According to published reports, bookseller Barnes & Noble is laying off hundreds of people nationwide including some of its most dedicated and experienced workers as part of its new “flexible staffing plan. According to a B&N press release, “Barnes & Noble implemented a company-wide expense reduction plan. This plan includes a new store labor model that provides greater flexibility and better customer service by eliminating tasks and allowing booksellers to focus more on customers. The Company estimates that these actions will result in annual cost savings of approximately $40 million.”
The company has implemented a restructuring program following a disappointing holiday season (down 6% from the year before). Barnes & Noble CEO, Demos Parneros, wrote “We have initiated a strategic turnaround plan that is centered on growing the business and enhancing shareholder value. In the short term, we are focused on stabilizing sales, improving productivity and reducing expenses. Achievement of our longer-term goals requires a significant multi-year transformation. We expect our plan to provide consistent improvement beginning in fiscal 2019 and beyond.”
Is the Business Model Doomed?
The major best sellers are heavily-discounted by the big-box stores such as Walmart, Costco, and the "infinite bookstore" can provide hard-copy books within a few days, and their electronic version within a few seconds. Carrying auxiliary merchandise such as stationery, pens, and tchotchkes only produce incremental profits. Enhancing the environment with snack bars and reading areas may encourage customers to linger -- but they probably will not increase their buy to compensate for the expense.
The company’s last quarterly filing with the Securities and Exchange Commission (SEC) provides this “business overview” filled with corporate-speak and management’s dreams.
Barnes & Noble has been experiencing declining sales trends primarily due to lower store traffic. The Company has been able to offset some of the traffic declines through its efforts to increase conversion through higher customer engagement. Additionally, the Company has been able to mitigate the impact of the sales declines on profit levels through cost reductions. While the Company believes it has lost share on its recent sales performance, it sees opportunities in an industry that has become more stable.
To improve its performance, the Company has initiated a strategic turnaround plan. The Company’s long-term strategic plan is focused on strengthening the core business by enhancing the customer value proposition; improving profitability through an aggressive expense management program, which will be used to fund growth initiatives; accelerating execution through simplification; and innovating for the future, which will position the Company for long-term growth.
To strengthen its core business, the Company is enhancing this customer value proposition by improving its merchandise mix, enhancing the overall shopping experience, increasing the value of its Membership program and improving its omnichannel capabilities. The Company will leverage the strength of its Barnes & Noble brand, knowledgeable booksellers, vast book selection and retail footprint to attract customers to its omnichannel offerings and grow sales.
Merchandising initiatives are focused on increasing the number of value offers, narrowing product assortments, improving SKU productivity, improving inventory management processes, testing changes to existing store layouts and remerchandising select business units in stores. The Company believes there is an opportunity to increase conversion through higher customer engagement and by improving navigation and discovery throughout the store, including a customer friendly and more intuitive organization of books and improved signage for easier browsing within and across sections.
In-store events also drive traffic, reinforcing Barnes & Noble as a community center where customers can meet, browse and discover. The Company is also utilizing social media, where booksellers communicate events, promotions, and new product offerings with customers at the local level.
The Company’s Member Program provides the Company with valuable data and insights into its customer base, enabling the Company to better understand and market to its customers. Members are more productive than non-members, as they spend more and visit more often. The Company continues to test programs to grow sales to both members and non-members, increase membership, improve price perception and enhance its overall customer value proposition.
To improve profitability and accelerate execution, the Company is focused on simplification throughout its organization to create efficiencies and reinvest resources to support sales growth. The Company is also committed to right-sizing its cost structure. At B&N Retail, the Company is focused on increasing store and supply chain productivity, streamlining operations and eliminating non-productive spend. At NOOK, the Company exited non-core businesses and outsourced certain functions. NOOK expects to continue to re-calibrate its cost structure commensurate with sales, further reducing its losses.
In addition to initiatives focused on growing sales through its existing store base, the Company is innovating for the future and is currently testing new bookstore formats, which it believes could foster sales growth in the future. The Company has also created a Test & Learn pipeline process, through which it is testing a number of new initiatives to improve future performance.
Are you asking yourself, Am I Next?