It hasn’t been the best decade for Barnes & Noble, the biggest bookselling chain in the United States. As sales slowly eroded—and Amazon gained dominance—the position of CEO became one of the fastest revolving doors in the publishing industry. Each new leader trotted out a revised “concept store” to revive the fortunes of the bookseller, none succeeding. Here’s a brief history starting from 2015, when things started to get really bad.
If you don’t want the grisly history, skip right down to the “who’s to blame” section!
- September 2015: A new store prototype is announced. New CEO Ron Boire takes the helm, the stock plunges due to a bad earnings report, and media outlets wonder if Barnes & Noble can be “saved.” The bright spot: B&N sales of toys and games are up 17.5% and company leadership considers a new store prototype. The Wall Street Journal speculates, “A new prototype could be smaller and feature a broad assortment of merchandise.”
- December 2015: Barnes & Noble will become a lifestyle brand. Boire hopes to turn B&N into a lifestyle brand, saying “Barnes & Noble has become a destination for personal development, learning, and entertainment.” Overall performance continues to look stagnant, at best. B&N stock is down 45% since August. The BN.com website suffers reduced traffic and sales to the tune of 22% due to its problematic relaunch over the summer. Nook sales are 32% lower against the prior year.
- March 2016: Nook pulls back to the US market. Nook pulls out of the UK market and operates only in the United States after previously operating in forty countries. Nook’s digital content sales are down by 56% since 2012. Boire continues to talk of opening new concept stores, but no specific plans are made public.
- June 2016: New concept stores to feature full-service restaurants. More information is released about B&N’s concept stores, with the first set to open in October 2016. The most widely touted feature is the inclusion of full-service restaurants, complete with wine and beer offerings. For fiscal 2016, B&N overall sales are down 3.1% from the prior year.
- August 2016: CEO steps down. CEO Ron Boire steps down from his position, the third CEO to leave in three years.
- November 2016: New CEO hired. Demos Parneros is hired as CEO. He previously worked at Staples.
- Summer 2017: Revenue declines, but profit is maintained. B&N reports a more than 6% decline in comparable store sales against the previous year. B&N says that profit expectations will remain the same despite a decline in revenue because of a “company-wide simplification process” to cut costs.
- Winter 2017: Time for a pivot. The store claims to be “pivoting” back to books, emphasizing discoverability and bookselling interactions with customers. In line with its cost cutting, Barnes & Noble says it will shrink stores—carrying less inventory but improving discovery. CEO Demos Parneros said, “Our goal is to get smaller. We want to actually have a better store, even though it’s a smaller store.”
- February 2018: Layoffs ensue. The store announces a “new labor model” that eliminates certain store positions to save $40 million annually. Layoffs appear to target long-standing and full-time staff who would likely be essential to increasing store sales. Various sources estimate a loss of between 1,600 and 1,800 jobs and/or at least three positions per store.
- March 2018: Concept store 2.0 announced. True to Parneros’ word, Barnes & Noble opens five new stores that are about half the size of the traditional superstores. The original restaurant concept stores are dubbed “a great learning experience” (that is, a failure) and the new stores head in the direction of Amazon’s small-format bookstore strategy.
- June 2018: Sales keep declining, even for non-book merchandise. Sales fall 6%. Parneros says that “turnaround plans take time.” B&N sees not just a decline in print book sales, but in sales of non-book merchandise (not to mention online sales). Daniel Kline at Motley Fool writes, “It’s possible that the chain can survive by catering to its core customer base—people who still like to browse in bookstores—while finding small ways to expand that audience and increase its spending. That’s not a turnaround; it’s more like clinging to existence.”
- July 2018: CEO is fired, who then sues. Parneros is fired without severance, leading to his lawsuit (still being litigated) against Barnes & Noble.
- October 2018: Barnes & Noble is put up for sale. Big Five publishers actually welcome this development, hoping it will bring some needed stability. However, the announcement is made right at the critical holiday selling season, and the pending lawsuit is, at best, a distraction.
- June 2019: A hedge fund buys Barnes & Noble, takes it private, and puts James Daunt at the helm. The new owner, Elliott Management, also holds Waterstones, a UK bookstore chain. Elliott announces that the new CEO of Barnes & Noble will be James Daunt, who also heads up Waterstones.
Also: a quick history of the Nook
The Nook debuted in October 2009, two years after Amazon Kindle. At its peak, Nook enjoyed sales of nearly $1 billion a year. By summer 2019, in the last public earnings report from Barnes & Noble, Nook delivered less than $100 million in revenue per year, with negative profits.
In acknowledgment of Nook’s failure to compete against Amazon’s Kindle or even Apple’s iBooks, Barnes & Noble’s chairman at the time, Len Riggio, told investors in 2017, “There is no business model in technology” for the chain. That immediately led to speculation that the Nook business would eventually be sold off. However, current CEO James Daunt has expressed commitment to the Nook and said that it should have a more prominent place in the stores.
Are Barnes & Noble’s struggles preventable or inevitable—and who’s to blame?
This is where you’ll find the most interesting debate. There’s a reliable contingent that argues Amazon is to blame or points a finger at bad government policy (see the Department of Justice case against Apple and the Big Five). Others see the resurgence in independent bookstores and believe B&N has failed to innovate or at least capitalize on its strengths.
In a 2018 presentation at BookExpo on the future of retail, Kristen McLean of NPD said that the retailers then losing were those swimming in debt, those who couldn’t innovate or didn’t have the leadership to innovate, and those who didn’t have the right footprint (because they were locked into particular real estate contracts, for example). She said physical retail is not dead, but retailers have to give consumers a reason to visit stores—there has to be an “experience”—and that highly local businesses will compete.
In a 2018 podcast from Knowledge@Wharton, a few marketing professors discussed what the future might hold for the beleaguered retailer. Wharton’s Peter Fader said, “They’ve tried lots of different things from devices to experiences to broadening the merchandise. Nothing’s working. At this point, they haven’t found that hook to save the business; nor have they found the vision or leadership to give people any confidence in it.” Wharton’s Barbara Kahn said that while the retailer probably does a good job overall, “The problem is they’re not the best at anything.”
The Wharton podcast is enlightening for the points it makes when compared to McLean’s talk at BookExpo. McLean more or less offered a hit list for retail success during her talk: personalized attention, curated selection, and convenience (friction-free purchasing). The professors found fault with B&N in all of these areas. There is little or no excitement in the attention or experience provided in-store (laying off long-time staff couldn’t have helped), there isn’t a local focus to the store selection, and B&N hasn’t put much energy (if any) into an omni-channel experience (seamless purchasing and discovery from digital to in-store and back again). Fader summed it up frankly when he said, “It’s boring retail.”
Can CEO James Daunt “save” Barnes & Noble? How?
James Daunt is perhaps best known for spending the last eight years getting the venerable but once shaky Waterstones (with 283 stores) on its feet. Back in 2018, when Elliott acquired Waterstones, there were worries that Elliott might hamper Daunt’s efforts to cut costs and build the UK chain. But it doesn’t appear that was the case; in fact, Daunt has been able to open new stores, show some modest profit, and earn the respect and gratitude of many in the UK industry who want to see the chain survive.
Charlie Redmayne, CEO of HarperCollins UK, told The Bookseller, “James Daunt has done an excellent job stabilizing and now growing Waterstones back into a profitable and secure business. In my opinion Barnes & Noble will benefit hugely by having him at the helm.” Much public response has been similarly upbeat.
However, Daunt used some tough tactics, the kind publishers complain about with Amazon, to salvage Waterstones. Philip Jones, an editor at The Bookseller, warned the US industry, “Publishers should take time to understand Daunt’s singular vision. Gone will be the grand plans and corporate double-speak of the current regime, replaced instead by someone whose message will be simple, to the point, sometimes bruising, but effective.”
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.”
On Sept. 11 of this year, the Book Industry Study Group hosted a conversation and Q&A with Daunt, in which he stressed a local-first selling strategy. Daunt says that if you give booksellers the autonomy to choose and display and curate their stores (rather than making decisions on a corporate level), those booksellers will make sure the books that customers want to buy are in front of them. “Ultimately we will sell more, customers will come into the store more, and publishers will sell more. That is the happy outcome that should reconcile publishers to this [new model].”
However, because of the focus on local booksellers making their own stock decisions, there won’t be any co-op going forward. Co-op is the practice of publishers paying for title placement throughout the chain. It’s a reliable way for publishers to guarantee sales, but it’s also associated with high returns. Daunt said, “Co-op and promo and all of that doesn’t actually work with my way of running things, when one talks about giving stores the autonomy to do what they want. That’s not a form of words. That’s actually meant. Therefore you can’t take co-op.” Daunt said that no store would be required to stock even blockbuster titles like Rage by Bob Woodward (although it would be expected every bookseller would logically want some number of copies).
Furthermore, because of this local-first strategy, a number of longtime buyers for the chain (headquartered in New York City) have been let go. Some of these buyers, such as fiction buyer Sessalee Hensley—once profiled in The Wall Street Journal under the headline “So Many Books, So Much Power”—had been with the company for decades.
Daunt has been in bookselling for 30 years, but he is not precious about it, which is something of a rarity for the occupation. He said, “Bookstores do have to justify themselves, and I don’t think we have any God-given right to exist. If we are not inspiring within our communities and able to attract customers to us, frankly we will not exist. How is it that bookstores do justify themselves in the age of Amazon? They do so by being places in which you discover books with an enjoyment, with a pleasure, with a serendipity, that is simply impossible to replicate online.” He believes accomplishing that is all about empowering the local bookseller teams. “If the physical bookstores are good enough, they can live alongside Amazon.”
What would the publishing industry look like without Barnes & Noble?
In 2017, Nathan Bransford interviewed Mike Shatzkin to specifically ask what effect the loss of B&N could have on the commercial book publishing industry, which was built on the ability of big houses to put books on shelves. “That’s what [publishers] can do that authors can’t do for themselves and, up until now, Amazon couldn’t do for them either,” said Shatzkin.
Starting with the premise that B&N supplies about two-thirds of shelf space for books in the United States, Shatzkin’s points include:
- Smaller trade presses would be hurt worse by a B&N collapse, since they have fewer mass-merchant outlets (such as big-box stores, which trade mostly in bestsellers) for their books.
- Big publishers would find it less efficient but doable to launch trade books only through the disparate network of indie bookshops; smaller presses would have a harder time.
- Should Amazon’s physical bookstores continue, then all publishing roads would, finally, lead to Seattle. Amazon could say to publishers, “You pay the cost to print your books, and we’ll put them on our shelves”—at the publishers’ risk.
Ultimately, more authors might move to Amazon Publishing for its status as the reigning producer and retailer of books. Stranglehold is Shatzkin’s word for the grip Amazon would have on the business.
How is Barnes & Noble doing during COVID?
Store sales are reportedly down by roughly 20% this year due to COVID, per James Daunt. When stores closed during the spring, the chain used the downtime to revamp the store’s sets and displays, and implement James Daunt’s vision of fewer titles, better merchandised. But it will take time to know how well that’s worked out given reduced foot traffic during the pandemic.
If you enjoyed this post, consider a subscription to The Hot Sheet. Your first two issues are free.