Taking the 'Book' Out of Bookstores

Sales through the nation's three major bookstore chains fell 2.9%, to $1.82 billion, in the second quarter as declines in their bricks-and-mortar stores more than offset gains in their online units. Of the big three, only Barnes & Noble posted a sales gain in the most recent quarter as the 42% increase through BN.com overcame a 2.6% decline in sales through its retail trade operation.

Overall, sales of traditional trade print books did not fare well in the quarter at the chains. The gain at BN.com was driven primarily by sales of e-books and e-readers, while Borders said that the 6.8% decline in comp-store sales in the quarter was due entirely to declines in the trade segment, while sales of bargain books and cafe rose. Bargain books were also a bright spot at Books-A-Million as core book sales fell.

Borders CEO Mike Edwards said in an interview with PW that the decline in print trade titles was likely due to continued weak discretionary spending by consumers, migration of print sales to digital, and consumers "trading down" to bargain books in a still uncertain economy. Both Borders and BAM said they are expanding their bargain book offerings, and executives from all three chains noted that they are adding more nonbook items to their product mix.

Edwards clearly articulated the reason for adding more nonbook product—as more books are sold in digital formats, retailers need to redeploy the space they have used to sell trade titles. For Borders, that means adding more educational children's toys and games, more adult games and puzzles, plus high-end stationery. Borders is also opening "Area e" sections throughout the chain, which will sell digital products centered around e-readers, while B&N is expanding the size of its Nook boutiques. Even BAM executives said the third-place chain is looking for ways to expand in new product areas. In the second quarter, books and magazines accounted for 80.3% of BAM's sales, down from 82% in the same quarter a year ago; sales of general merchandise rose to 8.8% of sales from 7.7%, while other products—including music, DVDs, and e-book—generated 6.5% of revenue, up from 5.9% in last year's second quarter.

While all three chains are exploring ways to reconceive their businesses, Borders, in the weakest position of the three, appears prepared to adopt the most radical approach. Rather than merely focus on moving from print to digital sales, the company said it plans to expand its offerings to appeal more to women, the segment that dominates Borders customers. "Our research clearly is telling us that we have a predominantly female customer, and we are a family- and community-based destination," Edwards said during Borders's second-quarter conference call. "That is a significant difference relative to our competitive landscape." The desire to appeal more to women was behind the decision to hire Michele Delahunty-Cloutier as the new chief merchandise officer, with Edwards describing her as one of the most experienced marketers for women in the country.

Second Quarter Chain Sales
($ in millions)