A Bookseller Drowning in the Amazon

Greg is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Reading in the United States has changed in the last decade. No one denies that, but the rate and eventual result of that change is a matter of hot debate. While those issues are vitally important to sociologists and educational professionals, they also matter to folks who are trying to decide whether and how to invest in books. At the risk of incurring the wrath of both bookworms and tech heads, here are some humble predictions about how Americans will think about reading and buying books over the next few years.

The Digital Revolution Has its Limits

It’s common to hear people say that “In a few years, no one will read paper-and-ink books any more.” If that comes true, it’s obvious that the days of Barnes & Noble will have been numbered. The company does have a foot in the technology field with its Nook, a competent competitor with the Kindle and, to a smaller degree, the iPad. But the marketing of the Nook is not dependent on the existence of physical bookstores, and if actual books weren’t selling, those stores would eventually close. The Nook would probably not lose much traction by moving to a primarily online sales model, or even by moving to mall kiosks or some other small-scale location.

I don’t think any of that is going to happen, however. I think people like reading books and magazines more than they like reading off a screen. Because of that opinion, I think Barnes & Noble actually has a brilliant balance: it is the nation’s undisputed leading bookstore, and it also offers a technological option for those who do want the convenience of e-books. Add to that the tempting aroma of a Starbucks on site, and Barnes & Noble stands to continue doing business with both bookworms and tech heads.

The Biggest Threat to Barnes & Noble

So, the good news for Barnes & Noble is that the way Americans read books is probably not going to change completely. The bad news, though, is that the way Americans buy books is changing completely. Walking into a bookstore is no longer the most convenient, cheapest, or even the fastest way (in some cases) to get your hands on a specific title. Of course, there is one company to thank for this transformation: Amazon.com (NASDAQ: AMZN). Online shopping is no longer the exclusive domain of the computer-savvy; anyone can follow the prompts and order a book to be home-delivered. The network of used and new book sellers that Amazon pulls together results in prices that Barnes & Noble simply can’t compete with.

So What?

Amazon stock has been rising steadily for years, as it continues to expand its model to include more and more products. Customers can find anything from books to electronics to clothing for great prices, not to mention instant digital content. Investors have learned that Amazon knows how to keep and attract customers, and the rise in stock price will probably continue for some time.

Barnes & Noble, on the other hand, seems to have settled into a different role. With the exception of the Nook division, it’s hard to see the company expanding or innovating in any growth-producing way. An attempt to develop an online store would face the huge challenge of Amazon, and the cost of keeping stores open and well-stocked precludes the option of lowering prices to compete with online sellers.

Barnes & Noble won’t go out of business, but it won’t ride any tidal waves of growth either. If it comes up with ways to set the Nook apart from the e-reader crowd, it might be worth investing in, at least until the rest of the industry catches up. That’s something to keep an eye out for.


copyhubwriters has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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