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Broken Bookselling

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Barnes and Noble Prepares to Collapse by a Third

January 30th 2013

Barnes-and-Noble store shot

Stung by dysfunctional inventory and warehouse policies and a failing model, America's greatest book chain--Barnes and Noble--is preparing to shutter a third of its stores. Some 200 stores are slated to disappear in the coming years, according to Mitchell Klipper, chief executive of Barnes & Noble's retail group. Klipper claimed the chain would only close "about 20 stores per year" over a decade. But many observers expected the fast shrinkage period to be accelerated to just a few years--if not sooner. Moreover, the remaining shelf space, experts predict, will be devoted less and less to books, and more to widgets, chocolates, and cuddly dolls.

The chain was devastated by a dismal holiday period drop of approximately 12 percent in all three of its sales vectors: store traffic, web orders, and Nook.

Headlines predicting doom are now common. Fortune was typical when its headline declared: "Barnes and Noble's Hardest Lesson: It Pays to be Small." The Los Angeles Times blasted this headline: "The Incredible Shrinking Barnes & Noble." The Atlantic blared: "Welcome to the End of Barnes & Noble as You Knew It." Barnes and Noble has closed so many prominent stores that one newspaper local Washington, D.C. area newspaper actually headlined that its store might remain open: "Barnes & Noble Expects to Stay Open in Bethesda."

Among BN's fatal flaws is inability to stock books intelligently. The company's bizarre inventory practices sometimes prevent it from even selling or listing award-winning or NY Times bestselling books. Whereas Amazon jumps through hoops to ensure that it can obtain inventory from any source on the planet--from distributors to the authors themselves--Barnes is constantly returning and declining to stock the very books it needs to satisfy customer demand. For example, look at Reno, where BN has two stores. Title X may be selling out in one store, and less well in the second store or the second store reconfigures its shelf space. Instead of moving that Title X across town to satisfy demand at the other store, BN returns Title X to its Reno warehouse and then ships it back to the publisher, often on the east coast, as a return, then reorders that same book for the other Reno store. Hence one copy can travel back and forth across the country in a truck instead of simply satisfying immediate local demand. The Reno customer of the second store gives up and orders from Amazon which confirms the order in a few seconds.

In some cases, BN.com does not even list a bestseller that can be ordered instantly at Amazon or elsewhere.

BN's Klipper stated: "You have to adjust your overhead, and get smart with smart systems." But, said one publisher industry observer with hundreds of books in the chain, "the BN model seems to be retail suicide by a thousand cuts. Anyone with a dime's sense could fix Klipper's problem in 10 minutes. But BN is too arrogant to save itself."

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