Why Barnes & Noble Is Not in the Book Selling Business

Second post in the ‘Is Nook a Kindle Killer?’ series by Mikal Lewis.

At the conclusion of the last post on Barnes & Noble’s strategy I wrote:

What I would do if I was Barnes and Noble:

1. Discover what business you’re in. You’re not in the book selling business. You decided that long ago when you let Amazon run away with online book retailing. . .

While this follow on has been delayed- lets resume there.

Step 1

Barnes & Noble must discover the business they are in- they stopped being in the book selling business when they ‘let’ Amazon run away with online book retailing. Much as Yahoo has discovered they are not in the search business after Google similarly ran off with the search market- Barnes & Noble must come to grips that their business is not about selling books.

And of course its easy for me to say they let Amazon run off with the online book selling business but- if they didn’t let Amazon, who did? There is plenty of room for innovation in online book retailing (not just eBooks either)- but Barnes & Noble is still behaving ambivalently. For example compare the two homepages for books:

Amazon vs. Barnes & Noble (go ahead click through)

Notice something? One company behaves as if price matters, the other doesn’t (opting instead to showcase ambiguous numbers like 50% off – yeah, but you were 60% more expensive).

People buy online because of price. Don’t believe me- JPMorgan “Internet Team 2007 Consumer Survey” cited the number one reason people buy books online is price (86%+ of respondents across income ranges)- with selection being reason number two (73% of respondents) and it drops off starkly from there. Lets face it with gimmicky members clubs, buy this discount card to save more money on books, and with the limited selection of the store, we don’t have it but if you drive to this other store might have it, just wait 5 minutes here while I call them and have them locate it on the shelf if they can find it, Barnes & Noble gave away this market.

If Barnes & Noble were in the bookselling business they’d have bet the house in order to increase relevancy in the digital era “If we don’t have it in stock at our store- we’ll ship it to you for free”, pushed the envelope for giving Barnes & Noble customers a digital inventory of books they’ve purchased- commit advertising to its brand and highlighting the ‘essence’ of what Barnes & Noble’s stands for, I posit Barnes & Noble : Books :: Hallmark : Greeting Cards. I go to Barnes’ & Noble all the time but I can’t say what their brand is about vs. say a Borders- bigger stores? More sitting room?

Barnes & Noble’s true Business

In Pour Your Heart Into It, Howard Schultz defines Starbucks’ value as a 3rd place. It’s not home, it’s not work but it’s this third place where you can see people, meet and interact. With a lot of societal shifts that have occurred- Starbucks came along just as a time when our culture demanded a third place, to feel connected, the most. Starbucks grew based on the value and the promise of its brand as a third place, they monetized this through selling premium coffee. Of course I’m trivializing the value of the coffee intentionally, only to focus on the importance the social aspect of this accessible, and inviting third place was that filled a void- the local pub may have for blue collar males in a different era.

Barnes & Noble should take heed. Their business is not selling books, their business is selling knowledge, and experiences. To simplify today they sell knowledge & experiences through two means: selling knowledge- non-fiction books; selling experiences: fiction books.

Selling Knowledge

Selling knowledge doesn’t have to be in the form of books, in fact Barnes & Noble has an asset Amazon cannot match at least not in the next five years- the physical presence of their stores. If Barnes & Noble were to realize the value of their ‘selling knowledge’ – they would, for example, utilize sections of their floor space for ‘learning centers’.

Imagine for a moment. Today if you want to continue education or learn in a new field you enroll in university, a community college, or . . . buy a book. There has to be an opportunity to ‘right size’ lessons in the way the information is scaled down to fit into self directed texts. If I want to learn to cook, why simply sell me a recipe book, when you can sell me a recipe book + Wednesday Night at 6pm class? There has to be lots of categories ([Category Name] for dummies, anyone?) that are waiting to be explored. And as any great chef rotates their menu, Barnes & Noble in the area could rotate their course and classes to cover most subjects at a price point and a distribution point that would be otherwise unmatched.

If Rosetta Stone can charge $600 for learning a new language- how much would one pay for a lifetime classes on speaking a language?

Selling Experiences

I personally think this area is a bit more tricky- but in short the books people know and love, in many respects could be translated into other forms of experiences. Why wouldn’t Barnes & Noble be the brand to help book authors translate their experiences into games, sound tracks (what music might be on the lead character’s playlist?), documentaries, or movies. Perhaps Barnes & Noble could custom generate the accompanying manual for the books they sell- is it a period Novel on life in Rome? Why not sell the accompanying guide on life in Rome during that era to help augment the book- with images of areas described within the novel etc.

With a little programming magic- accompanying guides and info books for most of the major best sellers could probably be generated on demand extracting information and excerpts from books Barnes & Noble already sells.

And Step 2

Get out of the eReader hardware business, even if you win and build a profitable business- you lose, are you really expecting to over take Amazon as a digital brand? How long do you think eBook Reader margins will hold? My bet is they mimic the PDA with everyone selling an eBook reader at relatively low margins within three years. Barnes & Noble should figure out how to sell white label solutions and infrastructure to the companies that want to pursue this model- to challenge Amazon. And keep in mind, Amazon is fighting on multiple fronts- they have decoupled selling eBooks from the selling eReaders; which means Amazon may be fighting to get their bookstore on potential partner devices as well.

Step 3

Good luck!

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In many respects as industry shifts and competitive environments change- it is on us to to focus on the value we deliver to our customers. Doing so and framing our marketplace accordingly will often open the door to unique opportunities in open competitive space. Of course after we identify these opportunities the fear of being pioneers often paralyze us into inaction. But that’s for another post, perhaps best covered by innovation strategist, Qworky cofounder and friend Jon Pincus.