Serendipity and Samples Can Save Barnes & Noble

Bloomberg View , July 13, 2013

Turmoil at Barnes & Noble Inc. (BKS), where Chief Executive Officer William Lynch resigned last week after the company posted an unexpectedly large loss in the quarter ended April 30, has people in the publishing industry worried. “We’re all forced to ask: What would the book discovery environment look like without Barnes & Noble?” writes Rich Fahle, a former Borders executive who runs a marketing agency for authors.

The question zeroes in on a growing problem for the U.S. book industry. Although readers increasingly purchase books online, they still rely on physical bookstores to discover what to buy. In-store displays are the most common way, after personal recommendations, that frequent buyers find new books, accounting for about 20 percent of purchases, according to a survey by the Codex Group. Yet brick-and-mortar stores are disappearing, as customers defect to the convenience and, in many cases, lower prices of Amazon.com Inc.

Online discovery -- including everything from Twitter recommendations to authors’ Pinterest boards to Amazon pages -- is growing, but it hasn’t kept up with online sales. People still seem more likely to buy books if they’ve had a chance to flip through physical copies. “Something is seriously missing with online retail discovery. It’s not working,” Peter Hildick-Smith, the founder and CEO of Codex told the Digital Book World Conference and Expo in January.

Books are what economists call “experience goods.” Unlike blue polo shirts or AAA batteries, they have characteristics that are hard to observe in advance. You have to consume them before you know whether you like them. That’s why people rely so much on trusted friends to recommend books, and it’s also why browsing is so important.

One big reason readers find it more satisfying to “showroom” in physical bookstores is that many publishers deliberately make it hard, if not impossible, to examine books online. In a physical bookstore, the proprietor decides whether letting people read the books on display is likely to turn into sales. Most rule in favor of extensive browsing, allowing potential customers to stand, or in some cases sit, around for long periods reading their books.

On Amazon or Google Books, by contrast, the publishers rule, and too many seem determined to keep your dirty eyeballs off their merchandise. Although some works are relatively easy to look through, often you can’t even read the entire index or table of contents, much less actual prose, because publishers or authors are more concerned with would-be pirates than potential sales.

The other problem online is that even when you can see the whole book, you have to know to look for it in the first place. You’re less likely to stumble on something interesting.

Until he saw it recently in a used bookstore, my husband had no idea he wanted an 800-plus-page book about gravitational-wave detection. But he’s been devouring it. Not surprisingly, consumers are more than twice as likely to buy books on impulse in a bookstore than online, according to Bowker Market Research. The serendipity of a “new books” table or a bookstore science section is hard to replicate online. It requires a special mix of smart curation and easy browsing that, despite the best efforts of websites including Amazon, is still easier to achieve in-person.

For publishers and authors, losing bookstores is a problem because it makes it less likely that buyers will discover their wares. For many readers, the loss is also cultural and psychological. It’s enjoyable to be surrounded by lots of books and by other readers. Bookstores are special places in which to spend time. That’s why they attract so many deadbeats who sit around tapping on laptops, browsing new titles and buying nothing more than the occasional latte or Diet Coke. (I used to be one of those deadbeats until my neighborhood bookstores closed.)

“You go to Barnes & Noble to forget about your everyday issues, to stay a while and relax,” Mitchell Klipper, the chief executive of B&N’s retail group, told the Wall Street Journal in January. “When you go to Bed Bath & Beyond, you don’t sit down on the floor and curl up with your blender and your kid.” (Not even the Container Store attracts that sort of behavior.)

It’s a lovely picture, but bookstores don’t make money by giving you a place to read to your kid. They make money by getting you to buy their merchandise -- a business model that requires spending a lot on rent and inventory. A retail store is an expensive place to store books, especially if people are just going to flip through them and buy elsewhere.

So here’s an idea, for the publishing industry, Barnes & Noble or a tech-savvy retail entrepreneur: Instead of fighting showrooming, embrace it.

Separate the discovery and atmospheric value of bookstores from the book-warehousing function. Make them smaller, with the inventory limited to curated examination copies -- one copy per title. (Publishers should be willing to supply such copies free, just as they do for potential reviewers.) Charge for daily, monthly or annual memberships that entitle customers to hang out, browse the shelves, buy snacks and use the Wi-Fi. Give members an easy way to order books online, whether from a retail site or the publishers directly, without feeling guilty. And give the place a good name. How about Serendipity Books?