To the casual observer Barnes & Noble in Manhattan’s Union Square seemed to be doing everything right last Thursday lunchtime: displays heaving with books; customers milling around; every table at the Starbucks on the third floor taken by customers; a creche full of excited children; magazine racks browsed.
But appearances can be deceptive. America’s largest bookseller is in trouble. A quick chat with the “customers” suggests one reason why.
“I get a coffee, take a seat, read the latest magazines,” said a man who gave his name as Buddy. Asked if he planned to purchase the car and engineering titles he was holding, Buddy replied flatly: “No.”
Perhaps this is what it means to be a bricks-and-mortar retailer in 2018. It’s a feelgood customer experience and a showcase for online purchasing – but the sound of cash registers ringing? Not so much.
Last week, Barnes & Noble, the largest book retailer in the US, saw its stock price plunge nearly 8% just days after the New York Times published an editorial calling for the chain to be saved. “It’s depressing to imagine that more than 600 Barnes & Noble stores might simply disappear,” wrote columnist David Leonhardt. “But the death of Barnes & Noble is now plausible.”
Once the dominant player in US book retailing , the chain, which ironically in its time put countless private, neighborhood booksellers out of business, is suffering as the new big beast, Amazon, swallows its business.
Sales have been on the slide for 11 years; even online sales have fallen. Over the past five years, the company has lost more than $1bn in value. Dozens of stores have closed. A shake-up in February resulted in the loss of 1,800 full-time jobs.
If Barnes & Noble closes it will mark the death of the last major book chain in the US, leaving the field open to Amazon, which sells one out of every two books in the country, according to analysts. Closure is also likely to hurt publishers, who will become even more heavily reliant on Amazon. Big swaths of America will be left without a major bookstore.
It’s not that Barnes and Noble hasn’t tried to innovate – “it’s been very creative in staying alive and surviving into today’s Walmart-and-Amazon dominated society,” said one employee, pointing to games and toys as one area of expansion. The company also pushed into technology, spending heavily to launch and market the Nook e-reader to compete with Amazon’s Kindle.
But arguably innovation is where Barnes & Noble went wrong. Other big booksellers have tackled Amazon’s onslaught by doing precisely the opposite – going back to basics and putting the books first.
Take UK giant Waterstones, which was acquired last month for an undisclosed sum by the hedge fund Elliott Advisors. Chief executive James Daunt told the Guardian the company was succeeding by going back to “good old-fashioned bookselling” and is “very much in expansion mode”.
Analyst Neil Saunders of GlobalData Retail said one difference between Waterstones and Barnes & Noble is that the UK chain is centered on high streets whereas the US chain tends to be centered on malls. It’s one thing, he says, to attract high street foot-traffic, another to get customers to drive to a mall for a book. Especially when America’s malls too are being swept away by the Amazon effect.
“People may drop in for a browse but they won’t make a dedicated trip to a bookstore,” Saunders says. “They don’t have the need and they don’t have the time. The way people shop changed, and that’s been detrimental for Barnes & Noble.”
Saunders said Barnes & Noble also slipped up with the Nook. It’s reported that the company lost $1.3bn on the device hoping to replicate Amazon’s success selling content for the Kindle. “That was a massive distraction for Barnes & Noble that should now be abandoned,” Saunders said.
“If you’re only using it to sell books, and there are a lot of other competitors in the market, it’s not a sensible strategy.” (The company withdrew the device in the UK in 2016).
Nor, he continued, does it make sense to add new merchandise. “The stores just look like an enormous Aladdin’s cave of all sorts of random products, including departments selling CDs and DVDs that are never crowded. The stores themselves are too large for what they need and in the wrong locations.”
In a letter to shareholders including the company’s 76-year-old founder and chairman, Leonard Riggio, activist investor Thomas Sandell warned that at around $500m, Barnes & Noble, which still has more than 600 stores, was valued “unconscionably low”.
The company, he argued, should be taken private and become part of a larger business, just as Whole Foods became part of Amazon.
But as the crowd in Barnes & Noble Union Square shows, online shopping doesn’t hold all the answers. This venue is host to some of the biggest book launches in the country. It was the first stop on Hillary Clinton’s book tour for her memoir What Happened. Michael Ondaatje and Michael Pollan will read there later this month.
Manhattan is not a failing mall but customers everywhere still seem to want somewhere to read, browse and buy a coffee. Designer Carl Barnett said he’d noticed that the store could use an update but he still loved to visit. “The key is to offer an experience. A lot of stores are suffering, but it’s all about the mood and customer service and I’ve never not had a good experience here,” he said.
Now if only he’d buy a book.
