Barnes and Noble Case Study

Case Study: Barnes & Noble

James Face

MBA-635 Marketing & New Media Strategy

Bellevue University

Case Recap

Barnes & Noble, Inc. (BN) is a publicly traded company listed on the NYSE under the symbol "BKS." The company was started in 1917 in New York City. BN is the nation’s largest retail bookseller and the leading retailer of content, digital media and educational products (Barnes and Noble, 2015). In 2014, BN generated $6.4 billion in revenues and markets its products through three primary business segments: retail stores (includes website sales), college stores, and the “Nook”. The “Nook” is hardware reading device for consumers to use for downloading digital content. The Company operates 1,361 bookstores in 50 states, including 700 bookstores on college campuses. In addition, it operates one of the Web’s largest ecommerce digital bookstores, selling digital reading products (Barnes and Noble, 2015). In addition to books and eBooks, BN sells magazines, gifts, emblematic apparel and gifts, school and dorm supplies, café products and services, educational toys and games, music, and movies. For fiscal year 2014, BN’s balance sheet remains strong with $340 million in cash. Nonetheless, the company has not shown a profit since 2010.

Problem Identification

BN’s marketing strategy is to use joint merchandising programs and promotional activities to drive traffic through the stores and to their website: barnesandnoble.com. BN’s retail store sales and Campus store sales have been stagnant over the past four quarters. Having the most retail stores was a competitive advantage for BN in the past; however with the increase in digital consumption, BN had to change its business model by adding digital sales. Digital sales results have not met management’s expectations, representing $245 million in sales in 2014. From 2013 to 2014, retail store sales decreased 6 percent, campus store stores increased about 1 percent, and Nook sales decreased about 15 percent. Considering the trends in retail and book-buying, this is not surprising. Digital book buying sales have been growing over the past decade and now represent over 30 percent of all book sales and this trend is expected to continue (Nielsen Book Market Research, 2015). E-book sales revenue generated in the United States in 2014 was over $2 billion (Statista, 2015). However, there are two demographic segments that support in-store book buying. Christian book sales increased by 10 percent in 2014 and consumers prefer buying kids’ physical books in a bookstore (Nielsen Book Market Research, 2015). This is supported by Greco’s and Wharton’s findings regarding the book industry’s trends. According to BISG’s findings, book reading in the U.S. declined by 5 percent from 61 percent in 1992 to 56 percent in 2002. About 55 percent of females read compared to 37 percent of males. Adults between the ages of 45 to 54 read the most, followed by 55 to 64. The U.S. census reports adults who earn over $75 thousand per year read more than those making less.

Identify the root problem components

Changes in technology have resulted in many consumers replacing their physical book buying with digital books; and this trend is likely to continue. BN’s chief digital book competitor, Amazon, does not have a physical book store. BN was late to the digital market having started three years after Amazon in 1997. Through Amazon’s successful tablet, the “Kindle”, the company has captured about $500 million in eBook sales (Forbes, 2015). Physical books can also be purchased through Amazon, typically at lower prices, and may threaten BN’s ability to make a profit if they have to lower margins. Other problems facing BN are a struggling economy, overhead costs, and competition from Apple and Costco. In addition, the “Nook” is losing money and has declining sales. BN’s core business may need to change. “Core businesses change as industries change or a firm’s competencies change” (Iacobucci, 2015).

Marketing Mix

BN sells a diverse mix of products; however books are the main attraction for visiting the store or the website. The book business, like many other retail stores, is highly seasonal. Consumers are offered a yearly membership for $25 and save 10% on all purchases. You also get free shipping when ordering online. BN offers in-store promotions on many books and magazines, including best sellers. Their website is user friendly featuring books under $5 and easy to find links based on top-seller lists and popular categories. Unfortunately, BN does not have a rewards program which has proven to increase brand loyalty.

Social Media

BN has a dynamic website that makes searching for a particular book or genre fast and easy. There are staffs picks, best sellers, thrillers, new releases, coming soon, and many more options available to help you find the right book. There is a link for store events that include children’s story telling and book signing events. The website entices consumers to explore books and events, while connecting consumers to the store through promotions and incentives. In addition, BN promotes events on Facebook and Twitter and encourages customer interaction through comments about their store experience and books they have read. BN has not effectively promoted their phone and tablet app for customers who want to search for books or look for promotions on their Apple or Android phone.

SWOT Analysis

Strengths Opportunities

Strong brand Growth of ecommerce store

Large network of stores in the U.S. Growth in emerging markets

Economy of scale Globalize web presence

Retail and online distribution Increasing aging market

Weaknesses Threats

Dependence on U.S. market Declining book, magazine, newspaper market

Product substitution from digital Struggling economy

High fixed and inventory costs Increased online competitors

Piracy and illegal downloading Increase in property rents/fixed