Barnes And Noble, Inc.
Dr. Daniel Friend
May 11, 2004
This audit covers Barnes and Noble, Inc. from February 2000-February 2001. There is a gross need to examine the B. Dalton stores as they are continuing to see a drop in sales and are contributing to net income losses. The acquisition of other online retailers seems to help in obtaining more inventory and customer bases, but the initial purchase is a drain on our net income profits and has helped to create a loss in this year’s income. The marketing strategies may need to be expanded to include more of the available market of those with disposable income. Advertising with alternative newspapers and college campus papers on a local/regional level may help to expand the customer base and bring some who had been customers of our competitors over to our stores. Perhaps more sponsorship of various organizations would also be called upon. The biggest way to keep with our mission and values statement is to expand the budget and training of the Community Events Manager. This will help to generate buzz within the market and bring more customers into our stores. Our discount strategies are working reasonably well and should not be changed at this time, as we are competitive with our competitors in prices.
And while our discount strategies are working well against the major competition (Borders, Books-a-Million, Amazon.com) they are backfiring against the smaller local bookstores. This is especially noticeable in California where there are quite a few locally owned independent bookstores. These bookstores have loyal followings of their own that are not willing to let Barnes and Noble or any other major book retailer into the local economy. Perhaps by extending the hand of cooperation, friendship and market share we can quell the rebellion that is sure to arise from the local residents.
Merging of the GameStop, BN.com, B. Dalton and Barnes and Noble brands with in store promotions or educational pamphlets would be a move in a positive direction. Most of our customers are loyal to our brand and do not realize that we have other areas of product within our brand image/name. By making these customers aware that we are also active in the sale of video and computer games will help to increase sales at those stores as well as for the company as a whole.
Overall, Barnes and Noble, Inc. is going in the right direction, but can always use more assistance in the marketing of the product to the mass market arena. More local dollars, more in store events in smaller areas, better focus on a target market. Local dollars will bring in more people to the store for story hours, book clubs, various entertaining gatherings. More store events for smaller areas, meaning try to coax authors to visit more stores in some of the smaller markets. People in Lincoln, Nebraska are going to buy books just like someone in New York City and would also like to meet their favorite authors. Try to narrow the focus on the market trying to be reached in each specific area. If a store is in a large college area, attract the college student dollar as well as the local resident dollar by featuring “local” nights and “student” nights.
The local market is where the “bread and butter” lie, and more attention needs to be paid to those in that area.
Table of Contents
d. The 4 Ps:
While the flagship of Barnes and Noble has been fairing well and has seen profit increases over the fiscal year, the accompanying bookstores under the B. Dalton name have been losing market share to nearby “super” stores that have opened outside of the malls. B. Dalton is primarily a mall store location. Barnes and Noble stores have seen an increase in sales but B. Dalton has been suffering losses. The B. Dalton stores do not seem to be able to compete with the new “super” stores that are opened outside of the mall’s location. This is not region specific as it has been noticed throughout the country. To combat the loss of profits from the B. Dalton stores, the underperforming stores have been closed. 61 B. Dalton stores were closed in fiscal year 2000. B. Dalton’s focus is on the “middle-American” reader and so would do better to keep the bulk of its stores in areas free from “super” stores and in the non-urban or metropolitan areas. Much of the increased sales for the Barnes and Noble stores can be attributed to grand opening sales. To keep this situation, 40 to 45 new stores will be opened. The greatest opportunity for future profit for the Barnes and Noble stores would be to continue to open in metropolitan or urban areas.
All Barnes and Noble stores offer an extensive selection of over 1 million titles. However, given that there are more than 1 million titles to offer, an extensive warehouse storage facility is also utilized in sales within the store. Any book can be ordered and usually gotten in three to five business days and can either be shipped to the store for pickup or directly to the customer for home or office delivery. Barnes and Noble, Inc. has embraced the new technologies and opened an online retailer to compliment the brick and mortar sales in 1997. The online section of the company has alliances with major internet service providers and boasts one of the largest online retailer book inventories.
Not only has Barnes and Noble, Inc. embraced technology for furtherance of getting books into the reading public’s hands, but has also expanded into software and video game sales. The companies GameStop and Babbage’s have helped to increase revenues into the overall Barnes and Noble, Inc. family. For example, Babbage’s attracts the market of teens and young adults who want the latest video or computer games and also want to revisit some of the older ones. Babbage’s offers preowned games for purchase in all of its stores. Not only can a teenager help his dollar go farther by trading in an old game for a new one, but he will once again spend that same dollar to get the old game back that he realizes he can’t live without.
The three largest competitive threats are Borders, Books-a-Million and Amazon.com. Both Borders and Books-a-Million offer a café within their stores and carry music, movies and gift items. However, Barnes and Noble has a slight edge in the café sector as they exclusively offer Starbucks products. Starbucks has a positive brand image and is easily identified. Sometimes customers enter a Barnes and Noble only for a Starbucks coffee and wind up purchasing books or gifts as well. Books-a-Million offers deeply discounted books and a discount card. The deep discounted books are what Barnes and Noble also has listed as “bargain books”. These are discontinued titles; hardcover editions that are now available in mass market paperback, publisher remainders and overstock items. Borders offers no discount card and has a small selection of “bargain books”. Borders is able to offer title lookup and either store or home delivery for the customer, but usually within 5-7 business days. Books-a-Million usually offers publisher orders and those can take up to 2-4 weeks. The biggest competitive edge that Barnes and Noble has to offer for the discount sector is the Barnes and Noble Bestsellers, Staff Recommendations and Discover New Writers discounts. Hardcover bestsellers are 40% off, Staff recommendations and Discover books are 20% off and paperback bestsellers are 30% off. These discounts bring return and new customers for the great values. Borders and Books-a-Million only offer 30% on hardcover bestsellers (all bestsellers are from the New York Times Bestseller Lists) and 20% on paperbacks. Borders also offers discounts on staff recommendations, but only at 10%. Books-a-Million’s discount card offers 10%, as does the Reader’s Advantage offered by Barnes and Noble. Borders has no card. The Reader’s Advantage also allows a 5% discount on online purchases.
Another competitive threat are the local bookstores, mainly in California. Local bookstores are claiming that our national presence allows us a better deal with publishers, which leads to lower prices and better discounts and that they can’t compete. We need to find some way to join the local bookstores in those areas and work together. Perhaps sending customers over there if we are unable to procure a book for them and offer joint in store events. Since our mission is to be a part of the community, this will probably be seen as a favorable gesture of good will and good business practices and an adherence to our mission statement.
Barnes and Noble strives to remain the nation’s largest bookseller and as of the end of FY2000, was the fourth most trafficked online retailer and is among the top 50 largest web properties on the internet. There are clearly defined targets for each sales week and clearly defined goals of how to reach those targets. Each bookseller is fully trained in how to offer title ordering for the customer, make further recommendations for complimentary titles or gifts and offer membership for the discount card. Each store is given monthly instore marketing updates that contain an update for each week. Store signage is to be changed within these parameters and the various discounts and specials are to be marketed to the customer. This is also inclusive of the café side, which runs its own specials on coffee drinks, food items and gifts. For the FY2000, there was a net income loss, which can be attributed to the acquiring of the third largest online bookseller, Fatbrain.com; some of this loss is based on a 40% equity interest from the purchase and exchange of stock.
The market for Barnes and Noble stores is focused mainly on metropolitan area residents who follow the bestseller lists and listen to public radio stations. Barnes and Noble utilizes this by underwriting a portion of the programming on public radio stations nationwide. Borders also underwrites portions of public radio programming. Among the bricks and mortar competitors, Borders is the biggest threat to Barnes and Noble. They also use the “super” store approach to their stores and offer cafes, movies, music and gift items. The B. Dalton stores cover the Middle America market and the online store, bn.com, targets the heavy internet users. New strategies might be put into place to attract more of the college age market, which is one of the highest disposable income markets, by underwriting college radio station programming and advertising in the campus newspapers. This would be done on a local and regional level and each store has some say in how they will bring focus to their stores by the use of the Community Events Manager. This manager is given a budget to use in his or her best interest to promote the company’s name and create new business opportunities.
To compete with other online retailers, Barnes and Noble, Inc. offers free shipping on some orders, extra discounts for shopping online and the use of the store discount card on the website. To further promote sales, they also offer BN University which offers classes from knitting to Shakespeare with lists of recommended titles to purchase through the website. The classes are free. A comprehensive database of information on the latest movies and music as well as classic titles is available and is interactive for the customers to leave their opinions about their purchases. While some of these tactics are merely a repeat of what other retailers have offered, the university is a rather innovative way to increase sales of product. Links on the website might also be utilized to push shoppers over to the GameStop website to encourage more purchases within the umbrella of Barnes and Noble, Inc. In theory, functioning like Amazon.com, but not.
The Four Ps
Product: The product line of books, movies, music and gifts is fully appropriate to the store’s missions and values. The offering of instore cafes also lends to the sense of community that are part of the company’s mission statement and values. Perhaps a more localized handle on merchandising should be considered as each location attracts a different clientele and therefore has different interests.
Price: Discounting is the biggest strategy being used. The customer knowing that she is saving 40% on the latest Nora Roberts hardcover is now more willing to pick up a different, non-discounted title because the initial savings are still there. Also, by being able to fill out the hardcover collection of titles by using the bargain book section furthers sales numbers. The discounts are only 10% more than that of Barnes and Noble’s competitors, but sometimes that makes the difference in a sale or a loss. Profitability is approximate to industry norms and so the policies should not be changed as they foster a bigger incentive to return to the store.
Place: The distribution policy is quite clear and heavily utilized. With various warehouses and a constantly updated inventory system, there is slight room for error in ordering a title that is unavailable. If the market for B. Dalton does not improve, the suggestion to sell off the brand might be suggested.
Promotion: Instore promotions are the biggest strategy used by each store. As each store offers various events, a national marketing strategy would be futile with the exception of the program underwriting for public radio to get the general idea of Barnes and Noble to the public. Each community event (as instore promotions are called) is funded from the Community Manager’s budget. Every children’s story hour to each book signing are paid from this budget. Any free books given out as a prize are paid for from this fund. The “loss” of one book that generated sales of ten more copies is generally regarded as good use of funds. Promotion of the store’s other brands would also be a good idea, small flyers by the register announcing promotions at GameStop would be a way to increase sales under the umbrella of Barnes and Noble, Inc.
Each bookseller, as all sales associates are known even managers, are given weekly goals for sales. Also membership in the discount program is also something that is measured weekly. Training is given throughout employment with the company. Each employee is given a workbook and is to complete a certain number of assignments throughout the training session. This includes the use of the registers, customer service, book ordering and daily cash counts. As the bookseller is promoted a new level of training workbooks in introduced. While the wage is on average for the industry, there are other incentives. A book loaning program is in place for employees to borrow hardcover copies for a certain period of time so that they can read the latest bestseller or older title. This provides for further ideas for staff recommendations. Also, discounts are given for not only book, movie or music purchases; but also for café purchases. Kudos are given out for the bookseller in various departments who achieve the goals for the week.
Further analysis into the B. Dalton situation should be a top priority. Sale of the brand may be in the best interest of the Barnes and Noble company as it continues to be a poor sales attractor and has in fact been steadily losing sales through the years. The amount to reassign the stores may not be cost effective enough to consider keeping the subsidiary. Further push into the electronic and video game market would be a good idea as that is an excellent market for sales as shown by the difference in sales from FY1999 to FY2000 in that the sales nearly tripled. Continuing to develop the online retailer is also in the best interest of this company as it is continuing to grow and gain more market share. While the company has not caught up to Amazon.com in profitability or market share, more and more ground is being gained in that arena. Further acquirement of other online booksellers may be the way to gain more of the share.
Another avenue that could be used to further gain market share would be to enter into a partnership with Starbucks to offer various products through the online retail portion of the company. An alternate method of advertising could also be put into place by advertising locally within college campus newspapers, various local alternative papers and college radio stations to attract those with a higher disposable income and those more likely to purchase lesser known titles and music and movies.
The discounting seems to be working to attract those who would normally not come in and encouraging them to purchase more items than would they would have on any other given occasion. Once again, overall, the company is performing well in the industry and can only continue to grow and prosper. There are things that need to be addressed, but once these issues are resolved and/or taken advantage of, the company will surely gain a larger share of the market available to them. The book industry has a lot of competition from the internet, video games, television and cable and the latest blockbuster film, but will see that steady growth is possible as long as the company is willing to change with the times.
It's really long, so settle in for about ten minutes to read :)
In other news, my boss asked me if I thought that the beheading justified us using nuclear weapons. Before I scream at him for being a dumb asshat my phone rang and then his rang, so the subject got dropped and I probably saved my job. Thank you Inocencio for calling when you did! He also said that only the lefties were screaming torture and sodomy and murder, there has been no mention of these things in the nightly news (of course, he only watches FOX, so, you can see where that argument could have led) so I am now on a mission to find a "non leftist" paper that actually reported what happened to the prisoners. Any ideas?