Retail Customer Experience: Barnes & Noble Nook Raises Questions About Digital-Only Products

Discussion
Nov 10, 2009

By James
Bickers, editor

Through
a special arrangement, presented here for discussion is a summary of a
current article from Retail Customer Experience,
a daily news portal devoted to helping retailers differentiate the shopping
experience.

With the recent
launch of Barnes & Noble’s Nook e-reader device, consumers have yet
another way to purchase products that are completely digital — no tangible
product to take home. The trend that started for most consumers with the
iTunes store has zig-zagged across industries, from music to movies to
video games to books.

The $259 Nook
was met with skepticism from stock analysts, many of whom downgraded B&N
on the announcement. Why, they asked, would a bookseller want to create
a device that encourages shoppers to stay out of the bookstore?

“We’ve addressed
that from the get-go,” said Douglas Gottlieb, vice president of digital
products for Barnes & Noble. He said the Nook is far more than just
a way to download and read books, but also a way to interact with the in-store
environment. “Nook and the store experience go incredibly well together.”

For
instance, walk into a B&N location carrying your Nook and you’ll automatically
be connected to the free wireless network. And while you’re in the store,
you have access to complete book browsing — every book for which a digital
version exists suddenly becomes available on your device for as long as
you’re in the store.

Mr. Gottlieb
also said there is exclusive content on the way for Nook owners, but couldn’t
get specific, saying only that “some full titles, all sorts of really interesting
things” are on the way.

According to
research by Forrester, three million e-book readers will be purchased
in the United States this year and twice that many will be bought in
2010.

Discussion Questions:
What do you think of Barnes & Noble’s release of an e-reader?
How serious a challenge does the move
to digital formats pose for print books and Barnes & Noble’s
store-based model? Do you see a benefit to Barnes & Noble incorporating
this digital technology into its stores?

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21 Comments on "Retail Customer Experience: Barnes & Noble Nook Raises Questions About Digital-Only Products"


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Doron Levy
Guest
Doron Levy
11 years 6 months ago

You have to wonder if B&N is moving away from their original business model and have given up on the bricks and mortar end of the operations. I’m wondering what you can do with the e-reader. Does it have any special features that distinguishes it from Sony’s version? Can it be used at other stores? Can it play music or video? A lot of questions but I have to agree with the analysts here. Why would a retail operation offer a product that could kill traffic in the store? Can this device upsell as well?

Max Goldberg
Guest
11 years 6 months ago

The Nook is proving so popular with consumers that B&N can’t keep up with demand. It was a smart move by the company who realized that consumers want to be able to access content from a variety of sources, in a variety of formats.

The Nook will not hurt B&N in-store sales. Critics have their heads in the sand on this one.

Paula Rosenblum
Guest
11 years 6 months ago
This somehow reminds me of the old story of opportunity missed because the railroad companies thought they were in the railroad business, rather than the transportation business. B&N is in the rich content business…it’s not in the paper business. eBooks are easier to carry around, take up less space, and are more ecologically friendly than their paper counterparts. That doesn’t mean books are going away–they will likely be around longer than DVDs and CDs because some people like to touch them, students like to annotate and highlight them, and people like to put them on coffee tables–but a significant portion of the population will embrace the eBook. So really, what choice did B&N have? The reader is like the razor and the content is like the blades…B&N can break even on the reader as long as it can keep dishing out the content…and it’s not like the company needs manufacturing expertise to make the Nook work. I think it’s as close to a no-brainer as it gets. The stores will still have a place in… Read more »
Nikki Baird
Guest
Nikki Baird
11 years 6 months ago
On the one hand, it sounds cool. And I could make the argument (in fact, have made the argument for grocery) that if you’re trying to deliver a rich experience, particularly in store, then you probably need to control the user interface more tightly, and so it makes sense to invest in in-store technology or consumer-facing handhelds in order to do that. On the other hand, competing standards for eReaders are irritating to consumers, who naturally want choice. No one is really going to want to buy three or four different eReaders for three or four different retailers. The books I buy are the same no matter where I get them, why should eBooks be different? It is an interesting perspective that B&N has taken on it–if you look at the Nook as primarily an in-store customer facing handheld, that the consumer happens to be the one to buy–and by the way, it has enough value outside of the store that consumers are willing to fund the purchase, then the Nook becomes something different. It… Read more »
Steve Montgomery
Guest
11 years 6 months ago
Given that the marketplace for ebooks and their readers exists, this may be simply a defensive move by Barnes & Noble. Their rationale may be, if people are going to use this technology, then at least with our device we have the chance to capture more of that market. Unlike Kindle, they have retail stores that they can utilize to link to features that their competition doesn’t have. Maybe I am old fashioned but I like reading a book rather than from a screen. With a book the size, weight, etc, varies with each title. I can quickly look and see if I am half way through the book or getting close to the end. Should I forget it on a plane, I am able to replace it without making a major investment. When I am finished, I can add it to my library, donate it, or pass it along to a family member or friend. Like any technology, there will be people who embrace the use of readers whether it’s a Nook or a… Read more »
Matthew Spahn
Guest
Matthew Spahn
11 years 6 months ago

First off, the digitizing of print content is inevitable and is happening at lightning speed. In addition, e-readers can now be procured in many places, so if readers decide to embrace digital print content via Kindle or some other product, Barnes & Noble can’t stop or even limit that.

Many people feel that Penn Central Railroad went bankrupt because it viewed itself as a railroad company rather than a provider of transportation. The latter mindset of being a transportation company would have enabled a strategy to diversify into other other areas of transportation.

There is a little company called Amazon that is a provider of great content that has managed to thrive without brick and mortar stores. I am not suggesting that B&N stores can’t still thrive but that is secondary to what value they provide to customers regardless of the channel.

Kenneth A. Grady
Guest
Kenneth A. Grady
11 years 6 months ago

Yes, every business should fight to stay in the old business model and refuse to acknowledge or move to new products. This whole change thing is overrated!

B&N is better off being at the leading edge of this development than trying to catch up later (did someone say Blockbuster?). The demise of filing cabinets has long been predicted because digital would overtake printed paper, and yet sales of file cabinets increased year after year. At some point, digital readers may result in the decline of books but we aren’t quite there yet. If B&N does this right, they can learn on the way up and help shape the future rather than being a remembrance of the past.

Bill Bittner
Guest
Bill Bittner
11 years 6 months ago
There is a much larger perspective of the whole online book channel that retailers have to fear. I have not seen any actual studies on this but I have to believe that a larger amount of the consumer wallet is going to service and subscription fees. All retailers are no longer competing merely with other product sellers for the consumer’s money. They are competing against a whole virtual world of distractions. You don’t need paddles, gloves, rackets, or bats if your Wii machine is working. You don’t need a CD or DVD if you have a broadband connection. Retailers have to figure out how to get onto the service bandwagon in a way that does not increase operating costs and at the same times attracts younger consumers. Is it even possible for the retailer to pull someone from their virtual world to the physical world of products? Someone is going to figure out how to do this, whether through special “shopping bots” that help consumers find things they can use or maybe even by sponsoring… Read more »
Mark Johnson
Guest
Mark Johnson
11 years 6 months ago

I agree that it is a good idea to “hedge your bets” against the coming change in technology, much like what Netflix has done with being able to stream videos on the Internet.

If they can use it to create loyalty/engagement to the store and make it locally based (i.e., stores proximate to the local B&N can offer unique marketing messages) it could be quite successful.

I still do not understand reading a book on a reader. I listen to a ton of books on tape (iPod), but I would rather read a book. I am as socially savvy as anyone, but books are still much better for me. Maybe someone will buy me one for Xmas and I will change my mind.

You can mail it to Mark Johnson – Loyalty Marketer’s Association 4120 Dumont, Cincinnati, Ohio, 45244. http://www.loyalty360.org.

🙂

I will write about my experience in the next edition of Loyalty Management if I receive one.

Camille P. Schuster, Ph.D.
Guest
11 years 6 months ago

The investors who downgraded B&N stock do not understand the market. There are already a large group of consumers who do not go into the store to purchase books! The reasons to go into a B&N store and the reasons to purchase a book are not the same, do not occur at the same point in time, and are not necessarily related.

B&N’s reader may well be very successful because people do associate B&N with a HUGE supply and variety of books–much like Amazon. However, I think a lot of consumers will have to see the device and be comfortable with the interface before they choose to make a purchase.

Bill Emerson
Guest
Bill Emerson
11 years 6 months ago

This is a good move for B&N for a couple of reasons.

First, believe it or not, there are people who like to read, but don’t like to shop. Amazon cultivated this group years ago and, in a natural extension, made the experience faster, cheaper, and greener. B&N has an opportunity to capture some of this market as well as customers who like the shopping experience but don’t have the time.

Secondly, this is on the right side of demographic, technology, and environmental curves. Ignoring these waves would be a long-term business killer for B&N.

The interesting question on the e-readers is how they will differentiate themselves. Beta/VCR, Blueray/HD DVD, all are precedents of starting out with common content and proprietary technology. Someone wins, someone loses.

Jeff Weitzman
Guest
Jeff Weitzman
11 years 6 months ago
This should not be a debate about the merits of eBook readers. There is no debate, they are here. We’re on the front end of the curve, but digital books are a fact, regardless of what percentage of the book market they ultimately claim. B&N now has arguably the best eBook reader on the market, and the most compatible with different formats (supports PDF and ePUB, for example), but the format issue is a red herring. As Apple proved, if everyone has pretty much the same catalog, and a way to get other stuff onto your device (e.g. PDF), being locked into one digital vendor isn’t an issue for most people. It’s about the experience, and here B&N has a leg up, again with Apple as a good model. B&N has an advantage over Amazon in this regard precisely because it can provide an in-store experience. In this early stage of adoption, consumers can walk into a store and hold a Nook reader to see if they’d like it. They can sit in the store… Read more »
Janet Dorenkott
Guest
Janet Dorenkott
11 years 6 months ago
This is more than defensive and more than cool…it is necessity. The new competition B&N faced includes Apple’s Tablet, Sony’s 3-G E Book, AT&T, Amazon’s Kindle, and others. They are competing with a new set of companies and although there will always be a market for paper books, B&N needs to to be nimble. This is not an “either or” decision. They can and should do both. Paperless will never completely happen, but there is an environmental and technological trend that cannot be stopped. My 77 year-old mom loves to read but her eyes are bad, so I bought her an Apple Tablet. It’s simple and she can increase the font size and read easily. Text books will also soon be electronic (Amazon’s Kindle DX is designed for students). There will always be a market for paper books, especially sitting at the pool on vacation. But the bulk of reading can be much more efficient, environmentally sound, cost effective, and accessible electronically. Blockbuster missed the boat with online movies, Netflix and RedBox. B&N cannot let… Read more »
John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 6 months ago
This was a great move by B&N and I am frankly surprised they would be this bold to try something so innovative and industry leading. Just yesterday on NPR radio, there was a story about an elite boarding school in Ashburnham, Mass that has moved away from traditional books and opted for a library that is completely digital. By making this move, the school is moving from a collection of roughly 20,000 volumes to millions of digital books. Students use Amazon’s Kindle or a laptop to access the volumes. The library activity has increased dramatically since the move and became a hub for learning, networking and research. B&N could become that place for the general public. B&N is getting ahead of the curve and looking to lead, not follow. Just ask Kodak what happens if you don’t move forward with technology. Anyone still using 35mm film? How about Blockbuster now trying to catch Redbox and Netflix. Wall Street should be rewarding this move, not running away. Like most things in life, there is still some… Read more »
James Tenser
Guest
11 years 6 months ago
Although I’m a bit troubled by competing ebook standards, and I love the look of the overladen shelves in my office, I too believe the electronic reader is the future. Some speculation: The days of the $150+ college textbook are numbered, as students will acquire or license ebook versions for a fraction of the cost while publishers preserve margins and lower their capital risk from long print runs. Public school systems may find a reader to be a huge cost-saving alternative to today’s expensive texts (and incredibly heavy backpacks). Far less complicated and costly than managing laptops, with 80% of the benefits. They can expand school libraries virtually without limits. Lightweight portable readers may be the key to re-invigorating magazine and newspaper subscriptions. Tools to allow readers to “clip,” annotate, share, and print articles would help greatly with adoption. Lightweight portable readers may permit B&N to expand its program of publishing public-domain literature at very attractive prices. In-store interactivity has giant potential to re-connect the long tail of the online assortment with the merchandising limits… Read more »
Carol Spieckerman
Guest
11 years 6 months ago

Paula’s comment about B&N being in the content business vs. the paper business is spot-on and, as for concerns about retailers offering products that compete with owned stores…Let’s see, there are Starbucks, Dunkin’ Donuts, Macaroni Grill, California Pizza Kitchen coffee/food products in grocery shelves, Apple products are in Walmart, Origins is in Macy’s …the list goes on. The model isn’t unprecedented and one could argue that B&N’s reader is closer to the source by comparison.

The e-reader market is just now heating up, with Best Buy planning to dedicate space to e-readers and e-reader education during the holiday season; and it will only get hotter…estimates are that over 10 million e-readers will be in use by the end of 2010.

Barnes & Noble is making hay while the reading light shines!

Gene Detroyer
Guest
11 years 6 months ago
My colleagues are correct in referencing the old Harvard case study about the railroad vs. transportation company. It was 40 years ago it was first assigned to my class and it is the single case study that stands out in my mind. Of course, it isn’t about railroads, it is about how one looks at their business. Retailers should be reading this now. Unfortunately, not enough business leaders understand the concept. The Dow Jones Industrial Average lists a selection of the best companies. These companies have tremendous resources and shown great growth. They should be in a position to last for 100-years, yet they don’t. None of the original members of the DJI are a part of it today. Only one (GE) has remained on it since the 1920s. How can that be? The first answer is always that the market has changed on these companies. That is not the correct answer. The problem is that the companies have not changed with the market. These companies had the resources to remain leading companies but they… Read more »
Mark Burr
Guest
11 years 6 months ago

Judging by the length of the comments so far, the BrainTrust are into books…:-)

I would just ask the question, which do you think of first; Netflix or Blockbuster?

B&N is attempting to stay in the book business so that they are still there when books don’t look the way they do today.

Remember when there used to be record stores? I’m only surprised that books trail in technology as compared to other forms of media that have been transformed such as music and news.

They either change, or….

Lee Peterson
Guest
11 years 6 months ago

The “if you can’t beat ’em, join ’em” strategy is a good avenue to take in any case (a fast second in particular). It’s what both the music industry and Blockbuster were way too slow to realize. The question for B&N (and a lot of other retailers) then becomes, what do they do with all that real estate? You know, aside from the slaughter of a lot of good brands, this is going to be one interesting decade for retail, don’t you think? The possibilities are endless.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 6 months ago
When you investigate ebook categories, you’ll find that digital readers are primarily for popular fiction. And it’s in that category where traditional book stores face the stiffest competition from retailers such as supermarkets and Amazon.com. Other types of books, including instructional and most non-fiction, are normally retained by buyers to annotate and for reference. Digital readers are also manual razor handles. Sell the handles cheap and make money on the replacement blades. Sell the e-readers cheap and make money on the titles. Too, e-readers are umbilical cords, connecting users to a specific source and, along the way, offering ancillary content and building loyalty if serviced properly. But contrary to the previous comment that “the bulk of reading can be much more efficient, etc.” using e-readers, it simply isn’t true. Textbooks, anyone? Reference? Non-fiction? Granted, the internet provides a great deal of reference (much without attribution), but dog-earing will endure along with sales of highlighters. That said (written), I think that the astonished Jim Tenser put the finest point on this discussion: Look to the implications… Read more »
Marshall Kay
Guest
Marshall Kay
11 years 6 months ago
Selling its own eBook reader and presenting features that enrich the shopping experience in B&N stores makes a strong statement to B&N customers that the company wants to grow with them. Very clever. Since eBook readers will gradually erode the market share of printed books, B&N and others in the printed book supply chain and big publishers like Random House and Harper Collins, major printers like Quebecor and R.R. Donnelley, and distributors like Ingram and Baker & Taylor should work harder to tackle the publishing industry supply chain’s decades-old and notoriously large inefficiencies. Solutions that deliver enhanced item-level inventory visibility and labor efficiencies are already being put to work by a select group of companies, including the operator of a European book superstore chain. Organizations like the Book Industry Study Group (BISG) are starting to attach greater priority to these solutions. However, in order for their work to gain serious momentum, B&N needs to become an active DRIVER of collaborative dialogue with the other major players in the publishing industry. If eBook readers spawn some… Read more »
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