Quite frankly, Jane’s post made me sad. The latest chairman, James Daunt, is credited with saving UK’s famous bookstore, Waterstons. However, all you got to do is read the following quotes to understand that he really doesn’t get B&N – or books.
Early on, when Daunt was asked what he thought of Barnes & Noble on his last store visit, he said, “There were too many books,” by which he meant that featuring the right inventory is more important that stocking a big blur of titles. Back in 2015, he commented to Slate, “My faculties just shut down when I go in there.”
So… the big problem with a bookstore is that it has too many books.
And this gem:
Daunt loves the physical book, but he wants to give customers a digital option to get them into reading as an entry to physical books.
An entry. To physical books. Like, kids use digital books but us, highbrow grownups, know better. “Thank you, Amazon, B&N will stick to our guns and our lovely paper. No need for this new fandangled way of doing things.”
It’s all about the ROI
While Jane’s post almost made me despair, it was The Passive Guy’s commentary that I found most interesting. As he points out, in retrospect, Len Riggio picked a pretty good time to sell his controlling interest in Barnes & Noble. The bookstore chain is now owned by Elliot Management. Elliot says the following about itself:
There are a number of elements of the firm’s investment and risk-management activities that Elliott believes are essential to its goal of generating a consistent return to its investors. These elements include an opportunistic trading approach, the creation – not just the identification – of value, effective liquidity management, and managing operational and counterparty risk. The firm employs a value-added global investment approach.
What does Elliot think about its investment in Barnes & Noble based upon that statement?
The Passive Guy shared several possibilities:
- Elliot’s other investments and businesses may have been so badly damaged by the economic effects of widespread pandemic shutdowns that it has much more urgent issues to deal with than paying attention to or spending any money on Barnes & Noble. One possibility that comes to mind is that Elliot may have to sell itself to another company. Or divest itself of some of its major assets.
- Elliot may apply the greater fool theory and search for someone who will buy Barnes & Noble.
- Elliot may give James Daunt some time to see if Daunt has any book magic left that might work to bring Barnes & Noble back from the dead. Based on Daunt’s comments, that doesn’t look very likely to me.
- Elliot may require a huge cutback in the number of stores Barnes & Noble operates, keeping only stores in the most wealthy and book-loving locations and dumping the rest. Choosing this alternative might involve taking Barnes & Noble through a Chapter 11 bankruptcy proceeding.
What about the employees?
The Passive Guy then moved on to what may be an even more important question – what’s happened to the Barnes & Noble employees that were staffing the stores prior to the shutdown?
- How many experienced bookstore managers have retooled themselves or otherwise obtained other jobs? Other than an unknown number of managers who have been sitting around waiting for Barnes & Noble to reopen, how many managers will decide they like their new jobs more or feel more secure in their new jobs than their old jobs managing a Barnes & Noble store? Will those managers willing and able to return to Barnes & Noble be the best of Barnes & Noble’s managers, the worst, or something in-between?
- Most of the peons working at Barnes & Noble stores prior to shutdown have probably found something else to do, maybe something that pays more than they earned at Barnes & Noble. At a minimum, the managers of reopened Barnes & Noble stores will have a big job hiring and training a bunch of newbie employees to avoid driving away early customers who venture into the reopened stores.
And the customers?
And here is the final round. These crucial questions relate to Barnes & Noble customers:
Presumably, many regular purchasers of books who used to patronize Barnes & Noble and other physical book stores and who have not been subject to personal financial stress have continued to buy books.
Where have they purchased those books? Quite likely from Amazon.
Some percentage of those book buyers have likely become familiar with how to find books on Amazon and have enjoyed being able to order any book they like and having it delivered to them in one or two days. There may even be a small bit of satisfaction that arises from not having to pay the full retail price as they would if they had gone to a bookstore.
In its typical Amazonian fashion, the Big A has closely watched which books these new customers have purchased and started suggesting other books they might like. Perhaps the new Amazon customers have found some enjoyable new authors and their books via Amazon’s suggestions, including talented indie authors. Maybe Amazon’s suggestions have proven to be better than those they received when they asked a question of a clerk at Barnes & Noble.
One of Amazon’s largest competitive advantages over its online competitors is the extraordinary variety of ways that it helps its customers discover products they might like. There are lots of tools like Also Boughts and sub-sub-categories of books that let fans of Cowboy Science Fiction Romances find more of their favorite reads. Some book purchasers who have taken a deeper than normal dive into Amazon’s book section will become hooked. Amazon’s magic works for fishing lures, cooking utensils, and leaf blowers. It also works for books.
Jane’s post is titled, “Everyone wants Barnes & Noble to survive.” Based on what I read today, I’m worried.