We see this business mistake over and over again. It often happens during a business slowdown or a severe decline. In response to these adverse conditions, many businesses try to shift into some new line of business that hopefully will perform better than the one experiencing a downturn. This often turns into a disaster, particularly because the new line of business may not fit the company’s strengths. Sometimes companies can recover and get back on a successful track. And, this success generally happens when the company returns to its strengths.
Book retailer Barnes and Noble is a good example of a company recently in the process of successfully returning to its strengths. As I’ve written about before, Barnes and Noble had moved away from its strengths back when most retail booksellers were experiencing tough times. During that downturn, not only did Barnes and Noble make technology missteps, but it also added more non-book items to its merchandise mix.
This didn’t do much for Barnes and Noble’s performance. Most likely, the new items added were not any easier to sell during a book retailing downturn than were books. In fact, newly added non-book items could be harder to sell, since Barnes and Noble had extensive experience selling books, but may have lacked expertise in selling these other items. So, shifting a bit away from book retailing did not reignite Banes and Noble’s business.
In contrast, many independent book stores stayed focused upon in-store bookselling during the book retailing downturn. Then, when the market conditions for in-store bookselling turned more favorable, these independent book stores performed quite well. Unlike these indies, however, Barnes and Noble, continued to struggle.
Yet, in recent times, Barnes and Noble has been more successful. Why? It’s because Barnes and Noble has returned to its strength, which is in-store book retailing. Barnes and Noble is now doing what many independent bookstores have done all along. The company now focuses upon improving in-store book sales, rather than de-emphasizing its core business to chase new areas that are likely more ill-fitting.
A recent Wall Street Journal article “Barnes and Noble Turns the Page“ by Ben Cohen on July 29-30, 2023 discusses the company’s recent success. According to the article, Barnes and Noble is now being led by its new CEO James Daunt, who previously founded an independent bookstore in London that eventually expanded to nine locations. Then, he became CEO of Waterstones, a U.K. bookselling chain. Regarding his Waterstones stint, the Wall Street Journal article says, “After inheriting a troubled chain with over 300 stores in 2011, he nursed the company back to profitability.” Now he’s revitalizing Barnes and Noble.
As the article explains, today’s shoppers who already know what books they want will most likely go online and order from Amazon. The article says, “A physical bookstore competing against a $1.4 trillion online everything store must give people the stuff they know they want and the stuff they didn’t know they wanted. ‘We’re here to help people browse,’ Daunt said.”
As I see it, helping people browse can work well in a physical store and can build on a bookseller’s strength in bricks and mortar retailing. Browsing in a bookstore shares some similarities with the “treasure hunt’ concept that has enabled retailer TJX (owner of TJ Maxx and Marshall’s) to thrive despite its emphasis upon physical stores at a time when so much shopping takes place online. Although Barnes and Noble doesn’t have TJX’s discounter advantage during tough economic times, it can strive to create a browsing environment where shoppers “treasure hunt” for books, yet is designed in a way that increases the company’s book sales. A “treasure hunt” experience can thrive in physical stores.
To help convert “treasure hunting” into sales, Barnes and Noble appears to be doing data analysis. According to the Wall Street Journal article, Barnes and Noble is evaluating which books should be grouped together. They are selecting which books to put on tables where customers see the cover, not just the spine. As I see it, they are they are essentially trying to do the types of analyses Amazon might do, but do it in a way that applies to physical retailing. A company doesn’t have to be an online business in order to do the types of analyses that Amazon is known for. In fact, Barnes and Noble can do these kinds of analyses to encourage browsing and to help convert that browsing into book sales.
Furthermore, the Wall Street Journal article also points out that Barnes and Noble is striving to treat its locations more like independent bookstores, where the manager running the store has the authority to make changes to meet the needs of local customers. According to the article, this lets store managers take into account the fact that local tastes in West Des Moines may differ markedly from those in Manhattan. Yet, the article says, “Others in publishing are skeptical that local tastes matter as much in a business increasingly driven by national bestsellers.”
In my view, the possible disadvantage of store managers with complete freedom to decide what their stores carry is that some managers may end up ignoring the data and may incorrectly overemphasize items with poor sales potential. However, if CEO Daunt’s impressive previous experience has shown that this works, and if Barnes and Noble’s situation is enough like his previous stints, then he may be right about this being a good approach. Based on my research, however, there is overwhelming evidence indicating that Daunt’s other two strategic approaches—1. Building on the organization’s physical retailing strengths and experience and 2. Asking questions and gathering information about what is likely to work—generally go quite well and do lead to business success.
So, in conclusion, as long as there are books, Barnes and Noble’s new direction, which entails returning to the company’s strengths, appears to have good potential for success.
La Grange Park, IL