Barnes ; Noble’s Business Model



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The book retailing business was divided in independent local bookstores, larger chain stores and superstores. The 12,000 independent stores in the United States lacked a close connection with publishers and have a less commercial approach to merchandising books. They depended on local reputation, specialization and expertise. Although the most successful independent stores achieved higher sales per square foot than larger chains, a high number went out of business every year because of the growing success of superstores. Mall-based chain stores revolutionized bookselling in the 1960s.

They took over techniques from other retailing categories: they piled up books on tables, ordered little of everything and quickly restocked fast-moving titles like supermarkets and department stores did with their goods. Most of these middle-sized chains were taken over by the country’s largest retailers. Barnes ; Noble which will be discussed in greater detail in the next chapter bought the chain B. Dalton and later on several others to continue its expansion. The investment in superstores, however, turned out to be a more successful for bookselling business in the 1990s.

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Superstores had extended opening hours, access to major road and parking facilities. They encouraged browsing and tried to build up a sense of community within the store. Although there was no pressure to buy the average amount of money spent was $20 which is twice as large as in mall-based bookstores. The two leading superstore chains, Barnes ; Noble and Borders, were encouraged by these significantly high sales and had plans to double the number of their superstores until the year 2000. The rise of online retailers, such as Amazon.

com, however, brought an unexpected shift of consumer habits and decreasing turnovers for superstores and bookstore chains. Before we discuss the struggle between Barnes ; Noble and Amazon. com for the dominance in online retailing we look at he business models of both companies. With sales of approximately $2. 45 billion a year, Barnes ; Noble was the largest bookstore chain in the world throughout the eighties and mid-nineties. It had at least one story in every major US city and employed more than 20,000 employees.

In 1993, the company went public, but 26% of it was still controlled personally by Chairman and CEO Leonard Riggio. He purchased the Barnes ; Noble chain for $1. 2 million in 1971. The basic concept was to have a few so-called superstores with more than 70,000 square feet of total selling space in the biggest cities and a large number of smaller sized discount stores across the country, often located in malls. The superstores turned out to be a huge success and so their number rapidly grew from four units to more than 400.

In 1997, superstores accounted for 77% of the company’s sales and more than 85% of its operation income. Over the years, Barnes ; Noble also became a publisher for old titles such as Webster’s Dictionary, it established a mail-ordering book business, ran a membership club for book discounts and became the largest supplier of books through catalogs in the US. Although the company broadened its capacity to those book-related businesses, the revenues and profits continued to be dominated by its bookstores.

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