Can This Bookstore Be Saved

Barnes and Nobles is one of the biggest bookstores that has a brick-and-mortal store concept. In the past they were know as a “big bully” that drove small book stores to close down because of their aggressive tactics to have competetetive advantage over them. Nonetheless, with the evolving circle of technology they have had a hard time in keeping up with the E-book era. In 2014 E-books increased its reader subscription by 28% compared to 23% in 2013. This number will continue increasing because 50% off American’s have access to devices that are either an e-reader or a tablet. B&N changed its business model to adjust to this new setting before it suffered a similar fate as some of its competitor’s had encountered, which is closing down shop. B&N developed a Nook e-reader and tablets and in the mist of the change of the e-book era they have dedicated themselves not only sell actual books in their store chains, but to also be marketable with accessibility to selling e-books, devices to read them on, and attaching an app enhancement for a better reading experience.

The company has had success gaining market share but with a cost and in order to stay afloat it will need to contend with increased competition from Amazon, Apple and Google. Its top competitor is Amazon with a 98 billon capitalization and B&N has a market of capitalization of 1 billion, which puts B&N in a competitor disadvantage. Even thought Amazon might have a bigger capital, B&N has been able to grab a significant market share from Amazon and Apple but with a steep cost. B&N has incurred a loss of millions of dollars in 2011 and most of the loss is due to investment that the NOOK required for launching. It’s been questionable because they don’t know if the NOOK will eventually bring in revenues that justify its steep development and marketing cost, as well as bring traffic back into the B&N stores. Customers who visit B&N web site buy 3 digital books for every 1 physical book, which is indication that people are not going into the
stores.

B&N has been partnering with software companies since 1998 to develop prototype e-readers unfortunately they project was dropped in 2003 because it appear there wasn’t any money in it, as e-reader’s have come a long way since then. Also Borders once a competitor of B&N, biggest downfall was not able to go with the revolution of the internet. Publishing companies also have been affected by the change because companies like Amazon are working towards to cut out the publishers and publish books directly. Editors, publicist and other entities within the publishing business view Amazon as the enemy. Publishers received even worse news as the US department of Justice sued Apple and five of the country’s largest publishing houses for colluding to fix e-books. In response to Amazon’s pricing strategy publishers and Apple agreed to an “agency pricing” model in which publishers set the price and retailers take a commission.

Since the Nook was booming and brick and mortar stores had been stagnation B&N has been considering spinning off its digital business from its fading bookstore business. Microsoft announced that it would invest $300 million for 17.6 percent stake in a new company . This way Microsoft will be able to add its Window 8 into B&N tablet and e-reader business and its college division. The deal also furthers Microsoft strategy of investing in new business to move beyond its Windows and office software franchise. B&N has also experiment with ways to drive traffic to their physical stores. Other companies are using similar techniques to promote board games, toys, movies, and of course , physical books. B&N has also expanded its store space for toys and games and added new display space for its Nook devices.

QUESTIONS:
1-In order for Barnes and Nobles to use the Value Chain and Competitive Force Models they needed to be ingenious with their tactics. First, publishers are on B&N side and they are doing everything to make sure that B&N stay at float because they are basically their “bread and butter”. So B&N is securing supplier intimacy with the publishing companies which will lead to strengthening its loyalty relationship with its customer in the store and digitally. Second they are securing their niche in the market, they are doing this by having the stores advertise and communicate to their customer that a there is a specific book that “is a big deal” and B&N is offering an extensive inventory of physical books and it enhance its core competency. Microsoft announced in 2012 that they would be investing $300 million in B&N Nook tablet, e-reader business and its college division. This will enable them to included Windows 8 operating system in Nooks application; this is a space where it will have a product differentiate.

2-B&N and the book publishers are changing their business models to deal with the Internet and e-book technology by B&N developing its own e-readable devised called Nook. In order to meet demand and supply, they started to be actively in control of its supply chain by developing, marketing, manufacturing and retailing it. One of B&N competitors is Amazon and they are slowly cutting the publisher and the publishing books directly, this way they can cut cost to the consumer. But this is bad a step for Amazon because in the long term is not a tenable business model for publishers. In 2011, analyst estimated that B&N controlled approximately 27 percent of the digital market-share, which it grabbed significant market share from Amazon and Apple in the e-book marketplace. Although B&N has had success with the Nook, it encountered a rocky climb, with the excessive cost in investing and launching the Nook device.

3-B&N new strategy to be successful will work because they are allowing themselves to evolve and make changes as technology continues to integrate itself more deeply into the Internet. Since the publishers need a rock, they are leaning on B&N and this will strength B&N core to continue looking straight ahead into the future. Since publishing companies were forced to adjust allocation of printed books and the new titles for stores, and books are beginning to be released as APPS in addition to physical books. In the long run this will allow for B&N to team up with publishers to enhance e-books.

4-In order for B&N and the book publishers to stimulate more business they will need to to be more creative with their output. In other words B&N and the publishers will need to work on exclusivity on material so that it can only be merchandise/market on B&N tablet and their stores. It’s the same concept Netflix is beginning to have success with. Netflix was smart enough to have rights on material that will eventually lead for them to have their own shows and be able to “binge watch” whenever you want. Exclusively is very important because it will allow for B&N to analyze its gap in the market and work on fulfilling on them while profiting from what is working for them.