How logistics management innovation can help boost Barnes & Noble

Barnes & Noble doesn’t sell books. The company offers the experience to meet people who love books in a warm and comfortable store, having a steamy cup of coffee and reading or talking about some special title.

At least that’s the competitive advantage that Barnes & Noble had empowered in the last years in order to maintain its market share, despite the losses that e-commerce giants like Amazon have meant for them.

Currently, Barnes & Noble faces complex times because of a mix in internal and external factors that have weakened its business model. A 2010’s analysis case explains that Barnes & Noble has three main issues of concern:

1.“Is unable to find sufficient leadership in its boardroom. Leadership is struggling to deal with the ongoing issue of selling the company.”

2.“Profit margins are decreasing for Barnes and Noble. Competitors such as Amazon are currently stealing market share causing profits to fall.”

3.“The decline in physical book sales. Technology has created the eBook and eReader enabling readers to download books online.”

The thing is that Barnes & Noble wants to win the battle with its own weapons and terms. Duke University’s professor Daniel Egger holds that “the company does not want to turn itself into a pure online competitor to Amazon. A market where it has no competitive advantage (…) To me, Barnes & Noble’s basic value proposition is a place to gather with other people. Maybe sit and study or have a cup of coffee while surrounded by books. There’s the pleasure of people watching and the chance that you might meet somebody over a book. Something you’ll never get on Amazon.”

“Perhaps –professor Egger adds- the only way to survive long term while selling this kind of intangible would be to persuade people to pay a cover charge at the door just like a bar that offers a live band. Barnes and Noble is, in fact, a kind of old fashioned club. Essentially people are paying to be with other people who like or love books.” 

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Logistics to the rescue

In order to recover an important share in the marketplace a very sharp comprehensive and long-term strategy is needed, and Barnes & Noble is already taking some actions in several areas of its business model to improve its numbers.

Last September 2015 the company informed that “As we look to the second quarter and beyond, we are focused on opportunities to increase comparable store sales and reduce expenses. The Company plans to further reduce NOOK (Barnes & Noble’s ebook reader device) expenses through synergies with the Retail business and we expect to see those benefits during the balance of the fiscal year.”

Besides, several logistics management decisions have been taken to improve company’s performance. According to a study case of the Pennsylvania State University, “currently, there is a huge reduction in profit margins due to stiff competition, they’re operating at a net loss, and they are spending money on stores operating independently. Lately, there has also been a huge decrease in physical book sales due to eBooks. Barnes & Noble is also strongly lacking support activities. They lost $1 billion in their e-reading device, and have not spent any money in research and development in the past 4 years.”

The Penn State study –released in 2015- also propose that B&N could apply some supply chain tactics to reduce rent expenses, like “sharing our warehouses with Google to reduce our rent expenses.  We could offer them to use our current facilities at a charge of 25%. Our next strategy would be to offer “real estate” on our website.  This would allow outside companies to promote their products on our website, in return for “real estate” on their website.”

Besides, B&N had teamed up with Google to offer same-day delivery using Google Shopping Express. They’ve started in New York, Los Angeles, and San Francisco, with three different delivery options. This is a clear sign that for B&N giving the battle on its own terms doesn’t mean to narrow their possibilities to win, but to take advantage of new resources without loosing company’s identity.

“That Barnes & Noble is now venturing into the same space as its virtual foe is notable –Inbound Logistics explains-. Online retailers increasingly understand they need to use expedited shipping to differentiate from their competitors. Amazon wrote the book on it. But traditional sellers are catching up to speed and leveraging omni-channel convenience and flexibility to enhance the customer experience and deliver more value (…) Barnes & Noble stores are becoming dual-purpose replenishment centers. Google staff employees in Barnes & Noble stores to “pick” books off shelves and coordinate transportation with local couriers.”

As Barnes & Noble has been defined as a ‘brick and mortar’ type of company –a business that operates from built-up properties or storefronts- specialized media and consultants are started to talk about ‘brick and click’ as a mix between this classic business model with online business, and this concept explains what B&N is aiming to.

Currently, the physical book business has stabilized, and Barnes & Noble isn’t the exception. According to Fortune, B&N CEO Ron Boire said that “the retailer has benefitted from efforts to diversify its offerings and ramp up its educational toys and gift businesses, sales of which grew 12.5% and 13.8% respectively in the quarter ended Jan. 30.”

“B&N –Fortune adds- is hoping to build in its recovering retail business with the launch of a new store prototype next summer at four locations.”

Definitely, it’s a big challenge that Barnes & Noble and other ‘brick and mortar’ companies have been facing in the last decade. But, for several reasons there are some strength factors have helped them to maintain positioning in an always evolving market, where there isn’t just one right model anymore. What do you think about this ‘brick and click’ solution for storefronts companies? How should they manage its logistics to deliver both online and offline services? Share a comment.

Francisca HowardWriten by Francisca Howard

Francisca is a commercial engineer by University Adolfo Ibañez. She worked 10 years in the retail industry and the last few months she has been working as a business developer for Drivin, a SaaS solution that allows to distribution companies to reduce its transport costs as well as increase the service quality of their final clients.

 

 

 

 

 

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