How Can Barnes and Noble Compete With Amazon

#2 Ways Trying Harder

Barnes & Noble's strategy is to practice everything that Amazon does, but to do it afterward. It's rare in corporate America that a management fights so hard to be #two. This is not the same thing as the Avis motorcar rental company's media strategy of sometime: "We're #ii, so nosotros take to try harder." At the fourth dimension of the Avis campaign, Avis was in fact tied for #2 with National Auto Rental, behind #1 Hertz. Avis's target was National, not Hertz. It was a winner. But the B&N strategy is of a unlike kind, a deliberate attempt to be 2d best.

I happen to believe that B&North's position is ameliorate than many pundits would have it. Comparison B&North to Borders is a mistake; Borders was a shipwreck even in a strong economy. B&Northward has displayed cracking skill in managing its bricks-and-mortar stores and has surprised anybody by coming from behind and grabbing 25% of the east-book market. B&N has also attracted investment from Liberty Media, which could help in getting the kind of media backdrop it feels it needs for the Nook tablet, though that in itself may not assist information technology with its book business.

Which is to say that B&N is trying very hard to close the gap with Amazon. The problem with this strategy is that it requires Amazon to blunder. Merely Amazon is non sitting still. Virtually every week brings news of some other Amazon initiative, whether it's a new device or the opening of business in a new country. And Amazon is doing this on peak of a business that is already x times the size of B&N. It'southward hard to compete at this calibration. I wish B&North all the luck in the earth, just a different strategy would assistance more than luck.

Part of the reason B&North is intent on playing grab-up is that they continue to view the earth of online retailing as though it were driven by the same forces every bit bricks-and-mortar retail. This is what I phone call, "The Format Fallacy" — the conventionalities that what matters is whether something is print or digital and ignoring the broader structural changes that format changes bring about. Impress is not just a format; it is an ecosystem. As the world of books moves online in digital form, a new ecosystem is arising. Amazon knows this. Heck, they invented much of it. For B&North, a compelling strategy would be to study this new ecosystem, which Amazon dominates, and to seek ways to disrupt it.

So let'southward have the time machine back to the historic period of long-altitude telephone companies and the battle between AT&T (the original AT&T, non the current one, which bought the one-time trademark) and MCI. Hither was AT&T, the market leader (remember "Amazon" as you read "AT&T"), totally dominant in its market. MCI was the upstart. Both companies had an interest in getting as much as they could from every customer, from each and every phone call. But then MCI came up with a marketing plan called Friends and Family. This program allowed a client to create a circle of people with whom y'all could get discounted telephone service. This was a radical and cunning idea. MCI was cannibalizing its own business by offering its ain customers lower prices. Why would they do that?

The reason they did it was that they were #2 and had adult a strategy that exploited that market position. As millions of people signed upwards for Friends and Family unit with MCI, MCI lost some margin on customers that they already had. Only since AT&T had past far the most customers, about of MCI'due south new customers came from AT&T. Then the cannibalization of MCI's ain user base was more than than offset by the huge strides in increasing market share at AT&T's expense.

Information technology should be noted that this program left AT&T with no constructive response. They couldn't match MCI on cost because any price cut would be handed out mostly to AT&T'south own customers. AT&T did attempt ane laughable response, the development of a new low-cease brand called Lucky Canis familiaris (I child you not), which aimed to enter the cost-sensitive segment of the consumer market. This round went to MCI. It took mobile telephony and the Internet to change the playing field once again. Ultimately, AT&T had to sell itself to a erstwhile subsidiary.

Ascendant players in any mature market place (say, STM journals publishing, to take a random example) should think hard nearly what happens when the former MCI marketing head takes a chore with a scholarly-publishing start-up. (Oops! He already took a task at PLoS I!) They should also call up of the consumer book business as the canary in the coal mine for all publishing segments.

The trouble for B&N is that the numbers going forward don't await skilful. B&N has around 25% of the The states trade book market; no ane knows exactly what Amazon'southward United states market share is, but Amazon is near certainly a third or more smaller than B&N in the domestic market. (Amazon is bigger in books on a global ground and bigger everywhere when other trade categories are taken into account.) But with east-books at present comprising as much every bit xx% of the United states book market and Amazon controlling nigh 60% of that twenty%, you have to wonder how things look when e-books are 50% of the market place, which may be only a few years away. It'south understandable why B&Due north is determined to shut the e-volume gap with Amazon, but to add over 15 points of market place share (bringing both Amazon and B&N to around 40% each), would cost far more B&N can spend. B&N needs an MCI solution.

I don't believe that B&North has fully tuned into the economics of working in a network environment. For all the talk of the democratization of the Internet and the Long Tail, network economies tend to exist winner-takes-all. Amazon is fast budgeted a position where it becomes a virtual monopoly like other tech giants before information technology — Microsoft with Windows and Role, Facebook with social networking, Google for Spider web search, and Apple (through iTunes) for music consumption. All of these monopolies reach a plateau at some point, where other products and services begin to restructure the paradigm (e.1000., the function of Cloud computing and mobile telephony in eroding Windows' base), but while the political party lasts, information technology is one heck of a profitable ride. Information technology is far more than urgent for B&Northward to prevent Amazon from reaching that point than it is for B&N to strive to accomplish that bespeak itself. B&Due north should be hell-aptitude on destroying the e-book paradigm, not on trying to control it.

Windows is not declining because people prefer Macs or because programs written in Coffee tin run on whatsoever operating arrangement or because Linux is technically superior and inexpensive; Windows is failing because the paradigm has moved off the desktop to the Cloud and mobile devices. B&Northward can challenge Amazon not past being a better e-retailer but by undermining the very idea of third-party retail. The key for B&N is to enable (and profit from) the creation of more than and more places where people can buy books, all of them chipping abroad at Amazon's lead.

The first surface area to develop is publishers as direct-marketers of their own e-books. Of grade, information technology's challenging for book publishers to sell books directly to end-users. Few publishers take brands that attract users (in trade books, authors are the brands), and the technical infrastructure of online bookselling is not footling. The practiced news is that Google will help with the first item and B&N can help with the second. Google's Web search atomizes Web sites; it brings users deep within a site to the very slice of information the user needs. This ways that a site that has rich metadata about its books can cajole Google to ship traffic its way. A well-designed site plus a good search engine makes D2C commerce possible. Amazon won't throw in the towel every bit more publishers begin to sell directly, only direct selling will hamper Amazon's connected growth.

B&N can help these publishers past "skinning" its own site — that is, bn.com — with the brands and titles of individual publishers. B&N thus becomes a service provider, making its infrastructure available to third parties. GenericHouse Publishing creates a Web site and store on the B&North platform, fulfills books from the B&N distribution center, and uploads e-books for privately branded versions of the Nook family unit of due east-reading devices. B&Northward besides brings online know-how to GenericHouse, which learns how to analyze user logs, build better metadata (the key to online merchandising), and offer special packages — packages, by the way, that are not available from any other source (e.g., an advertising hoc collection of books by a major writer, offered as ebooks on a subscription basis). GenericHouse will never outsell Amazon, simply from B&North'southward bespeak of view, information technology doesn't have to, equally GenericHouse is 1 of thousands of publishers at present doing concern on B&North platforms, for which B&N extracts a cumulatively meaningful fee.

B&N demand non end in that location. The Nook family unit tin can be configured to let any seller of books, including Amazon, to brand an app available on information technology. This would make Nook e-readers into universal devices and bring more than buyers to information technology. I only went through the do of looking for a new eastward-reader myself, every bit the backlit screens of my smartphone and iPad tire my optics. Only no e-reader allows you to purchase and read books from any source. In the absenteeism of such a device, users flock to the market leader, which is Amazon. I thus recently became the possessor of a Kindle Affect.

Since the strategy is to create more and more places for people to buy books, B&N'south historical rivals, the independent bookstores, now become prospective allies. Franchise and boutique programs could be put in identify, enabling even small, local entrepreneurs admission to the B&N infrastructure, from overnight impress shipments to private-label online bookstores. Indeed, independent booksellers already are becoming publishers, usually of local material, only their path forward could exist made much more efficient if B&N provided all the back-office services for this.  Each franchisee delivers pennies to B&N, which add upwardly in the aggregate. Simply the more than important thing is the continuing down pressure on Amazon's market share.

B&N is no longer the big canis familiaris of U.Southward. publishing, but it continues to behave as though it were. For B&North, the strategy must be to put the network to work for it, making B&N into the new nexus. This is non a game of control, but of friends and family unit. And on the Cyberspace, anyone tin be your friend.

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Source: https://scholarlykitchen.sspnet.org/2012/01/10/how-barnes-noble-can-take-a-bite-out-of-amazon/

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