barnes and noble lsn5 Flashcards
What was the size of the U.S. consumer book market in 1996, and what were its growth projections?
U.S. consumer book expenditures reached $26 billion in 1996. The market had grown at a 5.4% annual rate since 1991, and was projected to grow at 4.8% annually through 2001, reaching $33 billion
This growth was considered modest due to competition from other entertainment options like TV and video games
Describe the typical book industry supply chain.
The chain starts with authors selling rights to publishers. Publishers then sell to wholesalers and/or retailers, who ultimately sell to consumers
Most books are sold on a consignment basis, meaning unsold books can be returned to the publisher for full credit
What were the key characteristics of book publishers in the mid-1990s?
There were about 40,000 publishers in the U.S., but the industry was concentrated; 20 publishers accounted for 88% of sales. The largest, Simon & Schuster, had an 11% market share
There was a trend of media conglomerates acquiring publishers, leading to increased bottom-line focus. Publishers offered discounts to retailers (up to 44-55%) and wholesalers (slightly higher), and provided cooperative marketing funds
What role did wholesalers play in the book industry?
Wholesalers like Ingram and Baker & Taylor acted as intermediaries between publishers and retailers. They stocked many titles, offered discounts to retailers, and provided speedy delivery
Ingram, the largest national wholesaler, stocked nearly 500,000 titles and shipped orders very quickly. Wholesalers were under pressure in the mid-1990s due to publishers offering better terms to retailers and the shrinking share of independent bookstores
How did bookstores evolve from mall-based stores to superstores?
Mall-based chains like B. Dalton and Waldenbooks became popular in the 1970s, but superstores with a larger selection and more space grew in popularity in the 1990s
Superstores sought to replicate an old-world library feel with cafes and public spaces, encouraging browsing. Superstores also had higher average transaction values than mall-based stores
What was Barnes & Noble’s traditional business model?
Barnes & Noble was the largest bookstore chain in the world in 1996, with a focus on superstores. They had a centralized procurement system to gain scale economies
They also had a number of book-related businesses, such as publishing reprints, direct marketing through mail order and membership clubs and some stakes in other book retailers
Describe Barnes & Noble’s procurement and logistics.
They centralized procurement, attempting to leverage scale economies. They dealt with many publishers and wholesalers, with a large distribution center in New Jersey
Barnes & Noble aimed to increase the use of their distribution center for better margins and availability, but still trailed Borders in this area
What were the key aspects of Barnes & Noble’s store operations?
Barnes & Noble’s superstores ranged from 10,000 to 60,000 square feet and carried 60,000 to 175,000 titles. They began implementing a new store system called “BookMaster” to improve efficiency
They also operated smaller mall-based stores under various trademarks. They were focused on expanding their superstore presence
How did Barnes & Noble market its stores?
Mall stores offered selective discounts, while superstores had a lower price structure aimed at attracting destination shoppers, with discounts on hardcovers and bestsellers. Superstores focused on selection, service, and location
he Barnes & Noble brand name was carefully maintained to evoke a large selection, low prices and a welcoming atmosphere
What was Amazon.com’s online business model?
Amazon.com was a “sell all, carry few” online retailer. It offered a huge selection of books but kept very few in its own warehouse
Amazon’s founder, Jeff Bezos, chose books due to the large number of SKUs and a lack of “800-pound gorillas” in the market
Describe Amazon.com’s procurement and logistics strategy.
Amazon relied heavily on wholesalers, particularly Ingram, for most of their inventory. They aimed for a just-in-time procurement system to multiply inventory turns
This system led to very low return rates compared to traditional bookstores
What were the key aspects of Amazon.com’s store operations?
Amazon’s operations were centralized in Seattle, chosen for its proximity to a large book distributor, tech talent, lower taxes, and faster shipping to the East Coast. They invested heavily in software development
The company focused on back-office operations and customer service
How did Amazon.com market its online store?
Amazon.com built traffic through word-of-mouth, print and online advertising, and an Associates Program. They offered information about books, interviews with authors, and personalized services
Their value proposition focused on selection, reliability, and price
How did Barnes & Noble respond to Amazon.com’s online presence?
Barnes & Noble launched its own Web site, BarnesandNoble.com, in 1997, and partnered with AOL. They emphasized leveraging the existing Barnes & Noble brand name
They aimed to dominate online book sales by the end of 1998, focusing on incremental sales opportunities
What were key aspects of Barnes & Noble’s online business model?
BarnesandNoble.com was organized as a separate company to avoid sales tax complications. They used the same centralized procurement system as their traditional stores but shipped books from a separate warehouse
They leveraged their existing infrastructure and systems for back-end operations
