01-30-2013, 08:47 AM | #16 | |
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http://eoinpurcellsblog.com/2011/10/...three-choices/ Booksellers have to either: - Bet on digital and phase out reliance on print - Amazon's approach - Bet on retailing - Indigo's approach - Bet on books - the indies' approach B&N has tried to do all three at once and while they have spawned a locally-prominent ebookstore that might serve as a lifeboat in case their B&M business implodes, Nook is not strong enough to carry the load of the rest of B&N. Mostly because in trying to simultaneously revamp the B&M operation they didn't devote enough attention/resources/whatever to Nook. They still have to choose since it is pretty clear they don't have the pockets to do all three. As I said above; *I* would sell off Nook and bet on books. If only because the other two roads aren't working well enough to bet the company on. To paraphrase Conan Doyle: "When the unworkable has been eliminated, whatever remains, however unpalatable, must be carried through." High volume bookselling at B&M *can* be a profitable business. To figure out how, just ask yourself: What would Amazon do? And the answer to that is customer focus, logistics, low prices. If B&N doesn't get their act together, we just might get to see Amazon step up to B&M. |
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01-30-2013, 03:04 PM | #17 |
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Sregener: they can't start pricing all of their books the same as Amazon. Then they'd be losing money in all of their stores, not just twenty of them.
Fjtorres: Hasn't B&N already chosen betting on retail? If they were going to bet on the others they'd already be more aggressively closing down stores, and we'd hear about them opening up new small ones. |
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01-30-2013, 05:40 PM | #18 | |
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Yes, Amazon doesn't have to lease prime retail space, heat it, cool it, light it, etc. And they can staff it with basic staff who know nothing about books. But as an accountant once told me, those are all fixed costs: they don't change based on how many units you sell. Thus, you can cover your fixed costs by pricing things just above marginal costs and make a whole lot of volume. In other words, what I am proposing is not that B&N change their retail presence to books-only and then sell only as many books as they sell now. I'm proposing that they sell a whole lot more books by becoming the instant-gratification price leader. Why wait 2 days or more for Amazon to ship you a book when you can have it right now for the same price? Why not impulse buy something at the mall if you can't find it cheaper later? But if, ultimately, a bookstore cannot sell at Amazon's prices and get enough volume to cover their costs, then everyone is just rearranging the deck chairs on the Titanic. The ship is made of iron; she will sink. |
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01-31-2013, 12:54 AM | #19 |
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Too long, and not needed now
10 year plans are useless. You can have a statement about what kind of company you will be in the future, and a 5 year plan - but you have to be continually rethinking and revising the 5 year plan.
Anyway, even in a down US economy 2008-2012, revenue increased 31%. That's enough growth (from a profitable 2008) that things should be in pretty good shape. Not great, but pretty good. The problem is, COGS is up 38% over the same period, and SG&A is up 40% over the same period. The result is the company is heading for trouble. CEOs can (and do) give all sorts of rationalizations for this kind of result, but basically it means that upper management hasen't managed the cost side of the business based on the reality of current revenue. So the first thing to be done is to get a new CEO, one that institutes internal cost discipline, and drives down COGS relative to revenue - doing whatever is needed to make that happen. If that can't be done, no plan will matter. |
01-31-2013, 01:04 AM | #20 |
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Sgrener: I'm confused by your answer. It is true that Amazon also faces expenses, but as we all know, bookstores' costs are higher than Amazon's, which is why they aren't able to price-cut as much. What your examples prove is that Amazon is willing to take losses in order to gain market share... or that for some reason, Prime is actually profitable. In any case, Amazon's inner workings are pretty much a mystery, and so I don't think it's helpful to compare e-commerce to brick and mortar commerce.
It is theoretically true that you can become profitable by selling enough units if your price exceeds your marginal cost. However, I seriously doubt that B&N could do this. I think the volume of what they'd need would probably exceed the total amount of books being sold in the US. In other words, I don't think anyone in the industry believes that B&N would have a prayer of survival if they price-matched Amazon and challenged them to a price war on all of their inventory. They don't even price match bn.com. |
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01-31-2013, 06:04 AM | #21 | |
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Target and BestBuy recently announced that they will price match Amazon.com in their stores. Obviously, they will get less money in sales by doing that. But they have faced the reality that customers will not buy enough products in the store to make up the difference. In other words, they lose so many sales because of their markups that it's actually better to take the lower price than nothing. BestBuy has been hurting in recent years, but Target is a strong company with a solid profit margin. And they're seeing this as a necessary step in surviving as retail stores. Now neither of them are price matching with their actual sale price (and that may be difficult to do, since Amazon changes prices on some products more than once a day) but you show them the price on your phone, and you get that price at the register. The fact the BN won't even do this with their own web site shows that they are not interested in making more sales for a lower price. They'd much rather make no sale at all. And that is the kiss of death for a retailer. |
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01-31-2013, 08:08 AM | #22 |
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^ I needed to get an audio CD as a present. It was about $27 on BN.com, not available in store, so had to be ordered. The price I was quoted was $44. I told the person at the register what the price was online, thinking they would price match, and his answer was simply "that's the ONLINE price" and "online is always cheaper", so I told him I'd go order it from amazon.com, where it was cheaper than on BN.com.
BN gave me no reason to do otherwise. They did not have what I needed in stock, so I had to wait either way. Also, great that I get their coupons by email, but they always exclude ebooks. Why?! |
01-31-2013, 08:47 AM | #23 |
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01-31-2013, 10:10 AM | #24 |
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If B&N had equal - or even close to equal - customer service as Amazon has, I might be tempted to do more shopping with B&N, but they dont'. yeah, their Nooks have some interesting features, and i like the idea of having expandable memory, but it doesn't tempt me enough to deal with having to use a credit card number for the DRM or their truly wretched customer service.
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01-31-2013, 11:41 AM | #25 |
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OK people, let's keep a few facts in mind.
• The retail stores are still profitable. This is how B&N is still making its living. The "zomg 1/3 of stores closing" omits the fact that B&N will also **open** stores over the next decade, not just close them. I.e. their retail store strategy may actually be working. Closing big stores and opening smaller ones, by the way, is an expensive proposition that can harm the brand. Smaller stores also carry fewer titles, which exacerbates the "you don't have it?" issue. • The Nook is killing B&N's bottom line. Supposedly, every $1.00 in digital sales costs B&N $1.50. They've thrown insane sums of money at developing the Nook. And no, they can't spin it off. It's too closely tied to their brand, website, stores and core business, investors would flee, and the Nook brand would also be heavily damaged. • International business will not save B&N. First of all, the US is the biggest book market in the world by far, and is B&N's home territory. If they can't make it in the US, where they have a brand history and retail presence, they aren't going to make it. Second, although it costs nothing for someone from France to go to B&N's website, actually doing business in 50 or 75 new nations is very complicated and expensive. They'll need to open warehouses, they need to navigate dozens of tax laws, they'll need to stock a whole new set of paper books, they'll need to translate their website into a dozen languages, and of course deal with hundreds of international publishers and their subsidiaries. Amazon already had all of that infrastructure and the branding, and it still took them a long time to do anything more than offer English ebooks to international customers. • All of us have limited information. We have the quarterly figures. But we don't have the detail on what's selling, which stores in which locations do well, why the Nook business is still running such heavy losses, and lots of other information that is critical to figuring out how to move forward. Might want to keep this stuff in mind when you insist that B&N turn its business model around on a dime. |
01-31-2013, 11:43 AM | #26 | |
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01-31-2013, 06:53 PM | #27 | |
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That psychology worked for a couple decades, it can still work today with a tweak or two on the logistics. Especially on *casual* book readers. And casual book readers are always in play, unlike avid readers. |
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01-31-2013, 08:02 PM | #28 | |
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One big problem, though, especially for the casual book readers, is that there is a lot of competition for popular books from non-traditional booksellers like Walmart and Target. I haven't actually counted, but these stores seem to carry several hundred titles at least: bestsellers and a lot of popular genre fiction. The selection tends to be wide and shallow, but I suspect that it's completely adequate for people who may read a few books a year in popular genres, and at least convenient for regular readers who may be interested in a book that just came out. It's been a long time since I've been in a B. Dalton or Waldenbooks, but they tended to have *some* series depth, although it seems like it was limited. They had an okay reference section and actually a lot of non-fiction - two areas in which Target and Walmart and grocery stores are pretty weak, so there is that. A related issue is that malls have become significantly less popular in the US than they were in the heyday of B.Dalton and Walden: a bookstore in a mall today won't give you the same bang for the buck it did in the 80's. |
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01-31-2013, 09:02 PM | #29 | ||
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Agreed. It could be that eBook penetration is near its max, and it could be that in ten years paper books will be no more popular than 33 1/3 RPM records are today.
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Since there is no way they can beat Amazon on price, maybe they are better off positioning themselves as a luxury provider. I'm not seriously arguing this, because there is no way to know how the market for books will move. A successful CEO for B&N needs two things: 1. Basic managerial competence. 2. Luck. |
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01-31-2013, 09:10 PM | #30 |
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I have a nook simple touch in addition to my kindle and its quite good at what it does, although I like it nearly as much as my kindle. I see this as an image problem, people see the kindle as cool, as a status symbol in a way, much the same way as teenagers used to see apple and their products, before they started to fall from their "cool" status. I think that B&N needs to do some immage marketing such as giving a way a few nooks to public schools to premote reading. Those kids will go home and want nooks as reading devices 24X7 rather than the kindle, taking a page from apple corp's play book some time ago.
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