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Blog: Blog2
  • Rand Pearsall, GPS

Is Barnes & Noble Trying to Commit Suicide?

In an increasingly online world, one of the great marketing challenges continues to be getting people to shop in brick and mortar stores.

The trick is to tempt me away from my computer/phone and drive to the store. Any store that can do this would be a big success, right?

And then there’s Barnes & Noble (NYSE: BKS).

I haven’t shopped B&N, online or in-store, in about four years. But they still have a great selection of music and mass-market paperbacks, the kind that can fit in your jeans pocket but which other stores have stopped carrying.

So thanks to a 30% coupon that arrived in my email, I decided to give B&N a try for some Christmas shopping. A quick online search showed they had my desired CDs in stock.

When I found the CDs, they were priced significantly higher than the online price. The very helpful salesperson advised that B&N couldn’t compete with Amazon's online pricing and still be able to keep the stores open.

I replied that this means B&N is providing a disincentive for me to shop in the store as I would just leave, buy the CDs online and still get my 30% off. In fact, paying the higher store price would feel like a stupid thing to do. Plus, I was now more than a little upset that I had wasted my time driving to the store.

How many other customers have been turned off by this pricing policy? Are incremental sales lost when these customers only buy online and no longer are being tempted by other items in the store? Not to mention, Amazon is only a click away and there is no captive audience or opportunity cost to leave B& to shop at competitors. Why go to B&N at all?

It’s not just me. According to McKinsey:

“Customer expectations are rising: for instance, customers now expect price consistency across channels, the ability to buy online and pick up or return in store, and a range of payment options. Price transparency puts pressure on retailers to develop ultraefficient operating models. The wealth of online information available to consumers raises the bar for in-store service and expertise.”

The real shame here is that B&N is getting a lot of things right:

  1. Local Manager Expertise and Ordering Authority. My salesperson noticed a consistent demand for jazz CDs and vinyl and built a sizable business.

  2. $4.99 CDs of Top Albums from Past Decades. Excellent selection and well below iTunes and Amazon prices.

  3. Makes Shopping a Great and Relaxing Experience. Nothing beats the aroma of fresh brewed coffee.

  4. Educational Toys. Takes advantage of parents who still shop for children’s books and would be interested in non-electronic toys.

  5. Star Wars. A good assortment of Star Wars products on the floor well before the latest movie opened.

  6. Convenient Locations. Two stores within 15 minutes of my house and close to other popular shopping destinations.

Except for the pricing issue, going to a B&N store was a largely pleasurable experience. I found things I could buy that I would not have bought online. But no store can survive if it turns away customers, which is exactly what their pricing policy is doing. They are choosing lower sales and higher margins versus getting more customers into a well-merchandised retail location where incremental sales (at a decent margin) would be possible.

Unlike other retail operations where the news is almost all bad (e.g., Sears), Barnes & Noble actually has a story to tell. But without more customers – and by taking the calculated risk of annoying lapsed/prospective customers with their inconsistent pricing – this story may not reach enough people. If so, B&N will take another step towards what my colleague Douglas Ritter and I call “The Brand Dead Zone”.

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