Meditations on a Nook

Gary Faitler, Pitney Bowes Business Insight

Barnes and Noble continues the fight. They recently announced that Walmart will begin carrying their Nook e-reader. This was followed by the secretive media build up to the kick-off of a new Nook color tablet designed to serve a niche between the black and white Kindle and tablet computers. With such moves, B&N displays its historic spirit to aggressively lead, grow, and redefine the retail book industry. Although these latest chapters for the dominant bookseller narrate a courageous effort to recapture momentum from the undisputed e-tailing colossus, the end of this drama is far from clear.

This uncertainty is reflected in such fundamental issues as: the storied battle of e-tailing versus brick and mortar, the virtual experience versus tactile traditionalism, increasing competition for the e-reader innovation lead and market share, and, of course, the prevailing sub-text of a generally skittish consumer in this lingering recession. This piece is not to include another review of the Nook’s specific feature and market comparisons with Amazon’s Kindle or its new effort to take-on the i-pad. Rather, it ponders on how this particular product’s fate touches the broad new themes confronting retail today as it adjusts to technology and fast evolving lifestyles.

As background, I must confess that, as a graduate student in Ann Arbor, MI, I grew up shopping the original Borders Bookstore on State Street. It was a source of local pride when that concept was rolled out to a national market. Later, when the new Barnes and Noble units came onto the scene, I initially viewed them as the upstart, shamelessly imitating the rarefied Borders mystique. As such, I was prepared to dismiss them. Yet, as my perspective grew as a retail consultant, I was forced to concede that Barnes & Noble would ultimately emerge as one of the seminal cases of successful retail cloning (think Lowes- Home Depot, Staples-Office Max,). In this case, the clone would ultimately outshine its DNA parent for growth and innovation.

A little history: Just as B&N’s battle with Borders for supremacy on the ground was breaking in its favor, a new competitive entity entered the fray in 1995 effectively lobbing an existential threat at the very core of its aggressive business plan. We almost have to remind ourselves that Amazon.com began as an on-line bookstore, providing virtual browsing that the bookstore giants could not match. Today, e-commerce competes in virtually every retail channel, but in the initial big showdown with brick and mortar, it singled-out the booksellers. To compete, Barnes and Noble had to re-assess the very essence of its business, stepping-up its already formidable spirit to innovate. It had no choice but to quickly think of itself as a practitioner of retail technology in which its physical store presence was but one asset for purveying its information-rich products to a varied customer base. And, though it has never looked back, the chess game for its survival gets increasingly complex.

One critical complexity on that board is the inherent tension between the traditional book, and B&N’s own version of a vehicle that immediately challenges a book’s very relevance as a future conveyor of written content. With the growing acceptance of e-readers such as the Nook, it is no longer far fetched to ask the question: Are we witnessing the biggest innovation in the transmission of the written word since the invention of the printing press? Will these current cloth and paper bound objects eventually become mere relic dust collectors, just as scrolls must have in the 15th century? And, if so, what is the fate of the premier purveyor of such products through its substantial real estate within the retail landscape?

Part of the answer, I believe, lies in the essential delivery of the retail experience. All successful retailers understand that a major component in the art of merchandising is providing entertainment value to the shopping enthusiasts of their products. For book retailing especially, entertainment is a critical component. That is why the big booksellers have perfected a store design that conveys genteel yet bohemian ambiance combined with a sense of intellectual excitement – the feeling that you are, in some way, bonded with great authors that you may have not touched since high school – or ever.

This is also why the dilemma faced by Barnes and Noble is fraught with such notable irony. Think about two types of frequent B&N customers. One type of frequent store “guest” particularly enjoys that shopping experience: the slow-paced browsing, the comfortable chairs, the young staff (with skin pierced and illustrated), the rich smell of coffee, free wifi, and oh yes! the books and magazines of all kinds. The other type of frequent customer is the serious, voracious reader. This shopper, who is heavily engaged with the core product, would be least driven by the store experience and most appreciative of an e-reader’s ability to deliver volumes of material with technology-charged efficiency. While the resolute reader may also enjoy the store experience, when it comes down to actually “getting the goods”, they will likely prefer the electronic means. One, ultimately divorced from an actual store visit, and increasingly disconnected from those quaint objects on the shelves. Unfortunately, the success of the B&N physical store formula very likely depends on both types of customers to survive.

It is interesting to contrast B&N with Blockbuster Video. Unlike B&N, a visit to Blockbuster was a rather tiresome experience. The “product” itself had no inherent tradition as it merely capitalized on relatively recent technology for delivering entertainment content (arguably in a monopolistic fashion). This left the chain exceedingly vulnerable to replacement technology that would render its considerable store network nearly irrelevant, almost overnight. Blockbuster continues in its head-scratching bids to discover a survival vehicle for the company, but clearly, no facet of that formula will fully include the extensive store network still visible on so many street corners.

What remains to be seen is whether the Nook will serve as a bridge, allowing B&N to harness technology in a way that is supportive of its primary current business proposition. The vision is for a network of outlets that blend technology and tradition-referenced ambiance into a synergistic whole. If they succeed, they will have, once again, transformed themselves – and their industry. If they do not succeed, they will fall victim to some variation of the current fate confronting Blockbuster. That is, attempting to “stay in the game” in some fashion, while divesting of a brick and mortar albatross. If this becomes the unfortunate outcome, then in hindsight, the Nook may ultimately represent for B&N, the beginning of its end-game.