Rocket Bomber - article - bookselling - "How can Barnes & Noble compete in 2014 and beyond?"

If B&N will not compete on price (or cannot) what can it compete on? A true luxury brand relies on exclusivity, rarity and the Veblen effect. The Veblen effect says that a reduced price reduces the status of the product. (There is some Veblen effect occurring for readers at the 99¢ price point). A purveyor of mass marketed goods can almost by definition not be a luxury brand.

In the Best Buy article, the new CEO says that they are trying to eliminate price as an obstacle for purchasing. This weekend at Barnes & Noble, the lines were enormous. People love buying books for other people but I also was with someone who wanted to buy a particular book for a friend and it wasn’t in stock. The exact conversation went like this.

BN: We can order it for you.

Person: It’s $16 here and $12 on Amazon. Why don’t I just order it myself?

The aforementioned conversation is what Best Buy wants to avoid. A brick and mortar retail store that can’t compete on price or selection has to offer something else. What else can Barnes & Noble offer? Better service?

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These are two very different types of transactions: the “item in store, let me buy this” experience, and the “I have a *very* specific item I need” expectation.

The reality for bookstores, poor things, is that customers conflate these two all the time.

Customers don’t even realize what they are asking. Even some booksellers don’t recognize the difference anymore.

How can Barnes & Noble compete in 2014, and beyond?

Let’s ask the one guy who had answers:

1 July 2012

I can’t compete with Amazon on price, so the primary advantage of the physical storefront is convenience: a book, in-stock, down the street and available for pickup today. That’s why I say the bookstore (even the big box bookstore) is too small. 100,000 titles doesn’t even begin to scratch the surface, and for a customer base now accustomed to finding books on the internet, my 100,000 books might as well be 10,000. Every hour of every working day, we get a call from a customer asking for a book [a particular book, as this title was specifically blogged about or came up as the #1 result in a keyword search] that there is no way in hell I’d bother to stock. [*]

The customer who calls with an exact title, or ISBN, doesn’t need a bookstore; she could care less about the coffee or the comfy chair, all she wants is the damn book and a bare minimum of time spent in the car or in the store in the process of buying it. Today.

I think what this customer wants is a book distributor, a warehouse with a sales counter. The ‘big box’ was just a reasonable substitute so long as the economics worked out: A reasonably-large mini-distributor that could be easily duplicated in many communities — good enough for the 1990s, self-supporting at 1990s levels of consumer demand for books, and nice places to hang out in besides.

Obviously the landscape for book retail has changed, but despite what you hear from tech bloggers & clueless financial analysts the market for print books is *not* shrinking — it’s growing from a small core of bestsellers, genre fiction, & general interest titles into the long tail of millions of books published (a number growing each year, and accelerating in growth).

The mistake that many make is to call the Long Tail an internet phenomenon. The internet is a discovery tool, but the Long Tail is a change in customer Demand. Come, work the phones at my bookstore for a week: you can learn this first hand. My inability to meet this demand is because my bookstore-cum-distribution-center is too small, not because customer demand can ‘only’ be met by internet retail.

The very first question a customer asks when I say I don’t have a book is, “Well, does one of your other stores have it?” (You might even have asked this question of a bookseller yourself.) This tells me two things: first that the convenience of a book, available today, *now*, is more important than how far away the bookstore is — and second, that the unnecessary duplication of bookstores in every neighborhood is a burden on bookstore chains, not a desirable outcome.

A single, truly epic bookstore that stocked even more books would be able to serve a city-sized community better (and be a better investment) than 15 stores spread across a metroplex, each stocking more-or-less the same 50,000 books plus a truly random and pathetic sampling of everything else.

2 July 2012

Don’t just rethink the box, rethink the chain. Instead of opening up a smaller, pale imitation of a New York 5th Avenue bookstore everywhere, open up just 50-80 landmark bookstores. That might mean just one each for many cities – or one in a nearby city for some. Why dilute your single best selling point: stacks packed from one end to the other and to the ceilings, chock full of books. Double down on that bet – forget the ‘standard big box retail’ model and think big.

Sure, right now I can special order books for customers from the warehouse. Takes about a week, down here where I’m currently located. (I’m sure it’s better up at corporate HQ, since they built the damn warehouse in the state next door — fine for you, sucks for 200 million of your potential customers.)

Let me turn it around though: If all the books are in the warehouse, why not throw in a coffee shop right there inside the distribution center and open it to the public?

I would aver that the bookstore chain is too big, too spread out, and also played out: our customers don’t care enough anymore to support neighborhood bookstores at that scale. We need to open a truly humongous bookstore. Much like amusement parks (Six Flags, Sea World, Disney, et al.) maybe each US Census MSA would only support one – or rarely two or three. While we all love a neighborhood bookstore [& there is a place for such; I personally could generate business plans for bookstores on a sliding scale from bistro to Strand] the real need of most communities is for a single Landmark bookstore like the Tattered Cover in Denver or Powell’s in Portland — or yes, the Strand in New York.

I’m looking beyond books, however.

The future of retail depends on managing inventory, especially in the face of internet competition. Let’s consider a new model, a truly humongous bookstore that doubles as a distribution center: with a little advance planning you could open up a very small chain that covers hundreds of millions.

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Not everyone would be willing to drive to a bookstore just to pick up a book — even if that bookstore was 4 acres of bookshelves under a single roof (about the size of a large IKEA, for scale). But if you could pick up a phone and call [or use a website] and know the book you need is there, that might change your mind. If you could know they had 20 copies of the book, and you needed 20 copies for your employees or clients, you’d be sending some lackey driving the 2 hours before he could sit down at his desk in the morning.

If this huge bookstore had not just a coffee bar, but also a pub, sit-down restaurant, hot dog cart, and ice cream shop — you’d plan your weekend around a trip.

There would be other ways to maximize the investment and key into “bookstore tourists” — topics I hope to cover in other posts. My point here was to build on yesterday’s column and show that there is a future for bookstores past the Big Box chain model. Additionally, if you chose to compete with Amazon on the internet, your massive bookstores are also fulfillment centers.

You don’t have to compete nationwide. Pick a market, serve that market. A single store in the right place can be the best bookstore for 30 Million customers — in person or with guaranteed 1-day delivery (at UPS ground rates, or via the post). A small chain of just 3 stores could easily serve 50 Million.

The 10 stores outlined above are within a 1-day delivery zone for 220 Million people, and within 2 days of another 70 Million customers. Looking at the map, a nice store in Denver would certainly plug in most of the rest to your network.

So, you want a nationwide brand that makes the most of internet searchability, access to customers, and that also features truly amazing bookstores that have the potential to be not just storefronts, but destinations?

Do we need a chain of 500 stores or do we just need 50? Or do we just need 10?

25 August 2012

Stick with me for a bit longer: IF the bookstore is a social space AND our sales depend, at least in part, on foot traffic in stores AND we have to put up with all you people anyway: why not go with it? Make the bookstore a destination — not an errand but a day-trip. Capitalize on what people are already doing, increase our site traffic, make a major impression on public consciousness — and then innovate to make the most of each customer, and each customer visit.

Sure, we currently run a café (can’t sell books without coffee these days) but the cafe shouldn’t be just a sideline — or more accurately, it won’t be the only sideline. Our coffee shop would stand to one side of the main seating area, now a spacious lobby: a nirvana of tables with outlets built into each column, a brace of comfy chairs on the inside wall, a row of patio tables just inside (and perhaps also just outside) the sunny windows, with a semi-detached space that just might be configured for an impromptu class or book group — and a separate 2nd floor lounge that would be even better for both. Set up the social space first, and put it in the center of your retail empire.

Immediately adjacent to the central seating [I could call it a ‘food court’ — ‘cause that’s what it is — but I hope the customers don’t dismiss it as such] in addition to the de rigueur coffee shop, we’d have a quick lunch counter, or maybe 2-3 concessionaires: Subway? Bagels? Ice cream? Starbucks or Dunkin’, even, instead of in-house coffee? (If I win the lottery, I’m setting aside a couple million to entice Tim Horton.) I’m proposing a monstrous bookstore with daily traffic that is going to exceed all-but-December-retail numbers, and our December is going to be absolutely nuts. As a landlord, I could make a nice chunk on rent.

Just off the central seating area, we’d have a full service restaurant & a first rate pub. These also directly support our ‘social space’ nexus: come in for a quick nosh and check your email while you wait for friends to get off of work, and then transition to the bar or to a table for dinner. Once again, we could run these ourselves or rent out the space; either works, and depends on how you want to collect your profits: guaranteed rent, or less reliable profits-from-food-service operations.

— I’ll understand if you’re not really comfortable with either. It’s a rare bookseller who has experience in facilities management AND hospitality & bar operations. Why, I think there may only be one person with this particular skill set. [*smirk*]

Keeping with the ‘mall food court’ model: once we’re past scone-throwing-distance from the coffee shop and our central seating area, well, that’s where the rest of our retail operation goes.

In this case, the rest of the retail operation is a big effing bookstore.

Now, let’s just assume for a moment that the commercial real estate market is so depressed that not only are a number of shopping malls all-but-closed, they’re even available for purchase — with no current tenants, falling into disrepair as we speak, and ripe for radical remodeling.

[I know: so unlikely, if it weren’t actually true. Once in a lifetime opportunity here]

We could buy a small regional mall — special bonus: the older and smaller malls are all closer to city centers, not further out in the suburbs — close down half of it to use as our warehouse/book distributor space, and reallocate the rest, building out from the food court, to sell books.

The wonderful thing (from the booksellers’ point of view) is that we could set up a window where 50% of our customers could just walk up and ask for, oh I don’t know, Organic Ostrich Farming, and then we go back into the stacks, find it, and hand it to them. We’ll set up this special order window with its own [small] seating space and register

…

Past this order window, we’d have the sales floor. Yes, I’m advocating that we separate “the stacks” from “the sales floor” — as 50% of our paying customers and 98% of the rest are either browsing bestsellers, browsing a specific genre [& we can accommodate that], or just hanging out for the free wifi and reading magazines. There is no need to make every shelf in every category available to the public. If the customers who already know the title and will buy it (if we have it in stock) can just walk up to the register closest to the main entrance and do so — that is a win-win-win. This call-ahead and pick-up may in fact be more than 50% of our business. We can stock as many titles as we can get our hands on, put them ‘in the back’ where they are immediately ready for sale, even if they aren’t necessarily ‘on the shelf’. We can take that part of the business and really streamline it.

What about the folks who don’t or won’t buy books? Well, we’ve already set aside quite a bit of dedicated space for social butterflies & campers — and this space will pay for itself with food service, I think.

And what about the grazers & browsers — who love to linger over tables & displays, and want to see what’s new – the readers, the book lovers — The other half of my book-buying customer base?

That’s the whole point of the bookstore. And now we look at how to really run a bookstore:

If I were in fact repurposing a shopping mall, then one “storefront” would be a newsstand with newspapers & magazines. Another might be a newsstand with comics. One storefront could easily be turned over to just the New York Times bestsellers & other mass market paperbacks — the direct equivalent of an airport bookstore. These could easily be the closest “stores” to our central-seating-area-slash-lobby-slash-food-court and there’s little thought or bookselling expertise required here, past keeping shelves full. We’re just meeting demand.

Just past the obvious though: If I can hire someone who loves romance novels, why not give her 3000sq.ft. and full reign to order in titles, stock shelves, merchandise tables, and above all sell books. We can keep the overstock in our warehouse [adjacent, on site] and face out a full “bookstore’s” worth of genre titles.

And do the same for mystery

And the same for sci-fi

And the same for history

And the same for biography [say, does A&E want to do a co-branded bookstore, with DVDs?]

And the same for design, or architecture, or gardening(from May-Sept), or cookbooks, or travel, or all of the above and more…

And most specifically, for kids: in the less-and-less-hypothetical case where I was taking over a shopping mall, put the kids shop [picture books, beginning reader, plush, games, et al.] in the last remaining ‘anchor’ location and put both Young Reader [10-12] and Teen Lit [12-16] in the two locations just outside – close enough that kids can wander away from parents but far enough so neither set has to shop the ‘kids’ dept. [*ack*, gag me]

[And even if it’s also in the teen section, there’s a chunk of ‘YA’ & ‘Teen’ lit that needs to be mixed in with the adult stuff – easy to hand, no judgements, cash at the register, thank you]

While I’ve used the shopping mall as my touchstone [as that is what I, as a child of the 80s, am familiar with] [and damn but the commercial real estate market is depressed: I’ve run numbers. I think I could actually buy a mall] this Concept would work even better with repurposed industrial or office space. I can only imagine what DC’s Old Post Office or an art space like Le Lieu Unique (in Nantes, France) would look like if they were turned over to books.

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The future of retail depends on managing inventory, especially in the face of internet competition. Still, it is easy to open a huge bookstore that doubles as a distribution center; in fact, with a little advance planning you could open up a very small chain that covers hundreds of millions. […which I’ve already posted]

There are are at least two ways to flatten verticals in retail: Amazon figured out one – sell direct from a warehouse & ship it. You cut out two layers—distributors & retailers—and make it possible to sell direct to customers from a massive inventory.

IKEA has figured out a second path: sell direct from your warehouse to visiting customers. This also cuts out two layers — a distributor/warehouse (as the store is your warehouse) and shipping via post or parcel service. Amazon’s model is not the only way to lower costs. From point of manufacture to customer fulfillment: physical retail space is not the only or even obvious thing to cut.

At IKEA, customers go home today with fine, flatpacked Scandinavian designed furniture & housewares. IKEA does so well with this model that their web site, actually (and intentionally) kind of sucks – and more often than not sends you into the store to buy.

Let me go back to the “massive inventory available direct to customers” part – Chris Anderson called this The Long Tail and characterizes it as an internet phenomenon. However, the long tail is a change not in available books but in customer demand – this new demand is enabled by internet search but not restricted to internet retail. If I, as a retailer, can meet that demand today, then there is no need for a customer to order from the internet. So we need a bigger storefront. Or even a warehouse. This is a logistics problem, and one I can solve.

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B&N spent $450-500 Million trying to launch and leverage the Nook. (maybe more; I haven’t followed this end of their business for a while)

I’d estimate a “Truly Massive Landmark Book Destination” would cost a tenth of that — or even less, considering B&N already owns the book inventory and has been closing stores at a pretty fair clip. Shifting a few books around the chain has got to be cheaper than buying new.

I’d call what is currently happening at B&N a failure of imagination, more than anything else. And complacency. Some hubris in there as well.

“Yesterday we had our best sales day in the history of 86 years at the store. So thankful for all of you.”
Strand Book Store record Christmas shopping holiday sales say print not dead : Michael Walsh, 25 December 2013, New York Daily News