The Endangered Fate of Barnes & Noble

America's last major book store chain is shuttering locations as it tries to evolve for a digital future. Is this simply a tough transition, or the beginning of the end?

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Reuters

Washington D.C.'s Union Station is a major point of entry for the nation's capital. Streams of daily commuters from the region, tourists, and business travelers on the Amtrak circuit from Boston and New York can choose from an especially ample array of shopping and dining opportunities. But, as of the end of February, one of the anchor retailers will be gone. Barnes & Noble is shutting down its bookstore in a main concourse after failing to reach terms with the landlord. Browsing the aisles at Barnes & Noble stores has been a core feature of the chain's strength in the forty years since Leonard Riggio purchased the assets of what was then a venerable seller mainly of textbooks and turned the enterprise into the country's most formidable shaper of a superstore culture for book selling.

It is hard to imagine a destination like Union Station without a fully stocked bookstore, even if it is also the case that an increasing percentage of the consumer traffic is carrying a mobile reading device that is loaded with books purchased elsewhere, mainly from Amazon. The sprawling Barnes & Noble on Georgetown's M Street is gone, and the company has closed superstores in New York, Dallas, Chicago, and Seattle (among other places) in similarly well-situated locales as part of a broader brick and mortar contraction that suggests--disturbingly--its long-term decline. Barnes & Noble's post-holiday report for 2012 reflected a drop in same-store sales of 3.1 percent, and despite a substantial push to expand its Nook line of e-readers, product sales for the devices were down 12.6 percent from a year ago.

In an interview with the Wall Street Journal, Mitchell Klipper, chief executive of Barnes & Noble's retail group, said that, over the next decade, the chain will reduce its outlets by about twenty a year to reach a figure of about 450-to-500 consumer stores, down from a peak of 726 in 2008. A separate chain of 674 college bookstores (which thrive on tchotchkes and their exclusive franchises) is not part of that calculation. Even with so many fewer consumer stores, Klipper said, "It's a good business model. You have to adjust your overhead and get smart with smart systems. Is it what it used to be when you were opening 80 stores a year and dropping stores everywhere? Probably not. It's different. But every business evolves." Klipper disputes the notion that bookstores will be unable to hold their own in the digital era, despite the chain's need to downsize where rents or locations are hurting the prospect of acceptable profitability. Only a handful of the stores--fewer than twenty--are actually losing money, he told the Wall Street Journal's Jeffrey Trachtenberg. But the company's revenues have been significantly impacted by its commitment to build the Nook franchise.

While holding on to ownership of nearly 80 percent of its Nook division, a $300 million investment in Nook from Microsoft last fall, followed by an $89.5 million commitment from Pearson, which sees value in the growing electronic textbook market, are signs that Barnes & Noble can forge a way to secure enough of the digital business to offset the problems it faces in traditional bookselling.

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Peter Osnos is a contributing writer for The Atlantic. He is the founder and editor at large of PublicAffairs books and a media fellow at the Century Foundation.

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