Barnes and Noble: The Nook Shouldn't Cost Much.

Back in the 1990's when Robert Haft of Crown Books fame crowed "Books cost too much" he went on a campaign to be the nation's foremost book discounter.

While Crown has since disappeared after having gone through bankruptcy, twenty years later Barnes and Noble finds itself in the same predicament. Should Barnes and Noble throw in the towel or reinvent itself in the new digital device world?

Paper Books Cost Too Much. Digital Books Don't.

Haft's strategy failed as overaggressive store expansion and unfortunate family riffs sent the company into bankruptcy. This occurred not only once, but several times until the company was bought by Books A Million in 2001.

The problem with brick and mortar bookstores is that today they are treated as personal libraries, rather than a place of shopping by the customers. More so when seats are installed in-store. I do recall the look of many of Crown book stores during their final years. Run down, un-shelved books strewn all over the place in aisles, and dwindling inventory that sat stale.

Now even to this day, paper books still cost too much at your retail brick and mortar store. Even walking into Walmart or Target and seeing books discounted, we all are aware that the reason why it is 30% less is because the publisher printed out a higher price on the jacket.

But the story is different shopping online. Amazon.com and other online book retailers reduce prices sharply and pass it onto the consumer. They know they have to and for a very good reason - to stay competitive by selling at a lower price at mass quantities.

With the recent advances in electronic book readers, the cost is even less. For example, at Amazon most e-Books are $9.99. With no paper publishing needed, the distribution and availability now becomes a simple download.

Leonard Riggio Has A Vision

From the 60's through 70's, Leonard Riggio, the chairman of Barnes and Noble, pursued a college textbooks selling business in New York. He would later acquire the Barnes and Noble trade name from a Manhattan retail bookseller. The Manattan store would turn into a huge success claiming bragging rights of being The World's Largest Bookstore.

In the late 1980's Barnes and Noble would take on its biggest acquisition ever by the purchase of the B. Dalton bookseller business. This moved the company to be the second largest retailer of books in the country. From there the superstore concept would evolve with the company selling both books and music CD/DVDs in much larger retail space quarters.

Scroll ahead to 1993 and we find Barnes and Noble trading on the New York Stock Exchange. Having seen the importance of the Internet, the company sells books on Compuserve and American Online. They would eventually open up their own company website known today as BarnesAndNoble.com.

Late To The Digital E-Reader Party

In 2007, Amazon would come out with the Kindle and quickly put Barnes and Noble on it's heels. It wouldn't be until two years later that the Nook would be released. But by then, Amazon had quickly dominated market share and attracted mainstream consumer attention.

Unfortunately, Barnes and Noble had dropped the ball and their execution came about too slowly. The Nook would suffer from production delays and inability to meet demand, especially during the holiday season of 2009. They would later send out a $100 gift certificate to those that were promised delivery before Christmas.

During the same year, Amazon would come out with Kindle 2 and a larger screen version called Kindle DX. Amazon announced that on August 2010 that Kindle 3 with 3G and WiFi will be released.

Then there's the Apple iPad, a marvel of a device released in April 2010. Users can download books from the Apple iBookStore where Apple had inked contracts with the major publishing companies including Harper Collins, Simon & Schuster, Macmillian, Penguin and Hachette.

The Ronald McDonald Approach

One of the risks to Barnes and Noble is if Apple makes strong headwinds into the education sector. One approach is to implement the "Ronald McDonald" approach to selling. That is, get 'em while they are young. By doing so, the device now fits in the hands of youth and used as a common tool throughout their life.

The strategy would be to start from the collegiate spectrum and work itself down to the grade school level. College kids can afford to pay for these devices simply because the spoon is already in the mouth - if you want to go to college you must buy one of these to learn and be competitive. This is different in grade schools where many schools wouldn't qualify because of financial hardship or economic background.

By pushing adoption of the e-Book reader in schools, Barnes and Noble will be no more. That's not to say they cant do the same thing. As mentioned Leonard Riggio originally started out selling textbooks to college kids. But there is a certain "cool" factor in this. Having the "cool" device makes kids want it because everyone else has it. The Nook doesn't really fall into the "cool" category when compared to the Apple iPad. And this is where Apple is very well poised and mature to take market share. Already colleges such as Seton Hall are requiring their students to use the iPad as part of their academic regimen. Striking deals with colleges and having a device that is more than just a book reader puts Apple at an advantage.

Barnes and Noble is currently left out in the blue. Amazon already has existing contract arrangements with publishers and can take competitive measures to use that as its advantage. Apple can do the same and deal directly with the major publishers as well. So where does that leave Barnes and Noble? In the digital world, as a middle man that can be eliminated. The business case is now how do we get the device into the hands of the masses?

Digital Reading Rooms With The Nook

The salvation to Barnes and Noble is to recognize that just like a Gilette 3 blade razor, you have to almost give the razor away and focus on selling the main product - digital content.

Everybody who's ever been in a Barnes and Noble superstore likes to camp in the store and peruse through the large selection of printed books and music. The problem with this, is that more people spend time in the store reading for free and few come out with purchase in hand. Too many people go in there to use it as a personal library, then head over online to a competitor to get the product cheaper. And that is where the company needs to realize that it must come to an end.

Barnes and Noble needs to transform itself. They need to pare down the sizes of their stores and be a showroom of books rather than a retail store carrying too much printed inventory. What can be done is have kiosks located in the store where customers can walk (or sit) and look at a selection on screen. If the user has a Nook, she can have the electronic book uploaded to the device by either one of two ways - through in store Wifi, or from placing the Nook into the kiosk port and having the data uploaded.

The other thing Barnes and Noble can do is print the books themselves like a Kinko's. If the customer wants a printed book, they can queue up the selection and the book will be printed in-store.

The new Nook (lets call it Nook 2) should be a Wifi and/or 3G device that does much more than just electronic book reading. The new Nook should store and playback music in stereo, not mono. It should also be capable of playing back movies, say through Netflix on demand. It should have the ability to store contact information, set appointments on a calendar, and browse the internet. It needs to be a product that wrap itself around the digital lifestyle people are becoming accustomed to.

The customer while in store is given the ability to download a sample of a book or music selection in seconds. This, all in a digital reading room drinking a nice cup of Starbucks coffee. This way, the environment of Barnes and Noble is still left intact as a retail bookstore and customers are gently urged to purchase digital content. This is what I mean by transforming and changing itself. Barnes and Noble needs to not focus on selling content, but rather selling an experience.

Sell The Experience

Now one may argue that this is no different than sitting on a computer at home and downloading sample content from their online store. But that isn't really the way to look at it. There is a need for social physical presence. People go to bookstores to relax and unwind. They want to go out and be among people, to socialize or be in solitude, and just read.

People who have gone through college understand the intellectual aura of being in an environment that stimulates that perception. That is why Barnes and Noble is the preferred location to go.

The value is in the experience of being in the store. No Barnes and Noble, the Nook shouldn't cost much.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.