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DESCRIPTION2008 presentation with Summer 2010 one slide update.
Executive SummaryExecutive Summary
BASIC DATA 1873 – Founded in Illinois Largest world bookseller: 5.125B sales in 2007. Stores 4,648M (+4.2%) Internet 477M (+13.4%) Owns 25% of the retail market Second largest internet book seller (400M) after Amazon (1B). Fortune 500 company traded on NYSE since 1993 40,000 employees 60-200,000 titles per store 300 million books sold per year (stores + internet) Len Riggio, owns Barnes and Noble College Booksellers (500
campus stores, whose sales are not included in the data above)
“To operate the best specialty retail business in America, regardless of the product we sell. Because the product we sell is books, our aspirations must be consistent with the promise and the ideals of the volumes which line our shelves. To say that our mission exists indipendent of the product we sell is to demean the importance and the distinction of being booksellers.
As booksellers we are determined to be the very best in our business regardless of the size, pedigree or inclinations of our competitors. We will continue to bring our industry nuances of style and approaches to bookselling which are consistent with our evolving aspirations.
Above all we expect to be a credit to the communities we serve, a valuable resource to our customers and a place where our dedicated booksellers can grow and prosper. Towards this end we will not only listen to our customers and booksellers, but embrace the idea that the Company is at their service.” (source: Barnes and Noble web site)
Situational AnalysisSituational Analysis
The US bookstore industry : 11,000 stores , $15 billion annual sales.
Major companies include Barnes & Noble, (Borders Group), Books-a-Million. And recently major retailers such as Wal-Mart, Cosco.``
Demand is driven by demographics and consumer income. The profitability of individual companies depends on merchandising and marketing. Large companies can provide broader selections and lower prices. Small companies can compete by offering specialized products or serving a local market but in reality the advent of the superstore has meant the closing of many smaller book stores. The industry is labor-intensive, with sales per employee about $120,000.
The industry is concentrated: the 50 largest companies hold about 75 percent of sales.
The industry is segmented into: general, bookstores 60% college bookstores 30%specialty bookstore (mostly religious)10%,.
The dominant chains have “superstores” that can exceed 20,000 square feet. The failure rate of independent bookstores has historically exceeded that of all US businesses
Discount store on Fifth Avenue (40,000 sf) Market penetration through acquisition
- 1987 Dayton Hudson (797 stores)- 1989 Bookshop (Texas superstores chain)
Super stores (> 20,000 sf) Verticalization (Publishing: 10% of titles carried) 2003 strategic acquisition of Sterling Publishing
Low margin of the industry (B&N NPM is 2.5%. Not a lot of wiggle room). Very competitive market; war being fought by big consolidated groups, both on the
retail side (Cosco, Wal-Mart, Book-a-Million, Amazon – which, as an online retailer with no stores, does not pay sales taxes) and on the publishing side, of which B&N has 17% share.
Product does not innovate and market is mature; threat of e-book. High fixes store costs and labor intensive industry A product which basically does not change; so could please someone write the
next Da Vinci code fast? Best sellers represent only 3% of sales, but they draw the crowds in the store.
On the short term, the company is very aware of the perils of the economic recession both for sales as well as for stock valuation: with a beta of 1.5 B&N stock has dropped more then 17% since year start. Profits are expected to be flat for 2008.
Legal monopoly issues and image issues. Decline in reading in younger generations (but L.Riggio founded and is the Director
of Gamestop, the world largest videogame retailer, so he is well hedged) Internet. Info books represent 50% of B&N’s volume. These info are now all online.
Amazon, one of its major competitor might be dispersing the brand and losing the book niche.
Strong emerging markets; Indians are the biggest world readers and China puts a huge premium on education. Barnes and Nobles should move fast to capitalize on this growth.
Big wave of wealthy and healthy baby-boomers which has just start crashing and will continue until 2024 (every 8 seconds a US citizen turns 60): opportunities both for academic books as well as for how-tos (Sterling chain).
Involvement in paper recycling programs: major cost and PR impact. Technology to build on consumers loyalty – besides the obsolete
discount card. Books can be bought by several people for several reasons: must tap into these reasons and expand on them.
Borders Group is considering selling part or all the company Branding
Marketing strategy Marketing strategy
To be the best specialty retailer (source: Mission statement, web site)
“To be the dominant portal (piazza) for the delivery of information “. (source: Steve Riggio, CEO and Vice Chair, interview with Wired, 1999)
To continue the grow expansion of the percentage of in-house publishing, which is currently 10%. (source: Self-publishing, 7/25/2005)
To remain on national territory, which is deemed sufficiently large for the needs of the Company (source: Len Riggio webcast interview with
Marketing tactics Marketing tactics Products Products
Books B&N main business is the traditional book and nothing seems to
indicate that this will change in the foreseeable future. E-book has not happened yet in a massive way and trends do not point in that direction.
It will remain a traditional consumer product.Mix has changed and will have to change more: 50% of stock used
to be in info books, which could be replaced with internet info.Internally published books will increase as costwar heats up.
Music: B&N, a book stores chain , may end up being the
only survivor in the music retailing industry. Strong core base, which, according to Len Riggio is sufficient to financially make sense.
Marketing tacticsMarketing tacticsPlace and PricePlace and Price
Place Retail store as a community center National market penetration with acquisition of chains
and/or opening of brand new stores nationwide (Super) stores mainly placed in Style Life Malls. Internet as a community center:
- opening of new online multimedia destination dedicated to the world of readers, writers and books (www.bn.com/studio)
Price: 10% fix discount to Members, and up to 40% on sales books. No discount to non-Members and up to 20% on sale books
Marketing Marketing tacticstactics
PromotionPromotionKey element in the marketing plan; B&N hosts
annually more than 100,000 community events nationwide: Book-clubs and Membership discounts Bookfairs Storytimes/Costume Character Visits Holiday Book Drive Down Syndrome Awareness Local Events America Supports You US army program Authism Awareness Month events in 500 stores in conj. with Authism Speaks The annual Hollywood book festival Daily store events with authors Project Home Again to build homes for Katrina victims And many others.
` Barnes and Nobles
Summer 2010 update
Fast-forward 2 years: failing to accurately prepare for the “barbarians at the gate” is proving to be a potentially disastrous oversight : underestimating the impact of and delaying dealing with e-book technology and Apples’s and Amazon.com’s aggressive strategies may make it more and more difficult to give B&N story a happy ending.
The stock plunged 21% in the first week of July, on the eve of B&N’s earnings announcement: the fourth quarter reported a sharply higher loss and the catch-up in digital investments will help wiping out cash-flow next year, along the lines of what happened this year. Add to this the purchase of Riggio’s family’s college bookstore chain at $ 596M and his intention to maintain the luxury of a $1 a share dividend, and the picture could use some of Barbara Taylor Bradford problem solving skills.