A Bleak Holiday Season for Barnes & Noble

The 2015 Christmas season turned out to be a challenging time for many retailers in the U.S.  Online sales continued to grow, while brick-and-mortar sales were disappointing for many operators.  One retailer under particular stress this year is Barnes & Noble.  The pressures facing them are well documented – the ongoing, relentless impact from Amazon, the decline in CD and DVD/Blu-ray sales, and the (somewhat surprising) resurgence of the independent bookstore as a competitor. Each of these is described further below:

Amazon – e-commerce has proven to be a very receptive environment for book sales.  While books are currently a small proportion of Amazon’s overall business (well under 10%), they are in many ways the face of Amazon.  The primary drawbacks of online bookstore sales are the lack of immediate gratification (albeit next-day delivery works for many people), and the inability to browse. Barnes & Noble has their own e-commerce site, but it is an also-ran compared with Amazon.  They have a challenging dilemma with in-store inventory as well – cutting back on inventory reduces carrying costs, but also increases the likelihood that a book customer will decide to abandon brick-and-mortar stores entirely.

Non-Book Sales – CDs and DVDs have traditionally been the largest merchandise categories for Barnes & Noble after books.  However, both of these categories have been hard hit in their own right: CDs by iTunes and other digital purveyors, and DVDs by Netflix and others.  As such, Barnes & Noble has scrambled to find suitable alternatives.  While shopping at Barnes & Noble the week before Christmas, I was stunned to see drones being marketed at the front desk.  Drones?  What do drones have to do with books?

Independent Bookstores – the number of independent bookstores has increased over the past five years (a 27% increase from 2009 – 2014).  This by no means suggests that book retailing will soon emulate local craft beers as the strongest growing segment of the market – much of the demand for independent bookstores has arisen from the demise of Borders and the fact that Barnes & Noble has closed many stores.  However, the ability of independent bookstores to cater to reader’s needs and desires while providing a more personal touch not available in large chain operations has also contributed to their growth.  Independents are often symbiotic with one another – in our hometown of Ann Arbor, the most recent independent bookstore to locate downtown (Literati) works to encourage their brethren by de-emphasizing mysteries (carried by Aunt Agatha’s) and graphic novels (carried by Vault of Midnight).