Barnes & Noble (BKS)
You can’t fight a ghost. But that’s exactly what Barnes & Noble (BKS: Charts, News, Offers), the largest U.S. bricks-and-mortar bookseller is doing. Just over a decade ago, Amazon.com (AMZN: Charts, News, Offers) arrived at the scene and threw the bookseller world upside down. The young online retailer had minimal expenses compare to its rivals, and quickly ate into their profit and market share. The ubiquity of the Internet, the explosion of mobile technology, the Kindle, and finally the recession of 2009 are accelerating the death of the few remaining survivors. The most notable victim is the Borders Group (BGP: Charts, News, Offers), who recently announced that it is laying off employees and closing 200 Waldenbooks stores. However, Barnes & Noble is still fighting. But you know it is a losing battle, and the latest quarterly report made it evident. Can Barnes & Noble survive? Will it still be around in 10 years?
You can’t fight a ghost. But that’s exactly what Barnes & Noble (BKS: Charts, News, Offers), the largest U.S. bricks-and-mortar bookseller is doing. Just over a decade ago, Amazon.com (AMZN: Charts, News, Offers) arrived at the scene and threw the bookseller world upside down. The young online retailer had minimal expenses compare to its rivals, and quickly ate into their profit and market share. The ubiquity of the Internet, the explosion of mobile technology, the Kindle, and finally the recession of 2009 are accelerating the death of the few remaining survivors. The most notable victim is the Borders Group (BGP: Charts, News, Offers), who recently announced that it is laying off employees and closing 200 Waldenbooks stores. However, Barnes & Noble is still fighting. But you know it is a losing battle, and the latest quarterly report made it evident. Can Barnes & Noble survive? Will it still be around in 10 years?
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Stock Analysis
Management at Barnes & Noble knew that it was in for a tough fight when Amazon.com first arrived at the scene. The logical response was to fight back with its own online presence. However, Barnesandnoble.com was, and still is, no match for the innovative Amazon.com web site. Whereas, Amazon.com web site is the hub of its strategic plan, Barnesandnoble.com is just an extension of its bricks-and-mortar stores, and a mere shadow compared to Amazon.com site. Amazon.com site has more innovative features, better user community and reviews, and more robust affiliate marketing system that leverages countless partner sites. For Barnes & Noble, the recent $210 million online sales that represents 32% increase is nice, but it will not carry the rest of the company. It needs to up its online game, and at least matches the capabilities that Amazon.com offers.
For the second round, Amazon.com launched its new wave of attack with its Kindle e-book reader. Again, Barnes & Noble responded, albeit very late, with its own version of an e-book reader called the Nook. Right off the bat, the Nook experienced some delays. And just like the online battle, Barnes & Noble didn’t bring anything new to the table. It simply gives consumers another undifferentiated alternative. In short, Barnes & Noble has to do a lot more than just being a copycat to win this fight.
Can Barnes & Noble survive? May be. At least Barnes & Noble has put up a good fight so far. The exclusive partnership with Starbucks (SBUX: Charts, News, Offers) was a nice touch, the most recent acquisition of the Barnes & Noble College Booksellers unit was a good move, and the Nook helped. Unfortunately, these are just tactical moves that slowed the hemorrhage. Will Barnes & Noble still be around in 10 years? If the past 10 years is an indication, the answer is most likely NO. To survive, Barnes & Noble will have to make some sacrifices (e.g., kill off some bookstores) and initiate a few aggressive moves of its own before Amazon.com’s third strike.
More news about Barnes & Noble:
- Barnes & Noble 3rd-quarter profit falls, but sales rise, boosted by college bookstores, Nook — The Nook helped Barnes & Noble online sales, but is this enough?
- Barnes & Noble profit falls, outlook is weak — Reuters shares some numbers from the most recent quarterly report.
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I don’t know if the specific store Barnes & Noble will be around in ten years but I am pretty sure there will still be bookstores and that e-readers won’t really be a big deal once the novelty of them goes away. Why? Because I only know one person that owns one, and he only has it because it is more convenient for him when he is shipped overseas with the military. Everyone else still prefers books. Now being able to order printed books online and having a good website may be the future of bookstores and might cut back on the amount of brick and mortar stores we see, but it won’t be a result of e-readers taking over, of that I am pretty certain.