Wednesday, October 30, 2013

The Kindle vs. The Nook: The e-Reader War

Growing up, one of my favorite past times was grabbing a good book, laying in front of the fire place, and reading for hours on end. I still read for hours on end, but now it is done on my eReader instead of a good old-fashioned book. eReaders have recently come to dominate the world of literature, and it’s no wonder why Barnes & Noble (B&N)—the giant of the “book trade[1]”—has tried to cash in on this strategy. This entry is about B&Ns new vision and whether or not that vision is enough to keep it afloat.

With Borders out of the picture, B&N is the only corporate “brick and mortar[2]” book store remaining in the US. However, this does not mean that they have monopolized the book trade—far from it. Amazon, one of the leading eCommerce companies in the world, has gone in head-to-head battle with B&N with its introduction of the Kindle. Its eReader and online book sales have stolen substantial sales and revenue from B&N, and despite the presence of Borders, until recently, CEO William Lynch, named Amazon as B&N’s most fierce competitor. This puts B&N in a unique position. They are a major “brick and mortar” book retailer that must learn to successfully compete in the arena of eCommerce. So how has B&N changed its vision and strategy to compete with this nontraditional (by historic standards) goliath?

Barnes and Nobles corporate strategy has historically been one that relies on book sales from one of their 703 stores in all 50 states. However, technology has redefined the boundaries of book profitability and B&N has adjusted its strategy accordingly. Unlike Borders, which filed for Chapter-9 bankruptcy in 2011, B&N has a tech-savvy CEO who has led the company’s business strategy transformation. To keep up with their competition, B&N has shifted its focus to e-Commerce by investing in and developing the Nook. The chart below shows the market share of the various eReaders.

Source: NextMarket Insights

However, the eReader is not the only strategic change in B&N's operations. Barnes & Noble has been updating its store fronts to have a more "tech" look, and is hiring engineers and designers in bulk. Lynch has even gone so far as to say that B&N is a “Tech company.” Statements like this prove their strategic pivot towards the technology revolution as a way to stay in the game., many people are not convinced. Some analysts have argued that in shifting its focus from traditional book sales, B&N is actually harming their position in the market[3]. This poses a unique challenge for B&N: How to capture online market share by investing in their e-Reader, the Nook, while also maintaining their iconic image as a book behemoth, an image that keeps brick and mortar sales steady—a critical source of revenue.

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