Barnes and Noble Bookstore Chain Put In Play

suraj.sun sends in word that the country's largest bookstore chain, Barnes and Noble, will put itself up for sale. "The news surprised analysts and alarmed publishers, who have watched as the book business has increasingly shifted to online retailers and e-book sales, leaving both chains and independent sellers struggling. ... For years, Barnes & Noble has been battered by large shifts in the publishing industry and the retail environment. Book sales have moved toward big-box stores like Costco, Wal-Mart and Target, and away from mall-based stores like B. Dalton, which Barnes & Noble acquired in the late 1980s. 'There's been a long series of pressures,' said David Schick, managing director at Stifel Nicolaus in Baltimore. 'The market has not been kind to bookstores, and it's for new reasons like competition with Apple and Amazon, and it's for old reasons, like what we believe has been a decline in reading for the last 20 years. Americans have devoted less of what we call media time to books.'"

Comments

A sad day

[lostros]

I know that i will certainly miss the ability to wander through a bookstore and pick up authors or titles I might not have otherwise. I love brick and mortor stores and I for one am not ready to see them go.

Maybe if they charged sane prices

[antifoidulus]

Last time I went into a B&N store I was looking for something to read on an intercontiental flight, I found something but a quick check on amazon.com(not even bothering to look for anything that may even be cheaper) they had about a 50% markup and thats not even including the sales tax(shipping from Amazon was free). Now I understand having to pay a couple of bucks more for the convenience of walking out of the store with the book, but 50% is just insane. Their online store isn't much better, 95+% of the time they are considerably more expensive than amazon. They aren't dying solely because of factors outside of their control, they are dying because they feel entitled to margins that the more successful players in the industry have known to be unreasonable for a long while.

Re:Maybe if they charged sane prices

[gstoddart]

They aren't dying solely because of factors outside of their control, they are dying because they feel entitled to margins that the more successful players in the industry have known to be unreasonable for a long while.

Well, I think more accurately what happens is what you're describing is factors outside of their control.

I don't think they need those margins because they feel 'entitled' to them, so much as Amazon has been able to rely on its sheet size to work on smaller margins. B&N is now simply being squeezed out so badly, they they can't compete.

For them to sell at the same price as Amazon, they'd likely have to do it at an even greater loss -- which will squeeze them dry even faster.

Amazon has truly been able to exploit Economies of scale, and B&N has not. With fewer people buying books overall, and Amazon being able to sell a much larger volume at a lower price, B&N has been squeezed from both ends.

This isn't about entitlement.

Re:Maybe if they charged sane prices

[jimicus]

If Borders in the UK were anything to go by, "entitled to margins" isn't really the problem. There's every possibility the structure of the entire business is such that they essentially have to charge that much or they'll be making a whacking loss.

An example: Virtually every book these days has a barcode, right? The barcode identifies the book, you can either use an existing database or build your own as you acquire stock. You can then scan your stock as it comes in and again at the checkout as it sells. Very easy, barcode scanners are cheap and the software isn't hard to acquire.

Borders used their own specific barcode labels. Which means every book had to have a separate barcode label which they'd have to pay someone £X/hr to apply, which means they had to manage their own unique barcode database, allocate barcodes - essentially they had added a layer of technology to deal with stock management which was almost entirely unnecessary. That layer would have cost money to set up and operate - money that nobody else was spending.

That's an example of one - fairly obvious, because it's customer-facing - silly thing. IME, it's vanishingly unlikely it was the only silly thing they were doing.

Re:Maybe if they charged sane prices

[bertoelcon]

That would explain why the Half-Price Books around here are doing great. They are usually the same price as Amazon with a brick and mortar store.

Re:Maybe if they charged sane prices

[confused one]

Amazon works out of a series of large, fairly automated warehouses. This allows them to keep their costs low. B&N, in comparison, has to maintain large storefronts on expensive retail real-estate, staffed by a crew of sales people, managers and maintenance staff. Based on my experience, B&N tends to maintain their stores at a level above that of their competition. B&N's real costs are considerably higher than Amazon's. That markup you speak of is, in part, a reflection of that.

Re:Maybe if they charged sane prices

[cappp]

That’s because B&N are competing with the likes of Amazon and Costco who can exploit their strengths and easily outcompete. Amazon doesn’t pay sales tax in large portions of the US, maintains a smaller inventory, doesn’t pay for stores, has a tiny staff, and offers a huge range of goods through which to earn money. It doesn’t hurt that they’ve been supported by investors for the who were willing to see consistent annual losses with the hope of eventual stellar profits. Costco stocks a tiny portion of available titles, specifically those targeted at mass the mass audience, and sidesteps the problem of placing anything with questionable star-potential on its shelves.

A little digging suggests that a book selling at its list price will give the retailer approximately 45% profit.

Based on a list price of $27.95
$3.55 - Pre-production - This amount covers editors, graphic designers, and the like
$2.83 - Printing - Ink, glue, paper, etc
$2.00 - Marketing - Book tour, NYT Book Review ad, printing and shipping galleys to journalists
$2.80 - Wholesaler - The take of the middlemen who handle distribution for publishers
$4.19 - Author Royalties - A bestseller like Grisham will net about 15% in royalties, lesser known authors get less. Also the author will be paying a slice of this pie piece to his agent, publicist, etc.
This leaves $12.58, Money magazine calls this the profit margin for the retailer, however when was the last time you saw a bestselling novel sold at its cover price.

Assuming the previous is correct, your local Barnes and Noble has to stretch that money to cover all those incidental costs of running a physical, specialist store – rent, local taxes, utilities, sales taxes, staffing costs, benefits, insurance, stocking cost, inventory and so on. Their prices are a real kick in the pocketbook but I don’t think they’re exactly swimming in profits either. Indeed, a quick look at their wikinvest page reveals that

company-wide operating margin fell from 2.8% to 1.3% in FY2010

. My econ’ tends to be on the weak side, and correct me if I’m wrong, but that means they’re making a profit of approximately 1c on every dollar sold (couldn't find the figure for Amazon but it looks like Apple has an operating margin of 29.1% and Microsoft has 39%).

Re:Maybe if they charged sane prices

[khchung]

If Borders in the UK were anything to go by, "entitled to margins" isn't really the problem. There's every possibility the structure of the entire business is such that they essentially have to charge that much or they'll be making a whacking loss.

Borders used their own specific barcode labels. Which means every book had to have a separate barcode label which they'd have to pay someone £X/hr to apply, [...]

That's exactly what GP's "entitled to margins" means.

If you are a sane manager, unless you think you are "entitled" to huge margins, you would be changing your business practices so your costs stay within your margin (which should be in line with your competitors')

By keeping their business structured in the way to requires more margin that their competitors, and keeping the high margin on the prices, they are thinking they are "entitled" to such margins, and are in fact slowly killing the company.

Re:Maybe if they charged sane prices

[DrgnDancer]

You can find those places in the States too, but the key word in your post is "London". Could you find a nice cross section of adorable little specialist book shops in (*picks random little British town*) Kirkby on Bain? Or even (*picks random decent sized British town*) Hull, or York? You probably could find a subset of such things in say (*picks random fairly large city*) Birmingham or Manchester, but I doubt it's as good as London. It's the same here. New York is simply full of nice specialist book shops. I'm sure Washington, Chicago, Boston, or LA have a nice compliment as well. The small city I live in (in Alabama) has a few, with Nashville an hour and a half or so away with more. The little towns an hour of so outside of here have nothing. Books in those places are bought at Walmart, Amazon, or not at all.

The problem here is also one of scale. Nearly anyone in England is a day trip away from a fairly large city, and no more than a weekend trip from London. The US is simply much more spread out.

It's the price of books has became obscene...

[Lumpy]

Sorry but I stopped buying books at B&N for one reason... Obscene prices. sorry but $69.99 for a book on Python programming is robbery. When I can get the same book on Amazon.com for $29.95.

Or how about the photography books ranging from $49.99 to $129.99 for an Ansel Adams coffee table book... Exact same books on Amazon.com for less than 1/4 the price.

I'm sorry. But I buy almost nothing from them.... Except their clearance books, those are honest pricing. Everything else I buy elsewhere.

Saw this coming

[Cereal Box]

I remember seeing B&N devote a rather substantial amount of space to toys, games, etc. around a year or so ago, figured the writing was on the wall.

Re:We live in a multimedia word

[Anonymous Coward]

We have a PS3, an xbox 360 and a Wii, plus a PSP and an NDS. We have several hundred DVDs and blu-ray titles, plus on demand FiOS, several computers around the house and netflix. Our two kids spend more time in books than on all those combined. Don't blame the options available, blame the parents.

Re:We live in a multimedia word

[ClaraBow]

I wasn't distinguishing between physical and electronic books. It is the act of reading that is personal and intimate, irregardless of whether the text is printed on paper or delivered electronically.

Re:We live in a multimedia word

[DrSkwid]

If your parents read to you, more chance you'll grow up liking books & reading.

Leafing Through a Book

[rla3rd]

The one thing that I will surely miss is being able to leaf through a book before i decide to put down my hard earned cash for it.

This is one thing that keeps me coming back to B&N when purchasing a book. Yes, there are time when I leaf through a book in the store, only then to note the title and then buy it cheaper through Amazon. But there are also times that I will use Amazon's reviews to narrow down my choices, then head out to B&N to leaf through the books before making my final decision, then purchasing it there on the spot.

I end up doing the latter for more expensive books. I'd rather spend the extra money knowing that I'm going to like the book, then send my money to amazon to purchase a book that I may find horrendous.

Re:We live in a multimedia word

[Sycraft-fu]

Also getting them books they enjoy. Something I see far too much, particularly from schools, is this emphasis on "classics." They want kids to read "good" literature and thus try to cram stuff they don't like at them. This very much leads to a books = boring kind of mentality. Let kids read what they want to read, even if you don't consider it to have literary value. I'm not saying don't offer them classic books, but if they don't want them leave it alone.

For that matter, maybe what they are reading now will be classic some day. More than a couple of the "great" books we were made to read in school really weren't in my opinion. Wuthering Heights is basically a trash romance novel, it just happens to be an OLD trash romance novel and one that people latched on to as being "classic" for that reason.

Re:I still enjoy reading a good physcal book(store

[foobsr]

I've always sworn that I'd never become the old fart who's confused in the world of modern technology, ...

It is neither you nor 'modern technology', it is the majority which is confused, e.g. believing to be able to 'multitask' with the help of friendly gadgetry while at the same time unable to read (and comprehend) simple texts (see post above) or to add one-digit nuimbers (as mentioned in some other post yesterday).

CC.

Something that doesn't help

[Dunbal]

When I go to B&N it's full of people lounging in chairs/on the floor, reading books.

While I understand that initially B&N's browser-friendly policy made it very popular, there's a difference between reading 3-4 pages of a book to see if it is a worthwhile purchase, and reading it from cover to cover - which is what a lot of people are very obviously doing. This means that 1) the person won't purchase the book - why should they? and 2) I would be purchasing a "used" book. While being read doesn't fade the letters, there's a difference between new and used in terms of wrinkled pages, smudges, etc. If I'm paying for new, I want new.

Re:We live in a multimedia word

[Kpau]

Agreed. But you're watching the intellectual death spiral that is the result of two generations of parental fail in a large percentage of the population (at least in the US). Side note: its very interesting to sit in the kids section of Barnes&Noble and do a little anthropological observation. Watch which families head for the shitty books that squeak and squawk and are mostly pictures. Listen to kids far too old hate on "chapter books". Watch them simply screw with the displays and misbehave ... Now compare this versus the families that sit and read together quietly and put books back that they aren't going to buy. There's about an 80/20 split... hard to sell books to an Idiocracy. This percentage has substantively changed in the last 25 years or so. Yeah, there are pockets of goodness but it rather reminds me of a sociological version of entering a dark age.

Re:We live in a multimedia word

[19thNervousBreakdown]

Oh I don't think we'll condition people preferring the first thing they try out of our nature any time soon.

Re:We live in a multimedia word

[Sockatume]

Expecting someone to learn to love reading by starting at the classics, is like expecting someone to learn to love mathematics by starting at the Riemann zeta hypothesis.

Re:Let me tell you...

[Psmylie]

They don't even have to give e-book copies away for free. Allow me to purchase both the physical book and the e-book for, say, an additional $1 or $2 over the physical book's cover price, and I will be happy as a clam. Not only would I buy a Nook (which I don't have now) but I would also do all of my shopping at B&N rather than at Amazon, even doing in-store orders rather than ordering online for items not currently in stock. Non-B&N brick-and-mortar stores could ally up together to offer downloads for a similar pricing structure for books purchased in stores. Heck, the publishing industry in general should get behind it. It makes sense. Why in the world would I buy an e-book for very nearly the same cost as a hard copy, without some kind of added perk?

Re:We live in a multimedia word

[IICV]

Wuthering Heights is basically a trash romance novel, it just happens to be an OLD trash romance novel and one that people latched on to as being "classic" for that reason.

Yeah, that's the problem a lot of classics have - Wuthering Heights was the first trash romance novel, and it defined the genre that we now think of as "trash romance novels".

I'm not saying you should force kids to read things they don't want to - hell, I didn't start reading novels until I found the Belgariad in middle school, and that thing was David Edding's attempt at making an entertaining story that followed every single fantasy trope to the letter - but I'm just pointing out that a lot of the reason why we think some classics are so cliche is because they invented those cliches.

Re:Let me tell you...

[PeeAitchPee]

Reality check to them: you're never going to get by selling the same thing everybody else does for double the price because it's in a trendy setting.

Starbucks might disagree with you.

Re:Let me tell you...

[HappyEngineer]

All those hard to find books are easy to find online at amazon.com and odds are good that they will be available used for a very low price plus shipping.

Offline stores are good for only one thing: paging through a book before you buy.