B&N: Would it likely still survive digitally?

What do you mean "if"?

It's not being talked about as much as Borders, in the media. But B&N is in serious trouble. Despite making a profit last year, their stock is sitting at only 47% of their 52-week high. In a recovering economy, their stock has been dropping badly. In fact, it was recently pointed out that they were the *only* Fortune 500 company whose total value in stock was less than the total asset value of the company - meaning their assets, if liquidated, were actually worth more than the stock. That's something often seen as a sign of impending bankruptcy.

That said, if B&N can retain a 15% market share in ebook sales, and ebook sales boost to 50% of the market over the next year, they can still retain over a $2 billion market share just in ebooks, all of which will tend toward higher profit margins than their brick and mortar sales.

B&N's survival question is going to depend on how fast they can divest themselves of as many brick stores as possible, and how effectively they can diversify the retail stores they retain. As print book sales continue to crash over the next year, they're going to need to focus more and more on selling non-book objects in those stores, and getting people in the doors to buy other things. And their longer term survival is going to depend on retaining substantial ebook market share and opening more overseas ebook markets.

Still very possible they will slip and end up a dead company, the way Borders is very likely going. But B&N is starting from a more secure point, and has a much better web presence, so their odds are better.

According to AAP February numbers ebook sales surpassed all other categories for trade books - that includes both children and adult hardcover, trade paperback and mass market paperbacks. From a sales perspective that was 30% of the total sales for all formats.

KevinMcLaughlin said:

What do you mean "if"?
B&N's survival question is going to depend on how fast they can divest themselves of as many brick stores as possible, and how effectively they can diversify the retail stores they retain. As print book sales continue to crash over the next year, they're going to need to focus more and more on selling non-book objects in those stores, and getting people in the doors to buy other things. And their longer term survival is going to depend on retaining substantial ebook market share and opening more overseas ebook markets.

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And they are MOVING on it. I've been told to wear non-dressy clothes next week because the only thing I'm going to be doing is dismantling bookshelves. More bestseller tables, fewer titles, more places for people to sit with their coffee and take advantage of the in-store reading feature on their nooks.

Not a great scene for the midlist author.

JSSchley said:

More bestseller tables, fewer titles, more places for people to sit with their coffee and take advantage of the in-store reading feature on their nooks.

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Which is odd, because one of the reasons I rarely go to bookstores these days is that they're unlikely to have the non-bestselling books that I'm looking for, whereas Amazon will.

movieman said:

Which is odd, because one of the reasons I rarely go to bookstores these days is that they're unlikely to have the non-bestselling books that I'm looking for, whereas Amazon will.

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Exactly. There's very little room anymore for a bricks-and-mortar store to compete in that arena--150,000 titles still isn't going to cut it when Amazon has warehouse after warehouse where an RFID tag gets the book on its way in twenty minutes. People who are looking for non bestsellers aren't even bothering to come into the store. I think the thinking is becoming, why keep the onesies and twosies around at all, when there could be more tables set out to facilitate casual browsing and buying of a smaller selection of titles?

The profit margin on the coffee you sip while wandering by the "Gifts for Grads" and "Mother's Day Finds" table is much, much higher than anything the store makes on the books.

Oh, and I should add in the way of disclaimer--I know nothing about the deep inner workings of B&N. I'm a peon who stocks books and slings lattes a few hours a week for minimum wage. But I also know the challenges faced by the book industry, and its interesting to see how the store is changing shape with those in mind.

LOG said:

If Barnes and Noble went down the drain financially (even more so than already, that is) do you think it would die off completely, or would we likely just see it's brick-n-mortar stores go away/reduce in number, and the digital book sales still stick around?

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If B&N goes into administration then it won't be able to keep back the profitable parts of its business and dump the bits that aren't making money: it'll have to let go of everything. At that point the administrators will sell off what assets they can, which would include the physical bookshops or leases which remain on them; and the online presence. But they'd not remain in B&N's hands, even if they were still called B&N. The books stocked by the company would probably have to be returned to the publishers, and would not get sold off to the highest bidder: at least, that's what eventually happened when Borders closed its doors in the UK.

movieman said:

Which is odd, because one of the reasons I rarely go to bookstores these days is that they're unlikely to have the non-bestselling books that I'm looking for, whereas Amazon will.

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So much depends on the shop. I love going to good independent bookshops, because I almost always find armsful of the peculiar, individual books that I like to buy. There are some branches of Waterstones which have an excellent range of stock; and there are some which are more predictable, but they still stock a good range of current titles. I don't think it's true that bookshops focus on bestsellers only: that's just not true. They might focus on recent publications, but that's an entirely different matter.

JSSchley said:

The profit margin on the coffee you sip while wandering by the "Gifts for Grads" and "Mother's Day Finds" table is much, much higher than anything the store makes on the books.

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I'd love to read some statistics on this: if you could cite your sources I'd be grateful.

Old Hack said:

If B&N goes into administration then it won't be able to keep back the profitable parts of its business and dump the bits that aren't making money: it'll have to let go of everything.

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I think it's more likely that B&N would shoot for Chapter 11 (reorganization) over Chapter 7 (liquidation), if they can manage it. That would potentially allow them some breathing room to dump more physical bookstores, and focus on their college stores (highly profitable still) and online store (again, highly profitable). How well they do will depend on how good their corporate management is and how they handle this transition, though.

How well they've done up to now also depended on its corporate management, though.

[That's such an inelegant sentence. My apologies.]

Old Hack said:

I'd love to read some statistics on this: if you could cite your sources I'd be grateful.

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I can't really cite sources because as much as this is semi-anonymous, I could be fired for revealing the exact figures I've seen on the ordering sheets. (See "peon" disclaimer .) But you could do the math--think about how much a bag of expensive coffee costs, and then calculate that each bag makes about three urns, each urn serving about 20-25 medium cups of coffee. Now consider that B&N doesn't spend anywhere near what you'd spend on a bag of good coffee, and you see what they're making when they charge you $1.65.

By margins I don't mean they make more money overall in the cafe; it's not a big enough aspect of the store to make that happen. No one wanders in and buys $250 of lattes, and there are always a few customers each day who will spend that on books. But the markup on food is WAY more than the markup on books; plus, the store can set the price of the food where the publisher sets the price of the book. So if people looking for more obscure books aren't coming in because they can just order it online (and why would they? Most of the time we have to order them from the warehouse anyway), it makes sense to make the store cater to those who will spend money on food, browse the new hardcovers, and maybe leave with a few frontlist books and gift items.

Also, I should clarify that by "bestsellers" I don't mean the current NYT list only. I just mean books that consistently sell. "Facebook for Dummies" isn't going to move the volume necessary for international notoriety, but that book is going to stay around because it does sell a copy or two every month or so. The book describing the history of a specific type of U-boat, however...that one you might start finding only online.

Ah, I see. Sorry, I didn't intend for you to tell us anything that would put your job in trouble. My parents used to own a cafe, and a small shop. If you looked at the cost of stock for the shop and compared it to the cost of the food for the cafe it did appear that the cafe provided a much better profit margin than the shop: but the reverse was true because the stock in the shop could just be put out and priced up and left to sell, whereas the cafe stock had to be refrigerated, cooked, and served. The staff cost was much higher; the cafe needed waiting staff, cooks, cleaners; one bit of bad stock control would eat up a lot of profit margin. It was a much harder business to run than the shop. And in an attempt to swing this thread back on-topic, I love the stationery departments in my local bookshops: but I don't think that for me they'd work so well online. I need to be able to touch and smell the paper.