This Monday, Barnes & Noble Inc CEO William Lynch resigned as the company struggles to survive amidst the e-reading business, and indeed in the bookstore business overall. Lynch also resigned from the board.
Over the past decade, Barnes & Noble has been facing financial troubles as the company endeavours to keep up sales and safeguard its revenue in face of serious competition from online retailer Amazon.com and the rise of the e-book business. To counter this reality and prevent a Borders-like fate, Barnes & Noble tried to launch its very own e-reader in 2009: Nook. The effort failed. The stats show that Nook never managed to attract more than 25-30% of the e-reading public. Moreover, recent reports show that the business has been declining. In the fiscal fourth quarter ending April 27, Nook unit revenue fell 34% to $108 million. The retail unit's revenue also fell, by 10% to $948 million.
Is Barnes & Noble's fragile situation spelling doom? Spokeswoman Mary Ellen Keating has declared that "The company is in a transition period, and we have no immediate plans to name a CEO." The chain has, however, made a few management shifts, such as naming senior executive Michael Huseby CEO of Nook Media and president of Barnes & Noble. What the company will do next, however, is still unknown.
In any case, it is clear that Barnes & Noble needs to re-structure its business strategy. The first step towards doing so is deciding for good what it is going to do about the Nook. As Maxim Group analyst John Tinker summarizes: "Do they close it [Nook] down? Do they reintegrated it back in the company? What happens to minority investors, Microsoft and Pearson [who own a 17% and 5% stake in the company, respectively]?" Personally, I don't see much hope for the Nook in face of competition from the fantastic four: Apple, Amazon, Google, and Samsung. And there are signs that Barnes & Noble executives realize this. A person "familiar with Barnes & Noble's strategy" told the New York Times that the company has plans to move "away from its program of to engineer and build its own devices and focus more on licensing its content to other device makers." Another move would be to simply sell off Nook to an investor willing to take the risk of buying it, although I think that abandoning the e-book altogether may be a bit precipitated, especially given the general decline of the retail bookstore business in the last decade.
Second, the company cannot forget its core business: retail. In 2010, for example, Barnes & Noble ranked number 1 in Forrester's Customer Experience Index. In 2012, however, the company was one of the fastest falling retailers on the list, being one of 23 brands whose score fell by five points or more since 2011. If it wants to stay alive, Barnes & Noble cannot let go of what made it successful in the first place; it needs to know how to properly share attention between Nook and its retail business.
So what's going to happen to Barnes & Noble? I have no idea. But it seems like the next couple of months are going to be crucial. If its executives are able to come up with a robust new business strategy that ameliorates Barnes & Noble's troubles on both the e-book and retail business, then there may be hope for the company. If they do not, then it may very well be the time to say goodbye to Barnes & Noble.