Karma’s A Boomerang

You’re Barnes & Noble.  For decades, you’ve done one thing extremely well:  sell books.  You’ve also published books, branched out into selling calendars, children’s toys, and other stuff, but you are first and foremost a bookseller.

Only one problem.  People are buying books online.  Your business model is in deep trouble, as evidence by the collapse of your biggest competitors, most recently, Borders Books and Music.

So you develop an e-reader called the Nook, and now the profitability of your company is tied to the success of that device.  The only problem is that you thought people would like a black-and-white device that can only read books, and you bet your 2011 Christmas season on that assumption.

Which proved wrong.

So now you’re stuck in a device/tablet/e-reader/whatever-you-want-to-call-it race with your biggest competitor, Amazon, which took its name from the world’s biggest river, because its goal has always been to be the world’s greatest river of goods.

Amazon’s multicolor, multitasking the Kindle Fire was a heck of a lot more popular than your Nook.

And now you have to spend money you don’t have to keep on competing with newer iterations of the Kindle, just to stay alive.

In other words, you’re competing against a much stronger player with much greater market share in a universe that has nothing to do with your core competency, selling books.

I used to have a girlfriend who liked to say, “Karma’s a boomerang,” especially when something bad happened to someone she didn’t like.

Barnes & Noble used to have one big bookstore on Fifth Avenue and 18th Street in Manhattan.  Then it expanded to another neighborhoods and other cities.  It would put in a huge Barnes & Noble superstore into places within blocks of highly successful local, privately owned bookstores.

Which it then destroyed, because Barnes & Noble had the financial strength the privately owned bookstores lacked.

Barnes & Noble took the bold step of dramatically discounting national best sellers, taking advantage of its greater buying power.  The smaller stores couldn’t afford to compete with that market share-stealing move, and one by one, the lights went out.

But then Barnes & Noble was stuck with massive, expensive bookstores in urban neighborhoods where people, who had once bought books at privately owned bookstores and then bought them at B&N superstores, now either bought books online or didn’t buy them at all.

And then Barnes & Noble had to close those stores and fire all the employees, leaving those once bookish neighborhoods with no bookstores at all.

And now Barnes & Noble finds itself on the other end of the squeeze.  The same way B&N’s smaller competitors couldn’t keep up with its financial power, as it created larger stores with deeper discounts, now B&N is in “arms race” with a stronger, wealthier competitor, Amazon, as the Nook is forced to face off against the Kindle.

My then-girlfriend was right.  Karma is indeed a boomerang.  B&N can compete for a while against Amazon and the Kindle, but ultimately B&N is doomed to sputter and die.

This is tragic for booklovers, of course, who are the biggest losers in this whole battle.  Even today, my local Barnes & Noble has replaced some of its bookracks with non-book gifts, toys, and all sorts of things you never would have gone to a bookstore to buy.

A year ago, B&N nearly sold itself out to Liberty Media, which owns, among other things, QVC.  Perhaps the idea was that Barnes & Noble’s brick-and-mortar stores could become outlets for QVC goods like jewelry or health and beauty items.  That deal fell through.

Liberty may now buy the entire Nook business from Barnes & Noble, allowing B&N a graceful escape from its technological struggles with Amazon.  What Liberty sees in the device is beyond me, but I don’t run multi-gazillion dollar retailers.  I’m sure they have a good reason for wanting to buy something that doesn’t sell as well as its developer had hoped.

But even if that deal went through, B&N would still have to compete with Amazon to sell books.  And they’ll have the same uphill struggle to face that they once imposed on their smaller competitors, back when B&N sought out and destroyed some of America’s greatest neighborhood booksellers.

Karma’s a boomerang.  Especially when B&N is playing with fire…with the Kindle Fire, that is.

(New York Times best selling author Michael Levin runs BusinessGhost.com, America’s leading provider of ghostwritten business books.)

 

Comments

  1. This is called the “Free Market”, you do what you have to do to keep ahead of the others.

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