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.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.