In the face of the digital revolution, Barnes & Noble has some hard choices to make. While comparisons to the failed Borders chain abound, the two companies have little in common in terms of business strategies.
Borders had a history of poor decisions, removing itself from the digital market early on; Barnes & Noble took the opposite approach and has been able to turn itself from a book retailer into a successful multi-faceted business. Its expansion into the digital realm has been directed and used to support and augment the company's existing business architecture. Offering mobile phones, payroll processing or web design services wouldn't make sense for a bookstore, but developing dedicated digital reading devices, like the Nook and Nook Color, and a digital bookstore tied into physical B&N locations is a strategic move to keep up with the times while still drawing people into brick and mortar stores.
The Nook division has breathed new life into B&N, but the company, as a colossus of an industry struggling to come to terms with the marketplace's recent changes, is contemplating breaking their e-Reader business off into a separate company or selling it off. This could be a part of a bigger strategy or just a poor choice that could lead to the corporation's demise. Only time will tell.
Could B&N Fail?
There are many comparisons being made between Barnes & Noble and Borders. Both stores were part of the shift towards bookstores that carried thousands of books, replacing niche stores with more focused content. For many years they were the giants of the book retailing business, but when the digital revolution came into full swing, the two retail giants moved in opposite directions and had very different results. Borders invested in CDs and DVDs, spent massive amounts of money on its physical stores and let Amazon.com handle the company's online orders, cutting them off from any possibility of developing a strong online presence.
How is the Nook Doing?
Barnes & Noble, on the other hand, set up an online store, though it soon sold it off. A few years later, however, the company reacquired its spin-off, benefiting from its years developing as an independent Internet entity. Recently, the corporation developed and released its own e-book reader, the Nook, to rival Amazon's Kindle, following it closely by an online e-book service. Since then, the Nook has been largely successful, taking a 21% share of the e-reader market. The decision to spin the Nook division off into its own company won't be made lightly. It could benefit the company in the long run, however, by giving the Nook's leaders more freedom to grow the business, possibly to be reacquired in a few years at an opportune time, as the company did with its web sales division.
With the declining sales at brick and mortar bookstores, however, divesting itself of its most profitable product might be financial suicide for the aging bookseller. Many wonder if the company could survive at all without the benefit of the Nook and its electronic book sales, which now outnumber physical sales for the retail giant. Sales of books for the e-reader grew 70% year-over-year and are expected to reach $1.5 billion in sales this year. It seems that, though it has successfully pulled off a similar maneuver in the past, it would be a monumental mistake for B&N to get rid of its digital book division at this time.
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