Barnes and Noble (BKS) was started as a Printing Company around 1873 and has grown to be the largest book retailer in the United States. It has enjoyed great success, and weathered one of the worst economies faced in decades. It also survived in an environment that Borders collapsed in, but is Barnes and Noble out of danger?
Recent numbers haven’t looked too promising, and while the Nook eReader appears to be a successful product for them, they are being outmaneuvered by rival Amazon.com (AMZN) and their Kindle eReader. It appears that Kindle is outselling Nook, and let’s not forget that they were considering spinning Nook off, which I believe would be the final nail in the Barnes and Noble coffin.
The Nook appears to be an excellent product, but I don’t believe eReader hardware will save any company. I have a different perspective on all of this, but I believe it is the eReader software and prices that will really determine the winner.
eReader Software To The Rescue?
As tablet PCs explode in growth, I believe we are going to see less demand for their eReader counterparts. Ultimately, the hardware will be of little consequence when it comes to the success of a business. These eReaders might provide some short-term profits, but ultimately, sustainable income will come from eBooks and media sales within their respective marketplaces.
I believe we will see eReader sales tail off as more people purchase their own tablet PCs, which means that the eReader software and prices will become the more important aspect when it comes to the success of these companies. Right now, people are buying the cheaper piece of hardware, with less thought on the price of media. This won’t be a sustainable trend.
What Will Save Barnes And Noble
Barnes and Noble can survive if they adapt their pricing to be competitive, and attract people to their Nook Book store. They will need to court as many customers as possible on third-party tablets to build a solid enough clientele to carry them through the future. Amazon has a lot of advantage in the eCommerce marketplace, and it will take Barnes and Noble some time to find their way.
Barnes and Noble has gotten off to a shaky start by being included in an eBook price fixing scandal, but if they can shake this off and focus their business, they might stand a chance. Here is a summary of what I think Barnes and Noble needs to do:
- Continue meeting Nook hardware demand while it is there.
- Develop the absolute best eReading software they can, loaded with the features people want.
- Be competitive in their Nook Book store pricing.
- Continue to be creative in their marketing, and adding value with their retail presence.
If Barnes and Noble focuses on those aspects of their business, then I believe they will build out a sustainable clientele, that will purchase from the Nook Book store for years to come.
I don’t believe the Nook hardware will save Barnes and Noble in the Long run, but I do believe that the eBook business will. I don’t believe the future of eReaders is in the hardware, unless the book stores can continue subsidizing the price of their eReaders with the possibility of future sales. I believe that plan is a poor long-term plan, and only serves the needs for current market conditions. Once the market is overrun by cheap tablet PCs, the application and book prices will determine where people spend their money.
Barnes and Noble has properly positioned themselves for the current market, but they need to follow through into the next phase if they want to stand a chance against rivals like Amazon.com. We also must not discount potential competitors like Wal-Mart entering into the battle. Wal-Mart tried to get into the MP3 downloads business, and I’m sure they’ll try to get into the eBooks business once the dust settles, and enough people have tablets.