Failure to Adapt to Changing Times:

An Analysis of Barnes & Noble’s

Corporate-Level and Business-Level Strategy
Sarah Waites
Barnes & Noble’s sales are consistently declining as the online retail giant Amazon has overtaken it as the cost
leader of bookselling. However, this is not simply a case of brick-and-mortar bookstores becoming outdated.
While Barnes & Noble’s sales have dropped, the number of independent bookstores continues to rise, suggest-
ing that there is something fundamentally flawed with Barnes & Noble’s business model and strategy. Simply
put, Barnes & Noble has not adjusted to changing times. To survive in the age of digital retail, brick-and-mor-
tar bookstores must pursue a strategy of differentiation and make themselves into a high quality, destination
shopping experience. Unfortunately, Barnes & Noble’s history as a cost leader has not given it the capabili-
ties it needs to pursue a differentiation strategy, and it continues to make notable missteps, such as investing
heavily in creating the Nook, an e-reading device, to compete with Amazon when technology development
and manufacturing is so utterly outside its experience as a retail chain. If Barnes & Noble is going to survive,
it must narrow its target market, diversify its product offerings, and bring its digital capabilities into 2018.

T
his paper aims to analyze Barnes & Noble, the outlets such as The New York Times. This case study
overall bookselling industry, and Barnes & No- is written for academic purposes, but it has relevance
ble’s place within it while ultimately propos- stretching beyond Barnes & Noble. Barnes & Noble
ing methods by which the company could adjust its is a case study of how a company responds (or fails to
strategy to better meet the needs of the marketplace. respond) to technological changes impacting the retail
The theoretical framework of this paper derives from market. The take-aways for Barnes & Noble, which
Robert M. Grant’s Contemporary Strategy Analysis, largely revolve around pursuing a strategy of differ-
which breaks organizational strategy down into busi- entiation, are highly relevant for other retail outlets
ness-level and corporate-level1 Industry-level analysis and relate to the general struggles of physical retail
uses Porter’s Five Forces2 to present an overview of versus digital retail. Secondly, Barnes & Noble plays
the bookselling industry and a conclusion on whether a key role in the overall health of the American book
or not it is a profitable area for a firm to operate with- industry, as within the bookselling industry it is the
in. I then applied these frameworks to analyze data only large-scale competitor to Amazon. If Barnes &
originating from sources such as Barnes & Noble’s Noble fails, Amazon will have a practical monopo-
SEC filings, the SEC filings of competitors, industry ly over the bookselling industry, so it behooves con-
sources such as Publisher’s Weekly, and credible news sumers and suppliers to pay attention to the state of
Barnes & Noble. Outsiders often cite the dominance
1. Business-level strategy concerns itself with two areas. of Amazon as proof that physical bookstores are
The first is whether the company follows a cost-leader-
ship model (having a lower price than its competitors) or doomed, but in this paper, I argue that bookstores
a differentiation model (having a higher quality than its such as the Barnes & Noble chain are not doomed.
competitors). Secondly, it looks at the relationship be- While Barnes & Noble faces steep difficulties and
tween what the company is supplying and what consumers
are demanding. Corporate level strategy looks at the level may lack the leadership and resources to necessary to
of diversification within the firm and the level of vertical change, it can increase its chance of survival by nar-
integration. Diversification can be thought of a lateral rowing its target market, diversifying its product of-
move (for example, Barnes & Noble deciding to sell toys ferings, and bringing its digital capabilities into 2018.
as well as books), while vertical integration is moving
along the supply chain (for example, Barnes and Noble
buying a publishing house). Background and Context
2. Porter’s Five Forces is a widely used framework invent- Although Barnes & Noble’s roots go back to
ed by Michael E. Porter. The five forces are competition
within the industry, the threat of new entry, the power 1873, the company, as it is now, began in 1971 with
of suppliers, the power of customers, and the threat of its purchase by Leonard Riggio, the owner of a
substitution.

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 FAILURE TO ADAPT TO CHANGING TIMES

small chain of college bookstores. Under the over- be a serious contender to the Kindle, but that did not
sight of Riggio, Barnes & Noble became one of the last. On the surface, moving into e-readers and eb-
first superstore-sized (or big box) bookstores and ooks made sense. Barnes & Noble already provided
was able to dominate the market with its large floor- physical books, why not sell ebooks and the means to
spaces and discount prices. Although big-box stores read them too? A second look reveals that the Nook
such as Barnes & Noble and Borders reigned in the requires a radically different knowledge basis — de-
1980s and1990s, digital technology and the intro- veloping and manufacturing hardware and software,
duction of online retail has shifted the context of skills Barnes & Noble had no experience with. In
the market and fundamentally altered bookselling. 2013, CEO William Lynch resigned, signaling Am-
Amazon and online sales have had a massive im- azon’s victory in the e-reader market.6 Since then,
pact on the bookselling industry, but the resurgence Nook revenues and market share continue to decline.
of independent stores shows that consumers still have Today, the Nook has only 2.1% of the e-reader market
a need for brick-and-mortar bookstores. In 1994, Jeff compared to the Kindle’s 84%.7 According to Barnes
Bezos founded Amazon, an Internet-based booksell- & Noble’s 2018 annual report, sales in the NOOK seg-
er. Bezos was primarily interested in bookselling as ment (which include the Nook e-reader itself as well
a means of developing a platform for online sales of as compatible ebooks) made up only 3% of Barnes &
all sorts.3 Bezos chose bookselling to start the plat- Noble’s total sales.8 When customers buy an e-reader,
form as books are essentially a commodity. Amazon they commit to a specific ebook “ecosystem,” mean-
and the rising digital tide contributed to Borders clos- ing that they will mostly be getting ebooks through
ing its doors in 2011. However, while the big-box the same retailer. For example, someone who owns
retailers may struggle, independent bookstores are a Kindle will most likely be buying ebooks through
resurging. While they decreased in number during Amazon. The different e-readers use different file
the ’80s and ’90s due to competition from the big- formats, .epub for Nook and .mobi for Kindle. The
box stores, the American Booksellers Association .mobi format is proprietary and owned by Amazon.
reports that the number of independent bookstores Someone who owns a Kindle, therefore, cannot buy
in the United States has almost doubled since 2009, Kindle-compatible books through Barnes & Noble, as
moving from 1,651 stores to 2,4704, proving that the Barnes & Noble does not have the rights to Amazon’s
public still has a need for bookstores. How consum- .mobi format. Thus, the success of the Nook and the
ers acquire and read books may have changed, but the success of Barnes & Noble’s ebook sales are tightly
US book market continues to hold steady at around integrated, perhaps partly explaining why Barnes &
$28.1 billion in revenues with a growth rate of 1.2%.5 Noble struggles with both. Losing out on the e-reader
Barnes & Noble struggles to adjust to a changing market also cost Barnes & Noble the ebook market.
world where its business model is increasingly irrele- Although Barnes & Noble has largely ceded the
vant. While it has made attempts to respond to these e-reader and ebook ground to Amazon, it continues
changes, these attempts have never been fully suc- to face declining sales. Since 2012, Barnes & Noble’s
cessful. Two years after Amazon created the Kindle, sales have consistently fallen. Hoovers reports Barnes
Barnes & Noble launched the Nook, its own brand of & Noble’s 2012 sales to be 7,129,200 million,9 and
e-reader. The Nook was at a similar price point, and Barnes & Noble’s own 2018 annual report shows those
Barnes & Noble was able to leverage its 600-odd numbers to have fallen to 3,662,280.10 Gross profits
stores as showrooms. Barnes & Noble poured mas- 6. Peter Smith, “The War Between Nook & Kindle Is
sive amounts of money into developing the Nook, but Over and Amazon Has Carried the Day.” Itworld, July 10,
the bookstore chain had little experience developing 2013, https://www.itworld.com/article/2706913/the-war-
between-nook-kindle-is-over-and-amazon-has-carried-the-
hardware. For a while, it looked as if the Nook would day.html
7. Andria Cheng, “Barnes & Noble’s Problem Is No
3. Mark Hall, “Amazon.com,” Encyclopædia Britannica. Longer Just Amazon,” Forbes, Sep. 6, 2018, https://www.
Last modified August 23, 2018, https://www.britannica. forbes.com/sites/andriacheng/2018/09/06/barnes-nobles-
com/topic/Amazoncom problem-is-no-longer-about-amazon/#4e92b90e44d0
4. Alexandra Alter and Tiffany Hsu, “As Barnes & Noble 8. Barnes & Noble, INC. 2018 Annual Report, June 21,
Struggles to Find Footing, Founder Takes Heat,” New York 2018, p. 52.
Times, Aug. 12, 2018. 9. “Barnes & Noble, Inc. Profile,” Hoovers Company
5. MarketLine, “Books in the United States,” Market- Reports, 2017.
Research.com, April 2018. 10. Barnes & Noble, INC. 2018 Annual Report, p. 4.

92 The Onyx Review

 S. Waites

have likewise fallen, decreasing from $1,418,949 in have also referred to Riggio as a “micromanager who
2014 to $1,111,203 in 2018. Most recently, book sales doesn’t give his chief executives room to operate.”21
have fallen by 4.0%,11 partly due to the lack of any Overall, Barnes & Noble is without strong leadership.
big blockbuster book releases in 2018. Meanwhile, Barnes & Noble struggles to adjust to the age of
non-book sales have fallen by 7.0%, primarily on online retail. If Barnes & Noble is going to continue
“Gift, Music, and DVD, partially offset by increases to survive in the 21st century, it needs to improve its
in Toys & Games.”12 Nook products faired worst of digital capabilities. Riggio admits that Barnes & No-
all, decreasing by 33.6% due to fewer sales and lower ble has “a problem integrating the retail stores and the
prices.13 Within the past decade, Barnes & Noble has online business”22, but Barnes & Noble’s digital woes
closed more than 150 stores.14 In February, Barnes & go beyond problems with integration. It waited until
Noble laid off 1,800 employees to savings of $40 mil- 2018 to introduce online ordering for in-store pick-
lion.15 However, such layoffs also impact the compa- up23, and the Barnesandnoble.com app in the iStore
ny’s functionality. Critics cite the laying off of shipping has an average of two stars and a plethora of negative
receivers and the resultingly bare shelves as at fault for reviews. Barnesandnoble.com’s net sales were $202
Barnes & Noble’s lackluster holiday sales in 2017.16 million in 201724 out of $3,894 million total sales25,
High turnover extends to the corporate side of meaning that its online store accounts for only about
Barnes & Noble. Over the last five years, Barnes & 5% of its total sales. Simply put, Barnes & Noble has
Noble has had four first-time CEOs. The most recent, not fully adapted to the digital world and it will need
Demos Parneros, is suing Barnes & Noble for unlaw- to radically improve if it is to survive as a company.
ful termination while Barnes & Noble is counter-su- Since the failure of the Nook became apparent,
ing. While Riggio is no longer the CEO, the seven- Barnes & Noble has made several attempts to set it-
ty-seven-year-old remains involved as the chairman self on the right path, which includes experimenting
and largest stockholder. According to Riggio, Barnes with in-store restaurants, improving merchandising,
& Noble will not be bringing in a new CEO until af- turning its stores into community spaces, returning its
ter the 2018 holiday season.17 While the turnover in focus to books, and building smaller stores. The in-
executives may make it difficult for Barnes & Noble store restaurants were part of Barnes & Noble’s “new
to maintain a consistent strategy, Riggio disagrees: concept” stores, where Barnes & Noble experiments
“Demos and the other CEOs reported to me. In that with reworking its standard format. These in-store
regard, nothing has changed.”18 The lawsuits have restaurants, Barnes & Noble Kitchens, offer food and
revealed allegations that Parneros purposefully sabo- beverages including wine and beer. While Barnes &
taged a proposed sale of Barnes & Noble, describing Noble has not closed down the current restaurants, it
it to the potential buyer as an “ugly mess”19 and that has realized that “[its] core competency is not full-ser-
Riggio is “erratic” and plotted the ousting of Parner- vice restaurants”26 and that it has “no experience in
os and the other CEOS.20 Other industry insiders the hospitality area like controlling food and payroll
11. Ibid., p. 9. costs.”27 As with the Nook and electronic devices,
12. Ibid., p. 9. Barnes & Noble was ill-equipped to move into the
13. Ibid., p. 9.
14. Alter and Hsu, “Founder Takes Heat.” restaurant business. Additionally, restaurants do not
15. John Biggs, “Barnes & Noble is Killing Itself,” Tech- fit clearly within Barnes & Noble’s primary business
crunch, Feb. 16, 2018, https://techcrunch.com/2018/02/16/ model, since while customers may come to Barnes
barnes-noble-is-killing-itself/
16. Ibid. & Noble stores to study or read, such activities do
17. Jim Milliot, “Len Riggio Says He’s Ready to Lead not fit with the more social nature of restaurants.28
B&N Through the Holidays,” Publishers Weekly, Sep. 28, 21. Alter and Hsu, “Founder Takes Heat.”
2018, https://www.publishersweekly.com/pw/by-topic/ 22. Nathaniel Meyersohn, “Barnes & Noble Is Overrun
industry-news/bookselling/article/78177-len-riggio-says- with Problems.”
he-s-ready-to-lead-b-n-through-the-holidays.html 23. Cheng, “Barnes & Noble’s Problem.”
18. Jeffrey A. Trachtenberg, “Publishers Are Tiring of a 24. “Retail: Sports, Hobbies, Books & Music in the U.S.
Revolving Door in Barnes & Noble’s C-Suite.” Wall Street 2018.” Statista, 2018, pp. 33.
Journal, August 10, 2018. 25. Barnes & Noble, INC. 2018 Annual Report, pp. 4.
19. Andrew Albanese, “In Counterclaim, B&N Says For- 26. Amanda Yeager, “Barnes & Noble Brings New
mer CEO ‘Sabotaged’ Sale; Sexually Harassed Multiple Concept to Columbia — Sans the Bar and Restaurant,”
Women.” Publishers Weekly, October 30, 2018. Baltimore Business Journal, Sept. 18, 2018.
20. Corinne Ruff, “Can Barnes & Noble Be Saved?” Retail 27. Cheng, “Barnes & Noble’s Problem.”
Dive, September 17, 2018. 28. Jonathan Maze, “Why Barnes & Noble’s Restaurant

Vol. 4, No. 2, Spring 2019 93

 FAILURE TO ADAPT TO CHANGING TIMES

While the restaurant experiment has been a failure, brick-and-mortar chains, Barnes & Noble is the larg-
Barnes & Noble continues to open new concept stores, est with 630 bookstores. The second-largest remain-
sans-restaurants. These newer stores are smaller than ing brick-and-mortar bookstore, Books-a-Million, has
the 25,000 square-feet average footprint of Barnes & 260 stores. Additionally, Amazon has moved into the
Noble,29 and Riggio has said that stores in high-rent, brick-and-mortar bookstore business, and it is now
urban areas will be around 14,000 to 17,000 square the fifth largest bookstore chain in the United States.36
feet.30 The goal is for these smaller stores to be lo- More generally, Amazon dominates the book market
cated in areas with higher foot traffic,31 which should with about forty to fifty percent of all print book sales,
hopefully translate to more customers in the door. depending on whether or not its self-publishing, print-
One of these new concept stores, located in Colum- on-demand books are included as part of the market.37
bia, MD, has a 17,000 sq. ft footprint, 35,000 titles, Meanwhile, Barnes & Noble sells roughly 23% of
warm oak shelves, employees equipped with tablet all books in the United States.38 Remaining market
computers, self-service kiosks where customers can shares are accounted for by smaller bookstore chains
look up books, as well as vinyls, games, and gifts.32 such as Books-a-Million, mass merchandisers such as
The Columbia store also has the bookstore cafe inte- Walmart, independent stores, and sales directly from
grated with the rest of the store instead of fenced off publishers. The ebook market is even more concen-
into its own separate area.33 In addition to the smaller trated, with 83% of all ebooks being sold through Am-
footprint, the Columbia store exemplifies another of azon.39 Product differentiation is next to nonexistent.
Barnes & Noble’s new strategies: improved merchan- Venues such as Amazon may strike up deals where it
dising. Merchandising encompasses how the products is the sole seller of a certain book, but such instances
are displayed, promoted and priced, and Barnes & No- are rare and usually limited to self-published authors.
ble is clearly trying to update its merchandising strate- Barnes & Noble attempts to differentiate its books by
gies to the 21st century by incorporating new technol- creating “Barnes & Noble Special Editions,” which
ogies such as tablet computers and self-service kiosks. may be high-quality hardcovers or exclusive versions
It has also created a mobile app which provides cus- of popular novels such as The Hate U Give by Ang-
tomers with a digital layout of the store and the means ie Thomas which boast of special covers, notes from
to request assistance from booksellers.34 In turn, the authors, or bonus chapters. While these exclusive
this new technology aligns with Barnes & Noble’s editions may appeal to a small segment of readers, for
plan to “enhance the overall shopping experience.”35 the majority a copy of The Hate U Give from Amazon
is as good as the Barnes & Noble exclusive. Overall,
Industry Analysis differentiation of products is difficult, and all book-
Rivalry Between Existing Firms sellers have roughly the same products available.
The rivalry between existing US bookselling Although most business models hold that when
firms is intense as established firms jockey for market a few companies dominate, price competition will
share in an industry where effective differentiation of be low, the bookselling industry proves that ev-
products is next to impossible. Looking specifically at ery model has an exception. Amazon is intensive-
Experiment is Struggling,” Restaurant Business, Sept. 11, ly price-competitive. From its beginnings, Amazon
2018, https://www.restaurantbusinessonline.com/financ- has taken a loss on books to promote consumer reli-
ing/why-barnes-nobles-restaurant-experiment-struggling ance on Amazon as a general electronics store. Am-
29. Cheng, “Barnes & Noble’s Problem.”
30. Milliot, “Len Riggio Says He’s Ready.” azon is able to make up the loss it incurs on phys-
31. David Sax, “What Barnes and Noble Doesn’t Get ical books through selling these other products. No
About Bookstores,” New Yorker, Oct. 21, 2016, https:// other player in the bookselling industry, including
www.newyorker.com/business/currency/what-barnes-no-
ble-doesnt-get-about-bookstores Barnes & Noble, can price compete with Ama-
32. Ed Nawotka, “B&N Opens New Prototype Store in zon, and Amazon’s intense price competition drives
Maryland,” Publishers Weekly, Sept. 19, 2018, https:// down the overall profitability of the US book market.
www.publishersweekly.com/pw/by-topic/industry-news/
bookselling/article/78068-b-n-opens-prototype-store-in- 36. Jim Milliot, “Amazon Books Will Be the Nation’s
maryland.html Fifth-Largest Bookstore Chain.” Publishers Weekly, June
33. Yeager, “New Concept to Columbia.” 5, 2017.
34. “Heritage,” Barnes & Noble, Inc, http://www.barne- 37. Shatzkin, “A Changing Book Business”
sandnobleinc.com/about-bn/heritage/ 38. Ibid.
35. Barnes & Noble, INC. 2018 Annual Report, p. 8. 39. Ibid.

94 The Onyx Review

 S. Waites

Threat of New Entry pered by relatively powerful suppliers. The largest US

The US book market is highly susceptible to publishers are known colloquially as “The Big Five.”
threat of new entry. Although any one small, indepen- They consist of HarperCollins, Simon and Schuster,
dent book store has a negligible effect on the overall Penguin Random House, Macmillan, and the Hachette
book market, the collective rise in the number of inde- Group. In 2007, the largest four publishing companies
pendent stores is impactful. Indigo Books and Music, made up 33.4% of the entire industry.44 Any company
the largest Canadian bookstore chain, has just opened in the bookselling market needs to deal with all five
its first American store and it has more on the way.40 of the major suppliers to meet with consumer demand
Meanwhile, Amazon continues to expand its physi- for popular titles. The Big Five are also able to verti-
cal bookstores and has recently opened its nineteenth cally integrate, as digital technology and ebooks have
store in Marina del Rey, California.41 The threat of made it easy for them to sell copies of their titles on
new entrants is even higher when it comes to online their own websites. Indeed, most publishing houses
sales and ebooks. It is easy to start selling books on- do so, although none have the reach or market pen-
line as barriers to entry are low and the products are etration of Amazon. Supplier power is limited by the
essentially commodities. As previously mentioned, concentration of the bookselling market. If publishers
Amazon chose to start developing its all-encompass- want their books to reach readers, then they have to
ing sales with books for exactly these reasons. In fact, deal with Amazon and Barnes & Noble. Withdraw-
the retail giant Walmart has just entered the e-book ing books from either would be a devastating and
market this summer through a partnership with Kobo, unprecedented move. In the largest and most public
which was formerly Indigo’s digital division. Walmart dispute between a retailer (Amazon) and a publisher
is also now selling an audiobook subscription service (Hachette), Hachette won out in its wish for an eb-
with a price lower than the rival Audible (an audio- ook pricing scheme, even if it endured months of
book streaming service owned by Amazon), hoping to harsh retaliation from Amazon, which artificially de-
undercut some of Amazon’s sales.42 Overall, the book layed the shipping of Hachette books, refused to car-
market is experiencing changes in how books are pro- ry preorders, and reduced its discounts on Hachette
duced, purchased, and consumed, translating into po- titles.45 As the Hachette v. Amazon case shows,
tential for new entrants and threats to existing firms. when the stakes are high enough, publishers are will-
Buyer Power ing to go head-to-head with their major retailers.
Buyers in the book market consist of everyday Threat of Substitutes
US consumers with a high amount of buyer power. For books as a whole, the threat of substitution is
These customers are price sensitive and easily able moderate. Other entertainment media, such as film or
to price compare thanks to digital technology and television, serves as a potential substitute for books.
the undifferentiated nature of books. Bookstores The surge in quality TV shows and streaming services
face the problem of becoming mere showrooms for has been pointed to as a potential reason for declin-
cheaper online books, as customers have no qualms ing fiction sales. The deputy publisher of Pegasus
about browsing in-store and ordering online. Addi- Books, Jessica Case, theorizes that “the itch people
tionally, book buyers are usually shopping for person- have for addictive storytelling has been scratched to
al reading material,43 and they do not have a press- a large degree by TV series binge watching instead
ing need that might let them tolerate high prices. of books in recent years.”46 But film and television
Supplier Power are not close substitutes to books, and it is unlike-
The bookselling industry’s profitability is ham- ly that they have a large effect on the book market.
However, the book market can be defined in many
40. Unlike Barnes and Noble, Indigo’s profits are increas-
ing. It will be discussed more in-depth under the recom- different ways, and more narrow definitions lead to
mendations section. different potential substitutes. Looking only at the
41. Jim Milliot, “Amazon Profits Soar Again, Despite
Disappointing Sales.” 44. “Market Concentration in the U.S. Book Publishing
42. Andrea Cheng, “Why Walmart Is Pushing Into E-Books, Industry 2007.” Statista, November 2010.
A Business on the Decline.” Forbes, August 22, 2018. https:// 45. Hannah Ellis-Petersen, “Amazon and Publisher
www.forbes.com/sites/andriacheng/2018/08/22/walmart-in- Hachette End Dispute Over Online Book Sales.” Guard-
troduces-ebooks-in-its-latest-loud-display-of-intense-fight- ian, November 13, 2014.
against-amazon/#30b40dd97b28 46. Jim Milliot and Rachel Deahl, “What’s the Matter
43. “Book Market in the U.S.” Statista, 2017, p.34. with Fiction Sales?” Publishers Weekly, October 26, 2018.

Vol. 4, No. 2, Spring 2019 95

 FAILURE TO ADAPT TO CHANGING TIMES

market for new, physical books, the threat of substi- the audio rights to books, making content exclusive to
tutes is high. For example, in the last couple of de- its platform. Barnes & Noble is not a significant player
cades, the ebook market has emerged, and ebooks are in the audiobook market, as it sells audiobooks only
an easy substitute for print books. Similarly, audio- as CDs in an age where that technology is increasing-
books can substitute for either ebooks or print books. ly outdated. Audiobooks growing popularity signals
Ebooks as a Substitute for Print Books the rise of another potential substitute for print books.
The ebook format traces back to the 1970s, but Industry Analysis Verdict
it began to take off in the early 2000s. The year 2000 In brief, the US book market possesses a high
saw Stephen King’s novel Riding the Bullet published amount of rivalry between existing firms, a high threat
exclusively as an ebook which sold 500,000 copies in of new entry, a high amount of buyer power, a mixed
forty-eight hours.47 In 2007, Amazon released its first amount of supplier power, and a mixed threat of sub-
e-reader, the Kindle, which continues to be the most stitutes, as the threat of substitutes depends on how
popular e-reading device.48 Although many analysts the market is defined. All of this suggests that profit-
speculated that ebooks and e-readers would make ability will be low, and the profit margins of Barnes
print books obsolete, that has yet to happen. The over- & Noble and Indigo Books proves that to be true.
all growth of the ebook market has leveled out at about With the inability to differentiate their products and
1% a year,49 and ebooks make up 17 to 25% of all the intense price competition of Amazon, booksell-
books sold.50 On one hand, the majority of consumers ers often struggle to stay afloat. Overall, the US book
love the feel of print books and like having books on a market is an unattractive area for a corporation to op-
shelf. On the other, 55% also agree that ebooks are more erate in, and bookselling companies such as Barnes
convenient and 68% say that ebooks are more modern & Noble would be wise to diversify their holdings
and environmentally friendly.51 So while consumers and move into more profitable areas of operation.
may not see ebooks a perfect substitute for print, their
convenience and potentially lower prices make them a Resources, Capabilities, and Competencies
powerful substitute for print books. In regard to Barnes Barnes & Noble’s most significant resource is
& Noble, ebooks are a particularly dangerous substi- its 630 bookstores, which in turn provides it with
tute as Barnes & Noble relies mainly on print sales. several capabilities. These bookstores are locat-
Audiobooks as a Substitute for Print Books ed in every state in America56 and are an average
Meanwhile, the market for audio books has grown of 25,000-square-foot floor space.57 This extensive
over the last few years. In 2018, 18% of US consum- amount of store space gives Barnes & Noble the capa-
ers listened to an audiobook,52 and audiobook sales bility to turn itself into community centers, a strategy
now make up 5.6% of the entire book market.53 While it is currently pursuing by increasing the number of
this may appear insignificant, that is more than dou- in-store events. In turn, in-store events drive traffic,
ble the market share since 2012.54 As with all other potentially leading to more sales. Yet, Barnes & No-
segments of the book market, Amazon dominates au- ble has been slow to take full advantage of its ability
diobook sales through its subsidiary Audible, which to become a community space, and it has been criti-
accounts for about 41% of the audiobook market,55 cized for waiting until this year to start its first in-store
and it works directly with authors to buy and produce book club.58 In addition, the Barnes & Noble store
space gives it the capability to make deals with other
47. Alison Flood, “Stephen King Writes Ebook Horror
Story for New Kindle,” Guardian, Feb. 10, 2009, https:// companies to host its products in the Barnes & No-
www.theguardian.com/books/2009/feb/10/stephen-king- ble space. Barnes & Noble’s most notable corporate
kindle-ur partnership is with Starbucks, as the Barnes & Noble
48. “E-Readers,” Statista, 2018.
49. Mathew Ingram, “No, E-book Sales Are Not Falling, in-store cafes share the Starbucks’ brand and sell Star-
Despite What Publishers Say,” Fortune, Sep. 24, 2015, bucks’ products. The Barnes & Noble deal with Star-
http://fortune.com/2015/09/24/ebook-sales/
50. “Audiobooks in the U.S,” p.9. 56. “Quick Facts.” Barnes & Noble, Inc.
51. “E-Readers.” Statista, 2018, p.24. 57. Cheng, “Barnes & Noble’s Problem.”
52. “Audiobooks in the U.S,” p.17. 58. Barbara Thau, “Death by Inertia? How Barnes &
53. Ibid., p.9. Noble Has Squandered Its Opportunities,” Forbes,
54. Ibid., p.9. August 27, 2018. https://www.forbes.com/sites/bar-
55. Jeffrey A. Trachtenberg, “Amazon Shakes Up Audio- barathau/2018/08/27/slow-death-by-inertia-barnes-and-no-
books.” Wall Street Journal, February 6, 2018. bles-squandered-opportunities/#7f46d0065cc7

96 The Onyx Review

 S. Waites

bucks is exclusive, and Starbucks coffee is not sold becoming a community space, and it still struggles
at any other bookstore.59 However, Barnes & Noble’s with how to monetize the community strategy. Be-
ability to form these partnerships and capitalize on its sides that, Barnes & Noble does not have a competi-
floorspace is underutilized. I will discuss further ways tive advantage when it comes to event hosting — that
Barnes & Noble could more effectively use its floor belongs to independent stores, as will be discussed in
space in the recommendations section of this paper. more detail in the section on Business-Level Strategy.
Barnes & Noble’s 630 stores are tightly related to While Barnes & Noble has worked with Starbucks to
another of its key resources: its strong relationships create in-store cafes, it has not explored similar uses
with suppliers. Traditional publishing companies, es- of floor space. Instead, space is wasted on music and
pecially the Big Five, have a vested interest in Barnes DVDs, which occupy roughly a fourth of the store and
& Noble’s continued success. Publishers want to get have most recently declined 7% in sales.64 Barnes &
their books to customers, and in-store browsing is key Noble could take that floor space and either dedicate
to getting readers hooked on new authors, especial- it to its community strategy or form partnerships with
ly when it comes to fiction sales.60 Physical stores are other companies and pursue a “store-within-a-store”
about 20% more successful at leading customers to approach. Activist investor Rick Schottenfeld, who
new books.61 Thus, for publishers, Barnes & Noble’s has recently invested in Barnes & Noble, suggests
630 stores are a powerful way to have consumers dis- that it considers leasing some of its floor space to
cover their products. Additionally, the Big Five have a online retailers, who would use the space to show-
tumultuous and strained relationship with Amazon, as case their own products.65 Regardless, it is clear that
evidenced by the earlier mentioned dust-up between Barnes & Noble’s current core competencies are not
Amazon and Hachette. Publishing insiders have “in- providing it with a sustainable competitive advantage.
dicated that they have a strong interest in Barnes &
Noble running a healthy and stable business, to coun- Business Level Strategy
teract the clout of Amazon.com Inc in book retail- Cost Leadership v. Differentiation
ing.”62 The combined effect of the 630 stores and this Amazon’s price cutting forces Barnes & Noble to
strong relationship with the Big Five is that Barnes & move towards a strategy of differentiation, but Barnes
Noble has notable bargaining power, which it is able & Noble has another group of competitors who are
to use to achieve its discounts and special editions. vastly more successful at differentiation: independent
Independent bookstores do not possess this capabili- bookstores. Even as Barnes and Noble struggles, in-
ty, as publishers will not discuss pricing or discounts dependent stores thrive. Professor Ryan Raffaelli of
with the association for independent booksellers.63 the Harvard Business School studies how businesses
Barnes & Noble’s core competencies are its abil- reinvent themselves during technological disruptions,
ity to act as a community space through hosting in- and he says the success of small, independent book-
store events, its ability to make partnerships with oth- stores has been due to three things: “community, cura-
er companies who want to use its floor space, and its tion, and convening.”66 Independent bookstores have
ability to bargain effectively with the large publishing successfully integrated themselves into the local com-
houses. Unfortunately, these core competencies are munities, becoming part of the “buy local” movement
either underutilized or are not a source of a sustain- and creating unique niches impossible for Amazon to
able competitive advantage. The lack of competitive replicate.67 Curation refers to how independent stores
advantage is clearest with its ability to bargain with do not try to be everything to everyone; independent
the large publishing houses, as even with discounts bookstores often focus on a particular genre and audi-
from publishers, Amazon is still able to provide lower
64. Barnes & Noble, INC. 2018 Annual Report, p. 9.
prices. While Barnes & Noble is capable of hosting 65. Andrew Bary, “Why Barnes & Noble Has Untapped
events, it is only beginning to pursue the strategy of Potential.”
66. Carmen Noble, “How Independent Bookstores Have
59. “Heritage,” Barnes & Noble, Inc. Thrived in Spite of Amazon.com.” Harvard Business School,
60. Milliot and Deahl, “What’s the Matter with Fiction November 20, 2017. https://hbswk.hbs.edu/item/why-inde-
Sales?” pendent-bookstores-haved-thrived-in-spite-of-amazon-com
61. “How Do You Find New Books?” Statista 67. Dave Roos, “Indie Bookstores Defied Amazon.
62. Trachtenberg, “Publishers Are Tiring.” Who’s Next?” HowStuffWorks. May 23, 2018. https://
63. Jonathan Platt, “Why Are Book Margins Stuck in the money.howstuffworks.com/indie-bookstores-defied-ama-
1990s?” zon-whos-next.htm

Vol. 4, No. 2, Spring 2019 97

 FAILURE TO ADAPT TO CHANGING TIMES

ence and then work to serve that very specific target a profitable balance between cost leadership and dif-
market.68 For example, Houston, TX has two inde- ferentiation, Barnes & Noble flounders in between,
pendent bookstores, Murder by the Book and Brazos “a giant saddled with hundreds of huge stores, and
Bookstore, right across the street from each other, but an image of corporate sameness in a market that
one focuses on mystery novels while the other focuses has increasingly come to treasure defiantly indepen-
on art books and non-fiction. By segmenting the mar- dent bookstores.”73 If Barnes & Noble is going to
ket, the two stores provide high value to their specific find success, it needs to discover what it can do bet-
subset of customers and avoid direct competition with ter than either Amazon or independent bookstores.
each other. In addition, indie stores highlight books Supply and Demand
that are not necessarily bestsellers, and they develop Barnes & Noble’s supplies standardized stores,
personal and ongoing relationships with customers. complementary services, and the Nook e-reader and
Many independent stores will contain hand-written related online retailing. Although independent book
recommendations taped to shelves; Barnes & Noble stores may focus on a particular subset of books,
is beginning to try and imitate this with less person- Barnes & Noble provides a broad selection that en-
al, typed print-outs. Finally, Professor Raffaelli’s compasses all types of fiction and nonfiction. Each
“convening” refers to how independent stores bring Barnes & Noble includes an in-store cafe that serves
customers together for activities and events such as Starbucks-branded coffee. Although Barnes & Noble
“lectures, book signings, game nights, children’s sto- is experimenting with different layouts with its new
ry times, young adult reading groups, even birthday concept stores (how the cafe is integrated into the
parties.”69 While Barnes & Noble has its own in-store store for instance), they are still similar to the standard
events, it does not have the same connections and re- model. This highly standardized model is what al-
lationships with authors as the independent stores. In- lowed Barnes & Noble to gain success as a cost leader,
dependent stores are not just fulfilling customer needs but as previously discussed, it is attempting to move
for a physical product; they are also fulfilling needs towards a differentiation model and to keep up with
for community and social identity. At the moment, a changing technological landscape. Enter the com-
Barnes & Noble is trying to mimic the success of in- plementary services and the NOOK retail segment.
dependent stores and they do host more than 100,000 Barnes & Noble hosts in-store events designed to get
events annually,70 including story time for children more foot traffic through the stores, many of which
and book signings, but the standardized Barnes & are geared towards the family market, such as story
Noble chain cannot be more different from flexible times for children. Yet critics contend that Barnes &
and personal independent bookstores. Investing in a Noble could improve its in-store events and question
community-based strategy is also costly, as Barnes & why it waited until recently to start its first in-store
Noble would have to invest heavily in talented book- book club.74 A recent investor in Barnes & Noble,
sellers and event programmers in each of its 600 odd Rick Shottenfeld, calls its stores “underused” and sug-
stores.71 Such a strategy looks at odds with the mas- gest it host events like children’s birthday parties.75
sive layoffs in February and Barnes & Noble’s over- Diverging from its focus on physical retail, Barnes &
all cost-cutting. Barnes & Noble is just not as capable Noble also continues to sell the Nook. Unfortunate-
at this sort of differentiation as independent stores. ly, everything the Nook can do, the Kindle can do
If Amazon has lower prices and independents are too. Oftentimes, the Kindle can do it better, and it is
more differentiated, what is left for Barnes & Noble? cheaper as well. Although Barnes & Noble needs to
Essentially, Barnes & Noble is what Harvard Busi- differentiate itself, its supply is highly standardized
ness Professor Michael E. Porter refers to as, “stuck and of debatable quality while unfortunately also
in the middle.”72 While many companies have found possessing a higher price than its main competitor.
68. Ibid. Barnes & Noble’s standardized stores are de-
69. Noble, “Independent Bookstores Have Thrived” signed to appeal to everyone, but its standardization
70. “Our Stores and Communities,” Barnes & Noble, Inc, is at odds with the diverse needs of its customers.
http://www.barnesandnobleinc.com/our-stores-communities/
71. “How Can Barnes and Noble Avoid Borders’ Fate?” Most Americans read only a handful of books a year;
Warton, December 18, 2015. http://knowledge.wharton.
upenn.edu/article/can-barnes-noble-avoid-borders-fate/ 73. Sax, “What Barnes and Noble Doesn’t Get.”
72. Robert M. Grant, Contemporary Strategy Analysis 74. Thau, “Death by Inertia?”
(West Sussex: Wiley, 2016), 108. 75. Bary, “Untapped Potential.”

98 The Onyx Review

 S. Waites

the median American reads four books annually76 ble, Sterling has started publishing Barnes & Noble
and in that same time spends an average of $30 on exclusive collectors’ editions of classic books, which
books.77 Only 7% of American consumers buy more are always prominently displayed in Barnes & Noble
than twenty books a year.78 However, the more a con- stores. Sterling also distributes 1,300 titles for other
sumer reads, the more likely they are to be purchasing publishers, and it is the distribution service which has
books online.79 For example, one of the most popular seen a large growth of sales — $3.8 million, or 10.6%,
fiction genres, romance, sees almost 90% of its sales more than last year.85 Barnes & Noble owns two distri-
coming through digital channels.80 Online retailers bution centers, one in New Jersey and one in Nevada,
simply offer larger selections than a brick-and-mortar that total around 1,745,000 square feet of capacity.86
store could hope to achieve and at lower prices. If you Again, Barnes & Noble’s distribution system in no way
read close to two hundred science fiction and fanta- comes close to competing with Amazon, which has a
sy novels a year, the single aisle of shelves at Barnes massive and technologically-advanced distribution
& Noble quickly loses its appeal. On the other hand, system. Sterling, with its focus on illustrated books,
some types of books do better in print and are more is a good fit for a brick-and-mortar bookseller, and by
resistant to online sales. Any book where pictures or handling its own distribution and selling its distributing
illustrations are the focal points tends to do better in services to others, Barnes & Noble is able to increase
print, and children and their parents tend to buy more its profits. Still, the capacities required by publishing
print books than e-books.81 Children and teens tend are different than those Barnes & Noble is familiar
to share physical copies with each other and many with (retail), and I would recommend that Barnes
children have never read on a digital platform,82 ex- & Noble not pursue vertical integration any further.
plaining the popularity of print for their demograph- Diversification
ics. Given these facts, Barnes & Noble might consider After the failed diversification attempt of the
changing its supply to focus less on genres heading Nook, Barnes & Noble has decided to refocus on
online and more on books for children and teens. books. Riggio remains committed to Barnes & No-
ble’s role as a bookseller. While nonbook items are
Corporate Level Strategy important to Barnes & Noble’s sales, Riggio said: “he
Vertical Integration doesn’t want to do anything that will take away from
Barnes & Noble is only lightly vertically integrat- the company’s reputation as a premier bookseller.”87
ed, a good choice for the field it operates in. Barnes Thus Barnes & Noble will not be exploring alter-
& Noble handles retail and distribution; producing its nate areas of operation or expanding its selection of
own supply of books requires a very different skill set, nonbook items. Potentially in line with the decision
as publishing is primarily an industry of talent acqui- to refocus, in 2015 Barnes & Noble spun off Barnes
sition. That said, in 2003 Barnes & Noble purchased & Noble College, the college bookstore segment of
Sterling Publishing for approximately $115 million.83 the company. Barnes & Noble College is now an in-
Sterling Publishing focuses mostly on non-fiction dependent and publicly traded corporation. Although
and illustrated books, including books on health and the spin off can be seen as a decision to refocus, the
wellness, music and popular culture, food and wine, rationale is shaky and the spin-off was more likely an
history, and children’s books. When Barnes & Noble attempt to raise cash than a careful consideration of
bought Sterling, it acquired the rights to Sterling’s long-term strategy. In the 2012 annual report, Barnes
15,000 titles.84 Since its acquisition by Barnes & No- & Noble said that the college bookstore business
76. Andrew Perrin, “Book Reading 2016.” Pew Research was “well positioned to be a growth business for us
Center, September 1, 2016. as colleges and universities increasingly outsource
77. “Book Market in the U.S,” pp. 41.
78. Ibid., pp. 23. their distribution of campus material.”88 Given the
79. Shatzkin, “A Changing Book Business” potential for growth, the decision to spin off the col-
80. Ibid. lege book store business is even more questionable.
81. “For Kids, Print Books Are the Thing.” Publishers Refocusing is the wrong move. As previously
Weekly, January 25, 2016.
82. Ibid. discussed, the bookselling industry is unattractive
83. “Barnes & Noble Completes Acquisition of Sterling 85. Ibid., pp. 7.
Publishing.” Business Wire, January 22, 2003. 86. “Barnes & Noble, INC. Profile.” Reuters.
84. Barnes & Noble, INC. 2018 Annual Report. June 21, 87. Milliot, “Len Riggio Says He’s Ready.”
2018, pp. 7. 88. Barnes & Noble, INC. 2012 Annual Report, pp. 3.

Vol. 4, No. 2, Spring 2019 99

 FAILURE TO ADAPT TO CHANGING TIMES

for investment and Amazon is undercutting pric- period. Yet, Riggio rejects any suggestion of Barnes &
es. Barnes & Noble needs to find a new strategy to Noble following a similar model to Indigo, saying that
achieve a profit, and that will not come from simply move would be “not in [Barnes & Noble’s] DNA.”97
doubling down on what it has always done. While I This lack of flexibility could spell doom for Barnes
do not recommend moving outside of the nonbook & Noble. Faced with intense financial difficulties, it
areas it currently operates in, Barnes & Noble can needs to innovate and try new things, including taking
expand its selection of some of these items and bet- a hard look at what makes other bookselling chains
ter integrate them into the store. Currently, toys and successful and taking some pages out of their books.
gifts are scattered throughout the store with no clear
organization or integration. To understand how a Recommendations
bookstore chain can successfully diversify into other By trying to please everyone with a broad se-
product lines, Barnes & Noble should study the busi- lection, Barnes & Noble is pleasing no one. Barnes
ness model of Indigo, a Canadian bookstore chain. & Noble needs to narrow its target market, and the
Lessons from Indigo family market would be the perfect fit. Barnes & No-
The bookstore chain Indigo has found success by ble already targets parents and children, but it could
moving away from being a cut-and-dried bookstore increase its attention to this market and further cus-
and into being a “cultural department store for book- tomize its stores and product offerings to meet this
lovers.”89 About 41% of Indigo’s sales come from market’s needs. Children’s books do better in print,
non-book items and 55% from print books,90 making which aligns with Barnes & Noble’s strengths. Addi-
it fairly diversified. Within Indigo stores, “[b]ooks are tionally, parents and children both view reading as an
the main attraction, but they are often complemented important skill. In a study by Scholastic, both parents
with products that tell a story around a book category. and children listed readings skills as the most import-
The Wellness Shop, for example, displays books on ant for a child.98 In the survey, 45% of parents said it
meditation, mindfulness, self-help and other related was “extremely important” that their children read for
topics along with scent diffusers and candles.”91 Indi- fun, and a further 41% said it was “very important.”99
go has recently entered the United States with a loca- This belief is reflected in parents book buying habits;
tion in New Jersey and more on the way.92 Indigo also the average household with a child under seventeen
has a partnership with the American Girl doll compa- reports owning 104 children’s books.100 This target
ny where six Indigo stores carry American Girl doll market has a clear and pressing need, and Barnes &
boutiques, an example of the company’s aggressive Noble can do more to meet it. Barnes & Noble can
expansion into toys.93 Attracting children with upscale increase the number of children’s events the host and
toys ensures that as the children linger, “their parents expand its selections of children’s and young adult
will be wandering the aisles as well.”94 By narrowing books. It can make room for the increase in children’s
its target market, partnering with toy companies, and books by decreasing its stock of book genres that sell
diversifying with an eye to overall integration, Indigo better digitally and make up a smaller percentage of
has found success. Indigo’s revenues have been in- Barnes & Noble’s overall sales. Meanwhile, Barnes &
creasing since 2015,95 displaying double-digit growth Noble will need to increase its employee training so
in the general merchandise business,96 while Barnes & that its employees are knowledgeable about the prod-
Noble’s revenues have been shrinking during the same ucts they are selling and able to organize and run the
89. Indigo Books and Music, INC. 2018 Annual Report, events. The constant, across the board layoffs decrease
pp.7. the quality of the in-store experience, which is exact-
90. Ibid., pp.7. ly what Barnes & Noble says it is trying to improve.
91. Marianne Wilson, “First Look: Canada’s Indigo Books
and Music Makes U.S Debut.” Chain Store Age, October 8, To support the focus on the family market, Barnes
2018. & Noble should increase its toy sales and improve
92. Ibid. the way it sells toys. Currently, Barnes & Noble’s toy
93. James Cowan, “How Indigo Got Its Retail Groove sales are actually increasing, offsetting decreases in
Back.” Canadian Business 89, no. 3 (2016): p.4.
94. Ibid.
95. Indigo Books and Music, INC. 2018 Annual Report, pp.3. 97. Milliot “Len Riggio Says He’s Ready.”
96. Hollie Shaw, “As Retail Rivals Retreat, Indigo Books 98. “Kids and Family Reading Report.” Scholastic, 2016.
Plans Five U.S. Stores in Next Two Years.” Financial 99. Ibid.
Post, November 2, 2017. 100. Ibid.

100 The Onyx Review

 S. Waites

gifts, music, and DVDs.101 With Toys “R” Us going the Nook app for phones and tablets. It could use its
out of business earlier this year, Barnes & Noble has experience with co-branding and corporate partner-
an opportunity to claim some of its market shares. ships to partner with a tech company to create the
Barnes & Noble already stocks educational toys, but app, as Barnes & Noble is clearly failing at creating a
it can increase its focus on educational toys to fit with functional app by itself. Barnes & Noble should also
the strategy of promoting childhood literacy and edu- capitalize on the asset that Amazon does not have —
cation to gain sales. By focusing on educational toys, a team of experienced booksellers. Barnes & Noble
Barnes & Noble would have an advantage over gen- can have its best booksellers create curated “Nook”
eral retailers such as Target or Walmart, and it could lists to give the app a more personal feel. Addition-
train its employees to be more knowledgeable about ally, it can improve its data-mining capabilities. If it
toys than general retailers. Barnes & Noble should had Nook customers input a list of its favorite books,
also consider partnering with specific toy companies that would provide valuable data and let the Barnes &
to make a “store-within-a-store” experience, similar Noble find similar books to sell to those customers.
to Indigo’s partnership with the American Girl com- Amazon already has this ability through its buyout of
pany. While expanding its toy selection, Barnes & Goodreads,105 so Barnes & Noble is lagging behind.
Noble needs to remain mindful of how it integrates When making improvements to its app, Barnes & No-
products into its stores. If a customer visits a Barnes ble should consider integrating audiobooks, as those
& Noble store right now, they will find haphazardly are increasing in popularity and publishers would
organized toys on partially empty shelves. That must likely be thrilled to have a competitor to Amazon’s
change. Barnes & Noble should create a new sec- Audible. Finally, Barnes & Noble needs to enable in-
tion that combines both children’s books and toys, app purchases to increase the chance of impulse buy.
and it can find the floor space by removing its music
and DVD section, which takes up a large percentage Conclusion
of its current space but which is unlikely to gener- Barnes & Noble’s future is precarious, due to its
ate many sales. It can include dedicated event space mismanagement and inability to adapt to changing
and play space. Barnes & Noble is already moving times, but there are steps it could take to improve its
in this direction with some of its new concept stores situation. Barnes & Noble’s history as a cost leader
by including Lego tables in the children’s section.102 and developer of the big box bookstore format has
It can go further. The longer children spend in the left it with six hundred large stores, all of which have
store, the more likely their parents are to buy some- floor-space that could be put to better use. Barnes &
thing. The more likely a customer is to buy something, Noble’s partnership with Starbucks to create in-store
the more likely Barnes & Noble will make a profit. cafes is a business model it could pursue further, per-
While narrowing its target market and raising the haps forming partnerships with online retailers or toy
quality of its in-store experience will be vital to Barnes companies. Barnes & Noble also needs to narrow its
& Noble’s future success, it also desperately needs target market to highly satisfy a select group of cus-
to improve its digital capabilities. While the Kindle tomers rather than try to meet minimum satisfaction
dominates the e-reader market, “most people don’t for a broad range. The family market is the perfect fit
own dedicated e-readers.”103 Meanwhile, the “share of for Barnes & Noble, and it can diversify its product
e-book readers on tablets has more than tripled since offerings to better meet the needs of this market. In ad-
2011 and the number of readers on phones has more dition, Barnes & Noble needs to adjust to the realities
than doubled over that time, while the shared reading of retail in 2018. With the advent of streaming, CDs
on e-book reading devices has not changed.”104 Ama- and DVDs are practically obsolete, yet they remain a
zon may have won the market for dedicated e-readers, major section of Barnes & Noble’s stores. Similarly,
but how relevant is that market compared to people Barnes & Noble must improve its online store and inte-
reading on tablets and smartphones? Barnes & Noble grate its digital experience with their brick-and-mortar
should scale back its physical e-readers and focus on experience. While Barnes & Noble recognizes that it
101. Barnes & Noble, INC. 2018 Annual Report, pp. 9. 105. Goodreads is a website for book readers that has them
102. Corinne Ruff, “Is Barnes & Noble’s New Concept Store track what they read, upload reviews, and create a library
the Answer to Its Woes?” Retail Dive, October 12, 2018. of all the books they have read. Amazon gained access to a
103. “Mobile Fact Sheet.” Pew, February 5, 2018. treasure trove of book market data by purchasing Goodreads
104. Perrin, “Book Reading 2016.” in 2013.

Vol. 4, No. 2, Spring 2019 101

 FAILURE TO ADAPT TO CHANGING TIMES

needs to pursue a strategy of differentiation, its actions Longer Just Amazon.” Forbes, September 6,
are often at odds with the necessities of differentiation. 2018. https://www.forbes.com/sites/andria-
It has not capitalized on its floor space, and the mas- cheng/2018/09/06/barnes-nobles-problem-
sive layoffs last February severely hamper its ability to is-no-longer-about-amazon/#4e92b90e44d0
provide high-quality customer service and offer com- Cheng, Andria. “Why Walmart Is Pushing Into
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