As Amazon Closes Bookstores, B&N Bounces Back: A Sweet Irony

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What did I tell you a couple of weeks ago? I’ll remind you. I said the reason Amazon was closing most of their physical retail properties, including its bookstores, after years of fiddling around (testing is what they would call it) was because they simply don’t understand the “art” of retailing. And it seems that Amazon believes the “science” of retailing is superior with all the tech stuff they’ve been testing in some of their stores plus their masterful analytic skills identifying local consumer preferences.

Why is Amazon closing bookstores, particularly since they own over half of the book sales in the U.S.? Because just the right locations and products are not enough to succeed in today’s physical retail world.

Wait! Did I say superior analytic skills? Yes, I did! And yes, they’ve got them in spades. It has been one of the major factors powering their online marketplace. Then why wouldn’t Amazon use those same superior capabilities to stock the bookstores that they are now closing? The answer is they did. And that fueled their initial decision to launch physical stores.

A Faulty Premise

So, I ask again, why is Amazon closing these stores, particularly since they own over half of the book sales in the U.S.? This question is answered with the same reasons for the closures of the 4-Star, Amazon Go and Pop-Up stores: just the right locations and products are not enough to succeed in today’s physical retail world. The human touch points along the shopping discovery and journey are more important than ever, which cannot fully be achieved online. Thus, this is one big reason the digital pureplay brands are expanding into physical retailing.

It takes engagement with customers during the search part of the journey that leads to an uber compelling reason to take the time to go to the store. And finally, the in-store experience, includes the all-important human interaction with other consumers and brand ambassadors (the sales staff).

The Barnes & Noble Irony

If traditional brick-and-mortar retailers were concerned about Amazon decimating their businesses, the local and national bookstore chains were the first to be shaking in their boots — which in fact they were. And over time, Amazon’s rapid-scale formula of throwing cash flow into topline growth (not showing a profit for several decades) did steal huge chunks of book market share, driving thousands of independent bookstores, and notably the Borders Group chain out of business.

Barnes & Noble was left crippled as the last U.S. major chain still standing with about 625 stores. Following several years of management changes and repositioning attempts, Elliott Advisors acquired B&N, and James Daunt took the helm as CEO in August 2019. He had previously revived Waterstones, Britain’s largest bookstore chain, and employed a similar strategy to re-energize B&N. As of March 2022, B&N sales had risen six percent over 2019 (with book sales up by 14 percent).

So. what is Daunt doing that Amazon didn’t do with its bookstores? He’s doing what, in my opinion, Amazon could not do and cannot do going forward. It’s why their other physical store tests will also not succeed.

Daunt is mastering the “art” of retail. He is marrying the store with the consumer. B&N is decentralizing decision making down to the store manager (a no-brainer) who will have control over the quantities ordered and where they are placed — as opposed to centralized buying and cookie-cutter placement. This local control will also reduce returns and markdowns, resulting in a more efficient distribution process.

Honestly who is better to track local preferences and the customer’s journey through the store on a daily basis? The managers who are on the ground and the brand ambassadors who are in touch with local residents – an indisputable customer/brand marriage.

From a human engagement, experience and discovery perspective, B&N will be re-energizing its in-store layouts, including smaller tables and wider aisles, essentially creating a more youthful environment to attract and continue to increase in share with a key consumer segment. Paradoxically, B&N is also boosting readership among the TikTok cohort as they post using the hashtag #BookTok. Millennials (many with new families of their own) are also becoming nostalgic about this big-box bookstore where they discovered Harry Potter and other childhood favorites and attended storytelling sessions that brought books alive.

Daunt noted in a Publishers Weekly interview that the most enthusiastic and loyal shoppers at B&N’s physical stores have been teens and young adults and “the energy they bring to the stores is fantastic.” He also gave store employees full credit for helping B&N turn around, acknowledging the difficult conditions they were working under during the height of the pandemic when they had to learn a new way of working. He is resolute in his belief that the key for B&N to succeed is to empower store managers. Once the managers have the right tools and support, the best thing to do is “to get out the way,” he said.

I Repeat: Amazon’s Big Miss

Don’t get me wrong. Jeff Bezos is a genius (of eccentric sorts) imagining and creating the historical equivalent of the iPhone, both disrupting and transforming entire industries.

Author Brad Stone of Amazon Unbound made it clear that Bezos has always been obsessed with exceeding consumers’ expectations. Stone indicated that Bezos’s personal obsession was the primary reason for Amazon’s enormous success. However, the big miss was his lack of understanding that what delights consumers online is different than what compels and delights them in the pre-shopping journey and finally in store.

The DNA of Amazon is convenience, value, and speed. Brilliant! And no competitor has yet to come close to Amazon’s execution of those three operating pillars, which truly resonate with consumers. Enough so that Amazon’s growth is unparalleled in the ecommerce space.

However, the same loyal Amazon online customer also shops in the physical world. And to motivate them to spend the time traveling to the store, there must be a compelling reason — and product alone is not enough. There has to be fulfillment of the promise of a socially interactive, delightful discovery experience. Perhaps a compelling in-store experience should be the fourth pillar for Amazon’s offline DNA.

Technology is nothing more than a tool. Yes, an awesome one. It is the powerful science of retailing and iterates in incredible ways. However, the iterations are only supportive of the art of retailing, which is driven by the human imagination and empathy.

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