So the book store chain Borders is closing down, going out of business. I have been going there quite a bit recently in order to buy lots of books at very discounted prices. What I am wondering though is, is Barnes & Nobles next? Will they be able to survive? This is very upsetting to me as I love book stores, but the problem is that they cannot, or struggle greatly, to survive the pricing onslaught from the major retail chains such as Wal-Mart, Target, Costco and so forth. This onslaught is not just limited to the book store chains either though. It seems to be that retail in general has been consolidating in two ways:
1) First, many retail industries saw the rise of the Big Box "Category Killers," in which large chain stores in retail developed. These wiped out a lot of smaller retail stores.
2) The rise of the general-purpose retail stores such as Wal-Mart, Target, Costco, and such. These stores are now killing off many of the Big Boxes. Whether it is books, toys, clothing, consumer electronics, etc...many a big box is struggling. Circuit City was driven out of business, which many thought would benefit its competitor Best Buy, but now Best Buy appears to be struggling against Wal-Mart and the others now as well. Toys R Us and other toy chains were sent reeling when Wal-Mart decided to start selling toys, and sold them purposely at a loss in order to win customers over.
That is the power of these giant retail enterprises. They can decide to enter a product category, and sell said products at a loss because it is not their primary source of business, and then seriously hurt the competition while winning over lots of new customers. As an interesting side note, one of the axioms of free-market economists seems to be that a business cannot artificially lower prices, that this is impossible to pull off, because of the losses that will occur. Well perhaps most of the time, but monster enterprises such as Wal-mart have shown themselves most definitely able to lower prices in certain product categories to ridiculously low levels for temporary periods anyway, in order to win customers.
Going back to the issue of book stores however, it isn't just the big stores that have been killing book stores, another issue is simply that now people can buy books on the Internet and also e-books. Books are a unique product in that people don't need to try them on, and rarely do people care what they look or feel like, and they are very difficult to damage in transport, so they are extremely suitable to ecommerce sales. The combination of the likes of Amazon, e-books, and the monster retailers, have thus seriously hurt the book store chains.
There are some major dangers as a result of all this though. One thing that the book publishing industry has been doing that they are probably going to regret in the future is that because companies such as Wal-Mart, Target, Costco, etc...sell so many books, these retailers can make a book into a best-seller simply by placing that book onto its book shelves. This has proven irresistable to many book publishers, who thus have turned to the graces of the mega-retailers while ignoring the plight of the book store chains. The problem here is that unlike the book store chains, in which the survival of the business depends on the books, with these mega-retailers, the survival of the book depends on the business. Wal-Mart, Target, Costco, and so forth, do not need books to survive. Whether or not they stock books has solely to do with the bottom line. For example, Wal-Mart recently exited the arts and crafts retail industry (something that made the arts and crafts retailers very happy) because it wasn't making them enough money.
Now I am sure people have heard of the 80/20 rule, i.e. that 80% of a business's sales can come from 20% of the products. I am no expert, but I'd imagine that this applies with books. I doubt a book store has sales spread equally among top-selling books such as the latest Twilight book and the latest political book and so forth with books from the mathematics, classical history, economics and business, etc...sections. Probably 80% of a book store's sales, unless a specialty book store, comes from that top-selling 20% of product. What this means is that the mega-retailers are only going to focus on the top-selling 20% books. That's how those retailers work. They sell the fast-moving stuff. Same with clothing and consumer electronics and food products and so forth. You find the bulk-selling products, not the products that make up the 80% of stock, but consist of 20% of the sales/profits.
So in other words, if all the book stores go out of business, then not only are books pretty much at the mercy of these mega-retailers, but you will only be able to find the top-selling books in them. Going back to the issue of the book publishers, they have sprinted to curry favor with these mega retailers because of the massive amounts of books that they can sell. But they are as a result backing themselves into a trap, because the mega-retailers do not need books to survive. It is one thing, as a business, if you depend on a few big companies to buy and sell most of your product. You are essentially at their mercy. But if they need your type of product, you at least have that going. With the book publishers, not only will they be at the mercy of the giant retailers, but the giant retailers do not even need their product to survive.
Now this idea of book publishers going out of their way to try and help the book store chains is not strictly theoretical, as the toy manufacturing industry does just this with regards to Toys R Us. The toy manufacturers recognize that being solely at the mercy of the likes of Target, Wal-Mart, Costco, and so forth, is not a good idea. It is very much in their interest to have a business that sells strictly toys. Because just like with books, whereas Toys R Us depends on the toys to survive, with the mega-retailers, the survival of the toys is dependent on them (these mega retailers can also greatly influence the types of toys that are produced as well because they sell so many of them).
The book publishing industry really ought to look at doing this with regards to Barnes & Nobles, or they are going to find themselves totally at the mercy of a few companies that don't even need their product. As for what will happen to all those non-top-selling books if Barnes & Nobles goes down? Well, you will still be able to get them on the Internet and certain catalog companies, and I am sure small book stores will continue to sell them. Also, one might even be able to create a chain of specialty book stores, that are focused on selling all the types of books that the big mega-retailers do not sell (books on art, architecture, mathematics, sciences, engineering, etc...). Would be interesting to see if that retail concept could work. Especially if for a lot of books there was a print-on demand feature (there are machines now that can print a literal book out for you, 3D printing technology has seriously advanced as of late). For books that have to be ordered in, they could maybe focus on higher-priced, higher-margin books.
One thing I also have been wondering is that perhaps Barnes & Noble should try to find some ways to change their stores so as to attract more customers. This may sound odd, but for example find a way to change the stores where although they are "book" stores, their primary profit-making method may not be books. For example, maybe they could make the bulk of their money from coffee and food sales (they already sell coffee and food, but maybe improve and build on this?), and sales of certain other products, with books being "a" product, perhaps even the product that makes up 80% of the store, even if only 20% of the sales.
The book stores had no problem with getting foot traffic, it was the lack of actual sales that were killing them. People would come in, look at the books, but not buy anything. So try to formulate a business model that allows just this. Get foot traffic via the books, but make the bulk of the money via other products if possible (I have no idea if this is actually doable or how to go about doing it, but something to think about IMO.
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