Lloyd Lofthouse

Today I went out-of-my-way to order a book at the local Barnes & Noble bookstore and had to walk about a mile from a distant parking lot, because a few days earlier I was told by a B&N employee that the store would match Amazon’s price. But I wasn’t ready to buy then. I wanted to check out Half Price Books first.

Today, I was ready, but I had not learned all the details. After walking that mile, I was told that to get the same discount that Amazon offered, I had to become a Barnes & Noble member with an annual cost of twenty-five dollars.

B&N was even willing to automatically renew my membership each year. I wouldn’t have to worry about that.

I have changed my mind. Why should I be loyal to Barnes & Noble, because the Amazon giant is driving them out of business?

We have been through this sort of thing before but back then it was the independent bookstore being pushed out by the big chains like Barnes & Noble. We heard the same sob story then too but not from the chain stores.

Highbeam.com gives us a snapshot of this history. I pulled a couple of quotes to give you an idea.

“The retail bookstore industry in the early twenty-first century was dominated by several large chains, including Borders Group, Inc.; Barnes & Noble, Inc.; and Books-A-Million. The rest of the market was shared by about 10,000 independent bookstores. Chain stores, many of which opened during the 1970s, were generally located in shopping malls and usually carried between 15,000 and 20,000 of the most popular titles targeted for a broad consumer market.” Source: Highbeam.com

Highbeam.com says that “Barnes & Noble is the largest bookseller in the United States. In 2006 the company operated 793 bookstores in fifty states, including stores under the names Barnes & Noble, B. Dalton, Doubleday, and Scribner’s, as well as barnesandnoble.com. The company posted $5.26 billion in sales in fiscal 2006. Its superstores accounted for approximately 86 percent of sales. The company is credited with introducing the superstore concept (which Borders embraced) and has also established a significant online presence. Barnes & Noble was founded in 1873 by Charles Barnes & began as a used book business.”

There was even a movie that tells the story.

The movie was called You’ve Got Mail (1998). In the film, Tom Hanks is the son of the owner of a clone of Barnes & Noble that is spreading across the country like cancer, and Meg Ryan owns a small, warm, loyal, independent bookstore struggling to survive in the shadow of the so-called evil giant. In the end, Ryan loses her store, but ends up with the character Hanks plays and our two fictional heroes live happily ever after.

However, the real reason Barnes & Noble is in trouble is because it has to service a huge debt of $465.65 million with total cash on hand of $470.99 million (as listed on Yahoo Finance on February 9, 2013). Most of the cash must be from borrowed money.

Imagine what the payments and interest are for almost a half-a-billion-dollar loan. I suspect that loan came from the cost of adding more stores, and the pressure to grow came from being a publicly traded company on Wall Street. Bad decisions by management also landed B&N in this fix.

It is a challenge to compete on a level playing field when you carry such a heavy burden. That is the brutal curse of Wall Street style capitalism where the true meaning of survival of the fittest comes into play.

Amazon.com, Barnes & Noble’s competition, has a much better debt-to-cash ratio. Amazon.com carries a total debt of $4.28 billion but has $11.45 billion in cash and the operating cash flow was listed at $4.18 billion when I checked. Source: Yahoo Finance

That’s probably why Barnes & Noble has to charge a $25 annual membership fee before a customer can get a discount similar to the one offered at Amazon.com. B&N must use every trick in the book to earn money from loyal customers.

When I walked away from the special order desk at Barnes & Noble today, I thought this book seller’s days are numbered just like so many of those independent bookstores were when Barnes & Noble was the evil giant driving them out of business.

Barnes & Noble may never learn that if you want to compete and win, you have to offer a better deal and/or service than the competition, and the brick-and-mortar shopping experience may not be enough, because we can get the same fix from a library if all that’s needed is hanging out with books on shelves.

I wonder what will come along to kill off Amazon as the survival cycle continues. After all, millions of years ago the dinosaurs ruled the earth and humanity’s ancestors were hairy, monkey like creatures hiding in trees or holes in the ground.

Discover An Authors Bane—the negative review

_______________________

Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”