Barnes & Noble – Missed Opportunity?

Barnes & Noble has come to an end as we know it. The superstore concept, created by Leonard Riggio, became one of the world’s largest book chains located in malls and city centers across the country. The company is now being sold to an investment company for less than $700 million. It’s unclear what they will do, but it’s likely they will close down many of the stores.

I worked as a product development consultant to the company for five years beginning in 2009 when they decided they needed to develop their own eBook reader to compete with Amazon’s Kindle. Along with a small team, we developed their first product, the Nook, that proved to be a huge success. It combined a reflective e-ink black and white display with an LCD display along the bottom for navigation and to display the book covers in color, offering the best of both worlds. The product was positioned within B&N as its own “Manhattan project,” alluding to the do or die need to answer Amazon’s threat of replacing physical books with digital files. The product was developed and brought to market in under a year, introduced on November 22, 2009.

The success of that product and the sales of Nook eBooks grew Barnes & Noble’s share of that market from zero to nearly 30% within a couple of years, with most of the remaining 70% going to Amazon. The next product, the Color Nook, was actually the first mini-sized color tablet ever and the first dedicated color LCD eBook reader.  At the time the company was ridiculed by analysts, reporters and rivals, because conventional wisdom was that LCDs were too difficult for reading at length. We had conducted our own research using focus groups that compared LCD screens on mini-notebooks with black and white reflective e-ink displays, and the results proved otherwise. Barnes & Noble also was the first company to create an illuminated version of an e-ink e-reader.

With its initial success, the company then decided to double down and create an entire new division headquartered in Palo Alto. It grew rapidly to more than 300 employees with the capabilities and skills of some of Silicon Valley’s best companies. But, a few years later, just as Amazon came roaring back, it created a huge new headquarters that was never fully occupied, before scaling way back, and eventually closing.

At the time, I noted that this was a unique company that had the best of traditional retail experience and technology skills that could become the leader in merging the two and creating the future of retailing. We looked at new technologies such as in-store tracking to identify customers and their interests and send them to the right aisles, always with opt-in required. We examined ideas to make the stores become showrooms for online books, allowing a customer to examine the book on the shelf and with one click send it to their Nook. There seemed to be endless opportunities to move retailing forward.

But there was a problem, not uncommon in many companies. Different divisions don’t always see themselves as partners, and instead consider themselves as rivals and competitors; rivals for resources, for which one gets credit for a sale, and competition among the leadership. As a result, the company never took advantage of this opportunity to effectively bring the two divisions together. Ironically, Amazon has found the need and benefit of having a retail presence and is expanding their retail presence.

Many probably don’t feel sorry for Barnes & Noble because it’s suffering the same fate it brought to small independent booksellers. Fortunately, eBooks have never replaced books in their entirety and the independent bookstore is coming back:

According to GoodReader, between 2009 and 2015, the number of independent bookstores grew by 35%, according to the American Booksellers Association. Print book sales are on the rise too: Sales of physical books have increased every year since 2013. In 2017, print book sales were up 10.8% from 2013, while sales of traditionally published e-books actually dropped 10% from 2016 to 2017. ABA membership grew for the ninth year in a row, with stores operating in more than 2,400 locations. 

Barnes & Noble might not have done much better had they embraced technology in their retail stores more aggressively, but we’ll never know. They missed a golden opportunity that’s now beginning to be picked up by other progressive retailers.



by Phil Baker