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Why Did Merged Channel Fail Barnes & Noble?

Written by Frank Hayes
July 10th, 2013

Now that Barnes & Noble (NYSE:BKS) has lost its CEO and is exploring “strategic alternatives,” it looks increasingly like the last bookstore megachain has reached its last link. On Monday (July 8), CEO William Lynch resigned, and Chairman Leonard Riggio named a new president, but not a CEO. The obvious question: When does a retailer not need a CEO? When it expects a new owner to name one. The less obvious question: How could merged channel/omnichannel have failed Barnes & Noble so completely?

Think it’s because Barnes & Noble is in the dead-tree book business? So is Amazon (NASDAQ:AMZN). Besides, at last report the brick-and-mortar bookstore business was still holding up (if only barely). It’s the Nook and the chain’s efforts to merge physical book and E-book retailing that have been a bottomless money pit. So why did Barnes & Noble—having lost its biggest physical-store competitor when Borders went under—fail to gain any merged channel/omnichannel traction?

It wasn’t for lack of trying. The whole point behind putting Lynch in the CEO chair was that he had been running the chain’s online operation. That didn’t work out, in part because Lynch really, really didn’t like physical bookstores—so much that he moved out of the chain’s Manhattan headquarters to work in the dot-com offices a mile away, and the CFO and other top executives followed him.

So much for merging the channels.

But that wasn’t the only lost omnichannel opportunity, and if Riggio actually convinces his board to sell him the stores and E-Commerce operation, as he proposed in February, Barnes & Noble still has a deep omnichannel problem.

No, the Nook turned out not to be the answer—having a bookstore in your pocket is nice, but the Nook wasn’t as nice a pocket bookstore as the Kindle or the iPad. Barnes & Noble was used to getting books from publishers and selling them, not engaging in back-alley knife fights over pricing and exclusive rights.

But even with a successful Nook strategy, that would have been the wrong place to look for merged channel bookselling success. For one thing, physical books and E-books are a forced marriage. When Barnes & Noble came up with the idea of letting Nook owners who were physically in the stores browse a wide range of free books, that was clever—but no one seems to have realized that it was pointless. Yes, Nook owners represented traffic, but since they weren’t going to buy physical books, what was the point of luring them into the store?

But there’s a deeper reason the Nook was the wrong way to look. That’s recommendations.


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