Barnes and Noble Doubles Down on Bricks and Mortar
Damian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It’s Time to Buy Those College Textbooks
William Lynch, CEO at Barnes and Noble (NYSE: BKS) at his recent F1Q13 earnings call August 21, 2012 said, “What we are seeing encouragingly is an increase in the pipeline of our peers from schools looking to outsource their physical and on-line campus bookstores. These schools see the growth in text book rentals and recognize the pending growth of digital content and are unable or unwilling to invest in managing the distribution of course materials in these formats themselves.” Is Barnes and Noble fine-tuning their physical location offerings, or are they positioning themselves for the inevitable growth of the digital textbook market? I would say YES to both!
Lets Get Physical
The college bookstore model that Barnes & Noble has been expanding gives this company unique insight into the attitudes and preferences of the student consumer allowing them to deliver focused and engaging shopping experiences. With nearly 700 campus bookstores in place, Barnes and Noble is putting themselves in front of almost 5 million students and faculty each year as well as their family and guests. Barnes and Noble College understands how to connect with these students on various levels through their in-depth store analysis and focused retailing efforts. And according to their website, over the last 5 years they have been rated a leader in the specialty retail category by The American Customer Satisfaction Index.
The college bookstore segment also includes a rental option, which CEO William Lynch says is a fast growing part of the market, allowing students to pickup their textbooks as needed for a recurring credit card charge. There is also a digital store partnership with B&N allowing revenue from e-book sales and rentals to stay with the University and not with on-line competitors like Amazon.com (NASDAQ: AMZN). Amazon offers a digital rental option where you only rent the book for the time you need it from 30 days to 360 days for a savings up to 80%. Students can also rent the print version from Amazon with free shipping each way but B&N is betting that students will enjoy the convenience of dropping the books off at the school bookstore rather than searching out the local UPS drop-off. Additionally B&N’s Nookstudy is also being marketed as a digital textbook option and app for students allowing a savings up to 60% off the print version.
It's More Than a Physical Relationship
According to Barnes and Nobel's website, they continue to see strong growth in the digital bookstore universe with a 46% increase in digital content sales in its most recent quarter. A strategic business alliance announced last April with Microsoft (NASDAQ: MSFT) is putting the Nook and its digital footprint front and center in Windows 8, expanding the reach of B&N's extensive library of e-book material to millions of Windows users. Microsoft has a 17.6% equity stake in this newly formed subsidiary of Barnes and Noble Inc. giving both companies a strong position in the fast growing digital market and showing investors that Barnes and Noble is a solid investment into this growing arena.
B&N Does Seem to Get it
My local suburban Barnes and Noble bookseller was very busy for a Monday afternoon and I found myself walking the four corners of the store, while my family shopped, observing the many activities in this thriving community bookseller. Due to consolidation in the industry, Barnes and Noble continues to strengthen its position as a great place for consumers to spend leisure time. The in-store Starbucks (NASDAQ: SBUX) coffee shop was filled with people and their laptops taking advantage of the FREE wi-fi while sipping lattes and sampling light lunches. Even the music section had a few headphone wearing chaps listening to various recordings. There was even a customer lying down on his belly in the periodical section (B&N is the largest distributor of periodicals), leafing through the pages of what looked like GQ magazine. I know I wouldn’t feel that comfortable, but the point is that he did. These are signs that Barnes and Noble does get it.
What is sad to me is that there have been many now extinct retailers unable to reach today's consumer who could have changed their strategy rather than waiting on the world to change (borrowing a John Mayer lyric). Barnes and Noble seems to understand what it takes to survive in this ever-changing world of retail. With its three distinct areas of segmentation (Retail, College, and Nook), and their continued investment in each of those areas, perhaps Barnes and Noble is positioning itself rather nicely for this changing world of books.
Dubbles has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com, Microsoft, and Starbucks. Motley Fool newsletter services recommend Amazon.com and Starbucks. 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.
