Over the holidays, I spent some time in the mall and I found myself in a Barnes & Noble this one was a two story store and you can get a good view of the whole store at once – and when we got upstairs I was shocked to look out and see that a good third of the store was full of toys. Toys? I haven’t been to a B&N in a while and I was pretty surprised.

First off, it’s a bookstore and, well, Amazon. Since the bankruptcy of Toys ‘R Us was a big deal in my household (kids were very concerned) and having that having happened so recently it occurred to me that B&N is not in a great spot, between paper books and toys. So of course I spent two days digging into news coverage and annual reports to see what was going on with B&N.  I just kept thinking, What do you do?

Here’s a great blog post about Amazon’s footprint in the book space that’s quick to point out any print book sales increase is becuase Amazon is selling them, and at a discount. Amazon, who is getting headlines now for disrupting everything, started by disrupting the book industry years ago.  Borders is gone.  Books-a-Million is hanging on, but it’s really just Barnes and Noble vs. Amazon.

Barnes & Noble was a Fortune 500 company, it’s actually ranked 555 now, but we are talking about a massive enterprise.  Over 600 stores and 28,500 employees and $4.4 billion in revenue.  But if you walk through the store, it feels like it’s teetering. 

Based on their annual report, B&N has had executive turnover and don’t have much in the way of cash, although there is a sizable credit line they haven’t really used yet. If I was in charge, the first thing to figure out is what the enterprise is really about.

Is it about books? If B&N is really about paper things, including books, they could go this way.  Vinyl records are having a big resurgence, maps, Moleskine notebooks  (I’m a huge Moleskine fan), board games, coloring books, they are all manifestations of analog that aren’t going away.  From a volume perspective, I imagine it would be difficult to match the book volume that they are pushing through stores (or were) but it seems like a viable path to me.  The stores would likely need to shrink, but that’s something that B&N is pursuing already, with 500 stores for renewal in the next 5 years.  It’s something you can build an identity around, keep retail locations open, stay true to your roots. 

Is it about the story?  The concept of a book is pretty fluid right now.  Is it the paper thing? What about eBooks? (my preferred way of reading) Audio books?  Blogs that are compiled and printed? Oral tradition? My argument would be that it’s all of those things and that’s pretty tricky to monetize right now.  Besides paper books, the other things I listed are web-based in some form or another.  That means that B&N would need to get a more robust and innovative web presence and making them primarily a technology company. That doesn’t seem like a good fit for them. 

Is it about the store? It’s a daily occurrence to see an article go by about a retail entity closing, reorganizing; retail is really in flux right now. Retail is often entertainment, which used to be an area they capitalized on.  It’s possible that B&N could move back into that type of footing; it’s certainly how Amazon is moving with their concept stores.  A place to browse books, spend time, get coffee, host all those community book reading and signing events.

What would I do? If I suddenly find myself on B&Ns board, here’s what I would recommend:

• Smaller stores.  Most of their locations may need to be not just reduced, but moved.  They’ll need to be in places with foot traffic, and if they are in a shopping center with 4 other box stores, facing the same problems, that’ll need to be sorted out.  That seems to be the direction B&N is heading now.
• Focus on the analog.  Build out the vinyl section, notebooks, pens, board games. Give people places to test all these things out.  Listening to records, playing the board games. Consider talking to companies that have large board game divisions, like Hasbro, to see if they can strike up a preferred vendor status.
• Reduce the number of titles. This is the one I’m least sure of.  But unless they can out-Amazon Amazon, it seems to me that the footprint of carrying and distributing a vast inventory is not worth the return.  B&N has the depth of expertise to figure out the blockbuster books and then the metrics for their biggest sellers, and then stick to those swim lanes for now. Harry Potter type books, The Fire and the Fury, books that people want the day they are released and build out a reasonable library from there.
• Build a more robust events calendar.  Board game tournaments, book signings, school book reading events, poetry readings, musical performances that feature artists that are selling Vinyl.
• Keep and extend the cafe concept.  Sell coffee, tea, upscale concessions, wine and beer.  Host wine tastings in the store.  A key thing is to stay away from sitting down. Everything should be able to walk through the store with the customer, not keep them away from the things.  If they come in to participate in one of the events, they can grab a snack or a drink and stay a while.
• Build a web presence to match. By reducing inventory, they can tailor the web experience to match the analog offerings.  Everything in the store is the same price as online, and many of those experiences can move online as well.  Recording the events for re-distribution on the web to drive traffic.  Love this reading? Click here to buy the book!  There is even a path to integrate mobile into the store experience directly, increasing traffic both ways. With the reduced inventory, the web can specialize to support the store.
• Exit from toys, Nook, and the restaurant direction of their concept stores. The first two have been thoroughly disrupted by Amazon, the third just isn’t a bookstore.   

At the end you’d have smaller stores with a greater focus on community and analog entertainment that people seem to be craving.  The customers are going to be monetized through food and drink, and analog things, but likely at lower volume. That allows B&N to stay a retailer, involved with books, and true to their roots.

Based on what I’ve found about the history and the assets of the company, it seems as though there is a path to pivot, but my assumption is that there will be years of shrinking and reorganizing before the growth comes back.  But they are a public company.  With the constraints of Wall Street expecting earnings, that may be impossible.  I hope that they pull it off.