How Barnes & Noble went from villain to hero

After years on the decline, Barnes & Noble’s sales are up, its costs are down — and the same people who for decades saw the superchain as a supervillain are celebrating its success.

In the past, the book-selling empire, with 600 outposts across all 50 states, was seen by many readers, writers and book lovers as strong-arming publishers and gobbling up independent stores in its quest for market share.

Today, virtually the entire publishing industry is rooting for Barnes & Noble — including most independent booksellers. Its unique role in the book ecosystem, where it helps readers discover new titles and publishers stay invested in physical stores, makes it an essential anchor in a world upended by online sales and a much larger player: Amazon.

“It would be a disaster if they went out of business,” said Jane Dystel, a literary agent with clients including Colleen Hoover, who has four books on this week’s New York Times bestseller list. “There’s a real fear that without this book chain, the print business would be way off.”

The pandemic tossed substantial roadblocks in Barnes & Noble’s way. For nearly two years, there were no readings or author signings in most of its stores. Its cafe business is still way down. And in December, just as the Christmas shopping season arrived, omicron rolled in. Many of the chain’s downtown stores in urban areas are still underperforming because of a paucity of tourists and office workers.

Despite all this, sales in Barnes & Noble stores were up 3% last year over their pre-pandemic performance in 2019. The growth came the old-fashioned way, said James Daunt, the company’s CEO: by selling books, which were up 14%.

“I would never have predicted it at the outset of the year,” Daunt said, “but it’s been tremendous.”

The enemy of my enemy is my friend

For many years, hostility toward Barnes & Noble from independent bookstores was so potent, it made even Tom Hanks a believable, if charming, villain.

The feeling was captured in the 1998 movie “You’ve Got Mail.” Co-written and directed by Nora Ephron, the film centred on the owner of a major bookstore chain, played by Hanks, who put Meg Ryan’s character, a beloved independent bookseller in Manhattan, out of business. (Also, they were both adorable and fell in love.)

Back in the world of nonfiction, the American Booksellers Association, which represents independent stores, filed an antitrust lawsuit against Barnes & Noble in the 1990s. A few years before that, the group sued several publishers, saying they had unfairly charged big chains lower prices.

“There was a period where the competition was pretty ugly,” said Oren J Teicher, a former CEO of the American Booksellers Association. “Barnes & Noble was perceived as not just the enemy, but as being everything about corporate book-selling that was wrong.”

Over time, however, bookstores developed “a common enemy,” Teicher said: Amazon.

Barnes & Noble grew from a single Manhattan bookstore in 1917 to become a dominant player by offering big discounts on bestsellers to draw in customers. Once in a store, readers were presented with an enormous selection, sometimes more than 100,000 titles, most of which were sold at full price.

When Amazon came along, it took Barnes & Noble’s game and played it better, with deeper discounts and a seemingly infinite selection of books.

Today, despite the rise of other formats, the industry still relies on physical books — in 2021, they brought in 76% of publishers’ sales revenue, according to the Association of American Publishers. And more than half the physical books in the United States are sold by Amazon.

Buying a book you’re looking for online is easy. You search. You click. You buy. What’s lost in that process are the accidental finds, the book you pick up in a store because of its cover, a paperback you see on a stroll through the thriller section.

No one has quite figured out how to replicate that kind of incidental discovery online. It makes bookstores hugely important not only for readers but also for all but the biggest-name writers, as well as for agents and publishers of all sizes.

Independent shops play an important role in that kind of discovery, but because Barnes & Noble stores are so large, they can usually keep more titles on hand. And in many parts of the country, there are no independents: Barnes & Noble is the only bookstore in town.

“Discovery is so, so important,” said Daniel Simon, founder of Seven Stories Press, an independent publisher. “The more Amazon’s market share grows, the less discovery there is overall and the less new voices are going to be heard.”

For well-known authors, Barnes & Noble is important for a different reason — its size. An important stop on any major book tour, the chain’s 600 stores can place enormous orders and move a lot of copies.

“It’s funny how the industry has evolved so that they are now a good guy,” said Ellen Adler, the publisher of the independent New Press. “I would say their rehabilitation has been total.”

The chain also keeps publishers invested in distributing physical books around the country, said Kristen McLean, executive director of business development at NPD Books, which tracks the market.

That is good for booksellers of all sizes.

Michael Barnard, the owner and manager of Rakestraw Books in Danville, California, said that roughly 20 years ago, Barnes & Noble opened a superstore about 5 miles from his shop. A Super Crown bookstore, a Borders and a Costco with a sizable book section were also close by — and all this just as Amazon was ascendant.

But Rakestraw hung on, and even thrived. Last year was the best year his store has ever had, Barnard said.

“They’ve been, at times, extremely competitive and hard to have,” he said. But at the same time, “they’re the other major part of the industry that is committed to print and to in-person book-selling, and I do think they share some of our challenges.”

“Having said that,” he added, “I would prefer not to have one just down the road from me.”

A bookstore is not a battery store

In 2018, the company’s board fired its CEO, its fourth in five years. People in the industry worried that the largest bookstore chain in the country might fold.

The next summer, Elliott Advisors, a hedge fund, bought the chain for $638 million and put Daunt in charge.

A highly regarded bookseller who opened his first Daunt Books store in London in 1990, Daunt had been brought in to solve a similar problem at Waterstones, Britain’s largest bookstore chain. The company was on the brink of bankruptcy when he took over in 2011. His theory was that chain stores should act less like chain stores and like more independent shops, with similar freedom to tailor their offerings to local tastes. It worked, and he returned Waterstones to profitability.

He repeated that approach at Barnes & Noble. While orders for locations around the country used to be placed by a central office in New York, today a diminished central office places just a minimum order for new books, leaving store managers free to choose whether to bring in more copies based on local sales.

“I get all the glory, but actually what I’m doing is getting out of people’s way and letting them run decent bookstores,” Daunt said. “All the work goes on on the shop floor.”

Barnes & Noble has also concentrated on selling books, instead of the vast assortment of items that it once carried and that was only tangentially — if at all — related to reading.

“We were selling a lot of fairly irrelevant things to a bookstore,” Daunt said. “Nobody thinks, ‘I need a Duracell battery — I’m going to go down to my bookshop.’”

The chain has beefed up its selection of manga, making sure it had the inventory to feed an explosion of demand over the last few years, said Shannon DeVito, director of books at the company. It has also paid close attention to books that have taken off on TikTok, where viral clips of readers weeping over books they love have pushed many titles onto the bestseller list.

Barnes & Noble has also stopped taking fees from publishers to place particular books in highly visible spots, like by the entrance or in the window. It seemed like free money, Daunt said, but it caused a cascade of problems: Books nobody wanted to buy were prominently displayed, and big orders that didn’t sell had to be shipped back. (One quirk of the book business is that unsold books can be returned to publishers for full credit, a practice that dates to the Depression. The shipping and handling costs can be significant.)

Now store managers can choose which books to promote.

“Although it looks like we’ve piously held our hands up and said, ‘I don’t want to take the money,’” Daunt said, “we’ve actually said, ‘I don’t want to incur all the costs associated with taking that money,’ leaving aside that it forced me to run really terrible bookstores.”

After enduring years of unloved shabbiness, Barnes & Noble has started to refurbish its stores, many of which hadn’t seen a new carpet in about 15 years; shortly after he was named CEO, Daunt said Barnes & Noble stores were “a bit ugly.” When the company shut all its stores in 2020 because of the pandemic, it used that time to freshen up. Walls were painted. Furniture was rearranged. Some bulky displays were replaced with smaller tables. And at the end of last year, it started doing more extensive redecorating.

Barnes & Noble’s online business has also improved. That segment is up 35% over its pre-pandemic level, Daunt said, though it makes up only about 10% of the chain’s overall sales. After years of letting its Nook e-reader languish, the company has been investing again. It recently redesigned the Nook app to integrate audiobooks and released a new version of the device before the holidays last year.

The company’s reorganization has not been painless. The central office staff is half of what it was, Daunt estimated. Much of that reduction came through layoffs, including many book buyers as their duties shifted to local stores.

But a smaller central staff has allowed the company to give up expensive New York City office space. The remaining staff works out of two floors in Barnes & Noble’s flagship building on Union Square in Manhattan, which the company was already renting.

Plenty of questions remain about Barnes & Noble’s future. Costs are rising in the book business, which has low margins to begin with. And like all in-person retailers, Barnes & Noble needs to persuade more customers to stop buying everything on their phones.

There is a good wind at its back, however, because sales across the industry are up. With so many people stuck at home in 2020, a lot of people bought a lot of books. As the country has opened up, publishers have waited for sales to drop back down again to pre-pandemic levels. But so far, they haven’t.

Usually, said McLean of NPD Books, strong sales are driven by blockbuster releases from well-known authors, and while some are coming this year — Marie Kondo will have a book out this fall about how to manifest your ideal life by organizing — there haven’t been many recently. Right now, something else is behind all that buying.

“At the moment,” Daunt said, “it’s being driven by an enthusiasm for reading.”

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