrance into the online space. Rather, the future bookseller should taking a page out of Amazon’s initial playbook: not focusing on the existing competition, but on the “delighting” the customer.

In short, the issue of discoverability still persists. Per a Nielsen’s Books and the Consumer survey cited in the Ender’s Analysis’ incredibly useful study of the precarious position of publishers in the new publishing environment, entitled Value in volumes: Books, midlists and retail, half of the books consumers purchased in a bookstore were discovered during their visit to the bookstore. In contrast, online consumers cite just a quarter of their purchases discovered online – half of the effectiveness of the bookstore! The issue of discoverability online remains an issue across all art and media, but I’d argue that it’s been least solved in the book industry. In contrast, Spotify has made inroads in music discovery by using a combination of algorithms and tastemakers to broaden the individual consumer’s access to a diverse selection of music, and Netflix, which once offered a $1 million prize to improve its recommendation / discoverability engine, seemingly no longer cares about any content that isn’t its own (though it may use some combination of manatees / algorithms to conceive of their new shows.)

Despite millions of dollars annually committed to research and development and online “customer experience,” for a variety of reasons, including its prioritization of its own publishing imprints and more profitable self-published authors, Amazon has yet to replicate the experience of browsing a bookstore online. For this reason, as well as their attempts to try and more efficiently reach its consumers, Amazon has begun aggressively opening its own bookstores, seeking to replicate the discoverability experience of a well-curated bookstore through a combination of top-rated titles and new releases, with ample space for Amazon-branded products as well. However, as recently shown by the DC-based Washingtonian Magazine, while Amazon sought to mirror the offerings of its competitor bookstores in its new DC location, its algorithm-generated selection of titles of interest still paled in comparison to local stalwart Politics & Prose.

The future bookseller should overemphasize its singular mission of connecting its customers to books that will “delight” them above all else. The future bookseller can drive discoverability even further by devoting even more shelf space to curated picks, and leveraging the recommendations of the booksellers, celebrities/authors, and local, loyal customers. And even more ambitious, as Amazon continues to expand its purview and global reach, there remains an even greater opportunity (albeit a challenging one) to recreate the bookstore experience online by putting books front-and-center (including their jackets, accompanying videos/interviews, etc.), harnessing online communities of book / author enthusiasts, and driving the customer towards new releases, timeless classics, and obscure titles that would be of personal interest to the customer.

To answer the question posed at the top of this blog post, the question, in my mind, is whether Barnes & Noble is too foregone (or unwilling) to save themselves, and whether there are other players, either incumbent retailers, start-ups, or the publishers themselves, who would be willing to compete Amazon’s prices at this stage. Based on B&N’s recent track record, I think there is reason for skepticism. With regards to another possible entrant, I believe that there are scores of individuals passionate about the future of books, and hope to continue to see new, innovative ways carrying out of one of history’s oldest trades.

Note: I wrote this article in my personal capacity as a book lover and consumer. The views expressed are my own and do not necessarily represent the views of my current or former employer(s).

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