Barnes & Noble or Nails & Hammer?

There is an old saying that when the tool you have is a hammer, everything looks like a nail. In modern terms, if the tool you have is a bookstore, everything looks like it needs more books.

Barnes & Noble has been struggling for some time, and has even put itself on the block for sale. It has been hurt by a potent combination of: reduced book sales overall; shift to online purchases (Amazon started out selling just books); failure of its e-Book platform, the Nook.

But now, apparently, B&N’s CEO has its saving plan. Reuters, in an exclusive, has reported that Barnes & Noble is going to save itself by focusing on college bookstores. B&N has expanded in the last few years in the college bookstore segment – the only one in which it has done so – to over 1,000 stores, and has designs on the 1,500 bookstores that remain independent.

At first blush, it would seem to make sense. B&N started in the college bookstore space; college students are a highly captive audience; and college texts are highly profitable. Students spent an average of $1,200 last year on college textbooks and supplies (but mostly on books), and are forced to buy very specific books and editions.

Dig a little deeper, though, and this plan looks very shaky, and may even force B&N to go down the path Borders went not that long ago: six feet below.

There are two sides to the college bookstore market’s challenges: the college economy and the book economy.

On the college side, the societal pressure to rein in college costs is enormous, and coming from all fronts: students, parents, graduates, and governments, both local (city/state) and federal. Although $1,200 is relatively small compared to the annual ~$10,000 for in-state four-year college tuition, and tiny compared $20-30,000 for private colleges, it is still highly visible and a known easy target. Pressure to reduce profit margins and prices, and introduce competition, will prove irresistible.

However, the book side will prove even more challenging. College students are not only highly literate technically, they are also not (yet) caught up in “this is the way things have always worked.” They look around with their laptops, iPads and iPhones and say, “why should I pay over a thousand dollars to lug around books, when my entire music and movie collection are in my pocket?” These students want, nay, they will demand, that their college textbooks be on their digital devices. And they will insist on pricing for a digital item far below what the paper copy costs. With no printing, shipping, inventory and retail footprint costs, why should it cost even half that much?

Apple made a push into college textbooks with iBooks, although it does not appear to have really succeeded yet. Whether it will be Apple, Amazon or some other player, the days of the $75-100 physical paper college textbook that weighs 20 lbs (10 kg) and is out of date before the semester is up are numbered.

So, if you were the CEO of a business in trouble, would you double down on the one sector that is most vulnerable to both macro-economic pressure and miserably unhappy and impatient customers who want to cut you down?

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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