The Wall Street Journal over the weekend had a piece about Barnes & Noble, which is facing an uncertain future. "A franchise built on cappuccino, children's story time, and tables stacked with the latest from Stephen King, Neil Gaiman and Doris Kearns Goodwin is retrenching," the Journal writes. "A shrinking market for print books, competition from Amazon.com Inc., and the costs of investing in its own e-reader and tablets had led to three straight years of losses."
Despite some confidence in the executive suite, "the tide of history may be flowing against the retailer," the Journal goes on to say. "In recent years the rise of e-commerce has killed some well-known brick-and-mortar stores, including Circuit City and Borders Group Inc." While the chain still has 663 stores and a presence in all 50 states, it has closed 63 stores in the past five years. It also has "widened its offerings to include educational toys, games and other nonbook categories, which carry higher profit margins. Revenue for that category jumped 12% in the recent Christmas quarter. At the same time, the retailer has cut back on its book inventory: Its stores, depending on size, carried about 21,000 to 170,000 titles in 2013, down from 60,000 to 200,000 titles in 2004."
Leonard Riggio, the longtime chairman of the company, concedes to the Journal that it is hard to nail down a strategy for the future, considering all the influences that are affecting business. In the past, he tells the paper, "I could say that I could see around corners with ease. Then you reach a point as you get older and as things get more complex, you don't see as clearly around the corners. You've got to have people who do that for you."
While the company has a strong balance sheet for the moment, the question is whether the view around the corner is a friendly one … and whether Barnes & Noble can exist in its current form there.
Despite some confidence in the executive suite, "the tide of history may be flowing against the retailer," the Journal goes on to say. "In recent years the rise of e-commerce has killed some well-known brick-and-mortar stores, including Circuit City and Borders Group Inc." While the chain still has 663 stores and a presence in all 50 states, it has closed 63 stores in the past five years. It also has "widened its offerings to include educational toys, games and other nonbook categories, which carry higher profit margins. Revenue for that category jumped 12% in the recent Christmas quarter. At the same time, the retailer has cut back on its book inventory: Its stores, depending on size, carried about 21,000 to 170,000 titles in 2013, down from 60,000 to 200,000 titles in 2004."
Leonard Riggio, the longtime chairman of the company, concedes to the Journal that it is hard to nail down a strategy for the future, considering all the influences that are affecting business. In the past, he tells the paper, "I could say that I could see around corners with ease. Then you reach a point as you get older and as things get more complex, you don't see as clearly around the corners. You've got to have people who do that for you."
While the company has a strong balance sheet for the moment, the question is whether the view around the corner is a friendly one … and whether Barnes & Noble can exist in its current form there.
- KC's View:
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I'm with the consultants quoted in the story (not that I like to be seen in public agreeing with consultants). But in this case, I think they're right - it is hard to imagine Barnes & Noble resembling itself in two or three years time.
That said, existing retailers in a lot of segments ought to pay attention to what Riggio said about being able to see around the corner. That kind of candor deserves to be repeated.
