Andrew Taylor on the Business
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The challenge of blending physical business with on-line
Posted: October 26, 2009
Slate's ''The Big Money'' blog offers a fascinating analysis of the new Barnes & Noble eBook reader, the Nook. Author Marion Maneker suggests that while the Nook is designed to compete against Amazon's Kindle, it might only underscore the fundamental differences between Barnes & Noble's business model and that of Amazon.
In brief, Amazon is in the business of delivering books through on-line sales. If that book can be delivered digitally, rather than in physical form by mail, Amazon wins by delivering a comparable product with vastly lower cost. Barnes & Noble, on the other hand, is a bricks-and-mortar retailer. And while their Nook strategy offers incentives to actually bring the device to one of their stores, the cost implications are vastly different -- prices drop, more digital books are purchased instead of physical books, but the retail side of that equation gets hammered in the process.
Barnes & Noble still needs to stock shelves, pay rent, and hire staff...at least for the immediate future. And if they're successful with the Nook, their margin to do so will get narrower and narrower (and perhaps negative) really quickly.
For arts and cultural managers, the analysis offers a sideways glance at the challenge of adding on-line strategies to place-based businesses (theaters, museums, galleries, and the like). It's a necessity if your goal is really to engage an audience. But it can have consequences that accelerate the business problems you already have in your primary endeavor. And you don't get a lot of time to decide. Says Maneker:
In an orderly world where change takes place incrementally, the Nook
might be a smart long-term strategy to shift Barnes & Noble's base
from physical stores to e-readers. But we don't live in that world. The
book business has shifted into hyper-space with dramatic change taking
place within a compressed time frame.
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