Bookselling is a mature industry without a major upside, but is unlikely to experience a severe decline, Barnes & Noble CFO Joseph Lombardi told analysts at a Morgan Stanley retailer conference last week. He estimated that B&N holds an 18% market share, which has held relatively stable in recent years in what Lombardi called a still highly fragmented market. “It's no secret books are sold everywhere,” Lombardi said. And although bookselling is a mature market, demographics are favorable. “An aging population is a postive for us,” Lombardi said, noting that older adults tend to read more.
According to Lombardi, B&N operates its business based on the assumption that it will experience about a 2% increase in comp-store sales annually. Sales through Barnes & Noble.com are growing at a faster rate and now account for approximately 10% of total revenue. In response to a question about its Internet strategy, Lombardi said B&N's primary objective is to increase the amount of money customers spend at the retailer, be it online or through its traditional stores.
B&N's strategy to boost sales revolves around four “core competencies,” Lombardi told analsyts. If a book is in stock at a store, B&N employees are “to put the book in the customer's hand,” and not simply tell them to look for it in the mystery section, Lombardi said. Secondly, all B&N stores are prepared to fill special orders as quickly as possible. Any customer who is not already enrolled in B&N's membership club is asked to join at the checkout counter, Lombardi said. B&N has never disclosed how many club members it has, but Lombardi said enrollment has increased every month since the program was introduced seven years ago, and the rate of enrollment has increased in the last year since B&N upped the discount on hardcover titles. (Lombardi said the discount targeted hardcovers “because they were the softest part of the business.”) The final competency is “fast cashiering,” which B&N “monitors and evaluates,” Lombardi said.
B&N hopes its redesigned Web site will drive more online traffic, and several new features were aimed at addressing the question B&N receives most often: “What should I read next?” Lombardi had little to say when asked about the future of e-books, other than to note that B&N is monitoring sales of the format, which, in B&N's view, has not yet gained traction.
Lombardi sounded mildly optimistic about the holiday season. The bestseller list has turned over quite a bit in recent weeks, he noted, explaining that “an active bestseller is good for everyone.” Lombardi conceded, however, that for B&N, as well as most retailers, “everything happens in the last three weeks.”
