WSJ: “B&N Aims To Whittle Its Stores For Years”
I saw this in my morning Flipboard read, and then several people alerted me through private e-mails.
You may not be able to read it by clicking or tapping on the above link, due to the WSJ’s paywall. If that’s the case, search for
B&N Aims To Whittle Its Stores For Years
through Google, and I think you’ll find the full article.
The article is by Jeffrey A. Trachtenberg, who, as I’ve said before, is my favorite mainstream writer on e-book issues (although this isn’t specifically e-book, it has an impact). Trachtenberg is accurate, insightful, and entertaining: a great combination.
The basic point is that Mitchell Kipper, “chief executive of Barnes & Noble’s retail group”, has said that they will close something like 20 stores a year, getting down to 450 or 500 stores in ten years.
I strongly recommend that you read the article: your interpretation may be different from mine, and certainly, mine doesn’t match everybody else’s who is commenting on this.
First, I think that projecting a steady closure rate is…optimistic at best. Unless they significantly change their inventory (which they could do), I’m guessing that it will happen in lumps, and may certainly accelerate. Leases may be staggered somewhat, but I would think 100 closing in a single year is not unreasonable.
Second, Kipper says that most stores are making money, and why would you close a store when it’s making money? Well, the simple answer is, “Why would you keep a store open until it is losing money?” It makes more sense to close a store that is making a marginal profit, than to commit that store through another lease if it looks like it might be losing money in three months. Even if leases are month to month, it can still make sense. Let’s say a store is making a $100,000 profit in a year…and will start losing $250,000? in three months? You don’t want to wait until the losses start.
My last point before you take off to read is the one that seem the strangest to me.
“Mr. Klipper said that bookstores serve a different purpose than many other retail outlets. “You go to Barnes & Noble to forget about your everyday issues, to stay a while and relax,” he said. “When you go to Bed Bath & Beyond, you don’t sit down on the floor and curl up with your blender and your kid.”"
Certainly, people like going to a bookstore and relaxing. Is that a viable business model, though? As a former brick-and-mortar bookstore manager, I can tell you that you are always fighting rent. If you have taken up a couple of square feet for an easy chair, that’s space you don’t have for a popular book. The concept is that somebody browsing a book is more likely to buy it…but what are the odds now that they browse it, and then buy it online? Becoming a bit hyperbolic, wouldn’t more people hang out in your grocery store if you put a swimming pool in it? Sure, but that doesn’t make sense for a grocery store to do…it’s too expensive for the amount of return.
I have said that bookstores that changed to a luxury sales model could work, and that could certainly involve “reading rooms”. However, I don’t see your typical Barnes & Noble becoming that. That would be a lot fewer stores with a lot higher prices, and much more customer service.
Investors may like this in the short run, because I don’t think anybody is seeing having all those stores as a good investment. However, people may also see it a red flag indicator, which could create a spiral of sell-off.
It’s interesting to me that people have reacted so strongly to this story, since it isn’t really much of a surprise…and B&N isn’t exactly confirming all of this. It feels like it is because it has such cognitive resonance: it confirms for people what they already think is true (but hidden from them), and that feels good.
What do you think? Can Barnes & Noble close stores on a steady rate? Is this an overreaction? Do you think B&N will be here for ten years? Feel free to let me and my readers know by commenting on this post.
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.