March 24, 2013

Barnes and Noble: #Omnichannel Struggles

Have you had a chance to read through the most recent 10-Q for Barnes & Noble?  Click here to take a peek.

Barnes and Noble continue to generate a loss - and according to the profit and loss statement, the loss is in the Nook division.

We hear an awful lot about omnichannel, especially from the retail side of the spectrum.  We're told that we have to do the following (at minimum):
  • Align inventory across channels.
  • Align creative strategy across channels.
  • Same promotions in all channels.
  • Price parity, where reasonable, across all channels.
  • Be everywhere your customer is by participating in an explosion of channels.
If businesses do this, then omnichannel experts suggest that profit should be robust - because the business is meeting the needs of the customer.

Does Barnes and Noble meet the needs of the omnichannel customer?  Absolutely!
  • Inventory available via Nook (digital), e-commerce, or in-store.  How do you beat that?
  • Digital device (Nook), or available on iOS and Android devices via an app.  How do you beat that?
  • Similar book-based merchandise assortment to the competition (Amazon).
And yet, Barnes and Noble struggles to generate a profit.  The Nook division appears to be losing hundreds of millions of dollars, and it appears that sales of the Nook device are in decline ... content was +6.8% last quarter.

If omnichannel strategies are so critical to success, then wouldn't Barnes and Noble, with retail, e-commerce, and digital (Nook) have an enormous advantage over Amazon, which doesn't have the bricks 'n mortar advantage?

You can't blame the failure on merchandise (same merchandise as Amazon).

Why does an omnichannel strategy, one that should guarantee success for Barnes and Noble, lead to the opposite outcome?

Discuss.  And discuss what this truly means for the validity of omnichannel strategies.


  1. Hey Kevin,

    I love reading about these cases and am interested to hear your thoughts about pure-play online vs. "omni-channel" clothing retailers. I feel with books it's a different reason behind having a physical store than with clothes/shoes, hence why so many online-only shoe retailers offer free shipping+free returns.

    Also, what about the "everything in one" physical and online stores like Target and WalMart? I would love to hear what you think about those types of models as well.


  2. One more thought! What about the combination many book brick & mortar retailers like Barnes and Noble are doing with food/coffee? Has this allowed them to stay around longer?

    I think about the one that's near my parents' house that we always visit to sit, have coffee, read books (but not buy them). It was always very crowded with people staying for hours at a time. Is there any merit to this type of strategy?


  3. Amazon isn't purely omnichannel, but their revenues will almost certainly go down if B&N, or Best Buy, or any other physical retailers vanish.

    I wouldn't have bought a Kindle if I hadn't been able to "showroom" it in Best Buy. That's one example, but the huge expansion of price matching options in places like Best Buy, Lowes, etc, tells the tale of people looking at a product in real life, then going home, or pulling out a phone to order online.

    Amazon doesn't own an offline channel, that's true. But they're more than happy to let others pay that overhead, and get buyers excited about products that they can sell more cheaply online.

    If the "showrooms" go away, then so will much of the confidence (and a big chunk of marketing budget) that ultimately powers a lot of Amazon purchases. In that case, Amazon will have to find some solution, be it more investment in their online product demos, or an easier-to-use return policy--something that will restore some of that buyer confidence.

  4. Kelly - Clothing: There are cases where the in-store experience is fundamentally better than online, giving the retailer a considerable advantage of pure play apparel brands. Amazon has worked terribly hard to make apparel work, and does not have the kind of success it has in other product lines.

    I worked at Nordstrom for six years. Their stores have a unique feel, coupled with much-better-than-average customer service. Oh, and their employees earn 7% commissions ... sell $200 of merchandise, and you get $14. See, that kind of business model, coupled with fashion, causes the customer to purchase, it gives retail a reason for existing.

    I worked at Eddie Bauer for five years. We had a department in the stores that was called "Sport Shop", all mens outdoor merchandise. It did about $150 per square foot, about half of the performance of womens merchandise. We killed it. And then a funny thing happened. Womens merchandise performed 15% worse. It was a disaster!

    See, the mens "Sport Shop" caused husband and wife to enter the store. The guy stood in the Sport Shop and gazed at fly fishing equipment while the woman purchased $100 of apparel. When we took Sport Shop away, the couple didn't go in the store.

    When the retail experience is calibrated properly, it has huge advantages over e-commerce. If we work terribly hard at aligning channels, we can sometimes mess up this unique balance that makes retail work.

    Your example of coffee can work, if it is designed in the same way that Sport Shop was designed at Eddie Bauer.

    Brandon - You mention that Amazon revenue will go down if Barnes & Noble vanishes ... recall that a few years ago, Borders went out of business ... that sucked a quarter of the retail book business out of the ecosystem, and Amazon thrived.

    Showrooming is real, of course. But retailing is more complicated than showrooming. If showrooming were so prevalent, then Best Buy would be experiencing -25% comp store sales declines, not -2% or -3%.


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