Barnes & Noble Faces Its Last Chapter

Barnes & Noble is the largest bookstore chain in the United States having sold more than 6.7 billion books since going public in 1993. Leonard Riggio, the booksellers chairman, started with a single Manhattan location and now operates 627 stores in all 50 states. The New Yorkbased company has approximately 26,000 employees.126

Barnes & Noble has fallen on hard times. The bookseller has experienced declining revenues, resulting in increased debt from $84 million in 2017 to $178 million in 2018.127 The company also was forced to lay off its entire full-time staff of 1,800 employees in February 2018 to alleviate some of the mounting financial pressure.128 These financial pressures have taken a toll on the booksellers stock, which plunged more than 60 percent between 2015 and 2018.129 Lets explore the causes of Barnes & Nobles downfall.

THE RETAIL BOOKSTORE INDUSTRY HAS EVOLVED

Barnes & Noble was once vilified as a behemoth that drove local bookstores out of business. The bookselling giant grew at the turn of the century with the number of independent bookstores falling 43 percent from 1995 to 2009, according to the American Booksellers Association.130 This growth was fueled by the increased development of malls and shopping centers.

The companys fortunes changed with two critical, yet conflicting, events. First, the success of online retailers, such as Amazon, has led to the decline of storefront traffic, which Barnes & Noble relies on as a primary revenue source. Second, independent bookstores are making a comeback, aided by increased customer interest in localization and a curated experience. In fact, the number of independent store locations has increased 67 percent between 2009 and 2018.131

STAGNATION AND CONFUSION AT BARNES AND NOBLE

So why is Barnes & Noble failing in an industry that is growing in the face of Amazon? Its flagship Union Square location in New York City provides a clue. The CD and DVD sections, which still occupy a sizable chunk of store space, are often deserted and unmanned, according to Andria Cheng, a Forbes contributor. Customers dont seem to have a reason to come into a Barnes and Noble like they would a niche independent bookstore. The national bookseller doesnt have a unique experience to offer; on the contrary, it seems to offer too much of everything. Elsewhere in the store, alongside bestsellers, signed copies and books . . . are more examples of mismatched merchandise: journals, toys, candles and diffuser sets, tea and chocolate selections, says Cheng.132

Business Insider compared New Yorks Barnes & Noble with Amazon stores and found Barnes & Noble to be like a dollar store and that the grab-bag inventory strategy makes the store seem confused and desperate. The Amazon store, on the other hand, resembled the future of chain retail.133 In the end, Barnes & Noble doesnt seem to know what it stands for, and what it wants to be, according to Forbes.134

WHOS ATOP THE HIERARCHY?

Its difficult to come up with an effective strategy when you dont have a leader. Chairman Leonard Riggio stepped down as CEO of Barnes & Noble in 2002. The company had stable leadership for another decade, first led by Stephen Riggio (Leonards younger brother) and then by William Lynch. Lynch is credited with launching the companys electronic bookstore and introducing its electronic book reader, the Nook.135 Lynch stepped down in 2013, launching a turbulent time for company leadership with five chief executives leaving between 2013 and 2018.136

Some of the turnover atop the organization can be attributed to Chairman Riggio. Riggio is notorious for micromanaging his CEOs. An analyst at Gabelli & Company told The New York Times that, Anyone who joins there knows that the chairman is very hands on.137 For example, Riggio fired former-CEO Ronald Boire less than one year into Boires tenure. The chairman simply stated that Boire was not a good fit for the organization and declined to provide additional commentary after letting him go in 2016.138 Riggio then hired Demos Parneros as chief executive. Parneros was fired for misconduct a year later and is now suing Barnes & Noble for wrongful termination.139

The organizations skyrocketing CEO turnover rate has caught the attention of external stakeholders. For example, book-publishing executives expressed concerns to Riggio about continuing management instability at the retail giant and the direction of the business, according to The Wall Street Journal. Publishers arguePage 634 that Barnes & Noble needs to have a strategy to drive performance. This is especially important when Amazon is competing with it digitally and in stores, and small bookstores are nipping at its heels. I expressed frustration that if they had a plan, we didnt know it, a publishing executive who met with Riggio told the Journal.140

Riggio disputes claims that Barnes & Noble is mired in a leadership crisis. I have a big stake in the business, I founded it and Ive been here forever, so I think theres a lot of stability that comes with that . . . If were without a leader, Im it, Riggio told The New York Times.141 The chairman and interim CEO firmly believes he is the innovative leader the company currently needs. We have a lot of work that needs to get done, and I think I bring the necessary leadership, he told Publishers Weekly.

Riggios strategy is for Barnes & Noble to become an innovative storefront bookstore. The new store in Columbia, Maryland, is a prime example. It features a contemporary design, USB and electricity ports in the caf, and book theaters, which offer a 360-degree in-the-round browsing experience. Riggio believes these types of retail outlets are the way of the future. He also believes that the company will succeed with better merchandising and a coherent pricing strategy.142

Riggio doesnt appreciate having his strategy questioned, which is evident by the number of CEOs hes lost in a short amount of time. Only time will tell if Reggios vision and strategy will fix what ails Barnes & Noble.

STEP 1: Define the problem.

STEP 2: Identify causes of the problem in 350 words