Borders Mimics Partner’s Pilates Gear to Spur Sales

Bloomberg

 

Borders Group Inc. President Michael Edwards says he has hit on a solution for reviving his money- losing bookstore chain: Be less like a bookstore chain.

Edwards, 50, has taken a page from Toronto’s Indigo Books & Music Inc., which prospered as Borders and larger rival Barnes & Noble Inc. lost sales. Indigo, founded by Chief Executive Officer Heather Reisman, brands itself a “cultural department store,” using books as bait to attract shoppers to other items.

Edwards is mimicking that strategy for Borders’ 500 superstores, whose sales have dropped for 10 straight quarters, after consulting with Reisman last year and joining the Borders board on a tour of one of her Toronto superstores in March. Indigo outlets feature items like Pilates balls and wine glasses along with copies of “The Girl with the Dragon Tattoo.”

“They’ve done a cutting-edge approach to providing well- designed, sophisticated products that seem appropriate to a book lover,” said Edwards, who reports to CEO Bennett Lebow. “We found that valuable for us as we think about the future.”

Borders, the second-largest U.S. bookstore chain, has posted four straight annual losses as online retailer Amazon.com Inc. and discount chains won customers. The closing of most of its mall locations and store remodelings failed to stem the losses, and the recession led to even deeper sales declines.

The growing popularity of electronic books adds another challenge. Barnes & Noble has devoted many more resources to e- books, betting millions to make and market the Nook reader and transform the company into an e-commerce retailer.

“We are now putting money behind that business because we see something real,” Chief Financial Officer Joe Lombardi said in an interview. Online sales, which include revenue from digital books, climbed 42 percent in the latest quarter.

Rival’s Edge

Barnes & Noble may have an edge in executing its plan because it has more cash to invest, said Michael Souers, a retail analyst for Standard & Poor’s in New York.

“If I had to bet on one or the other, Barnes & Noble is probably the better off of the two,” said Souers, who has a hold on shares of both companies. “But it’s still really unclear at this point. Doing nothing is not going to work, obviously.”

Borders, based in Ann Arbor, Michigan, rose 15 cents, or 14 percent, to $1.26 at 4 p.m. in New York Stock Exchange composite trading. Barnes & Noble advanced $1.52, or 9.4 percent, to $17.71. Indigo fell 10 cents to C$13.75 in Toronto trading.

Simple Concept

Edwards began working with Indigo last year after Borders spent $5 million on a 20 percent stake in Kobo Inc., a Toronto digital book provider partly owned by the Canadian chain. Borders started selling e-books from Kobo on its website in July, a year after Barnes & Noble entered the market, and also offers the Kobo e-reader.

Reisman, 62, founded Indigo in 1996 after earlier stints as a social worker, management consultant and beverage company executive. She also is the wife of Gerry Schwartz, who runs Onex Corp., Canada’s biggest buyout firm, and serves on Indigo’s board.

The concept for Indigo was simple: Millions of people love bookstores so much they would buy almost everything there if they could. In the company’s founding documents, Reisman coined the “cultural department store” phrase to describe her booklover’s paradise.

That idea became a reality at the chain’s first location, a 20,000-foot superstore in the Toronto suburbs, when it began offering a book series on fly-fishing and later introduced brass fly cases for C$30 ($29) that sold out. The store also offered fresh flowers, part of a plan to feature merchandise that “smelled amazing or looked amazing,” Reisman said.

Nursery Rhymes

These days non-book items make up 17 percent of sales, more than five times the amount in the 1990s. Reisman expects to double that in three years, partly by building store appearances around special events.

About 30 percent of books are bought as gifts, Reisman says, so it makes sense to pair the wine guides with the brie bakers in the entertaining section or nursery rhymes and pacifiers in the baby area. That’s paid off in sales per square foot, where Indigo’s rate was about $295, more than two-thirds higher than Borders’ $173 last year.

“They give you a lot more reasons to go shopping in their bookstores that have nothing to do with books,” said Antony Karabus, CEO of Karabus Management Retail Consultants, a subsidiary of PriceWaterHouseCoopers Canada LLP. “Those other chains just look like bookstores. Indigo looks like much more.”

More to Buy

Now Edwards wants Borders to look like more too. The chain started by hiring a branding firm, Big Red Rooster of Columbus, Ohio, to make over signs and store layouts to emphasize items other than books for this holiday season. The company also brought on Michele Delahunty-Cloutier, a veteran of retailers Chico’s FAS Inc. and Gap Inc., to oversee the changes as chief merchandising officer.

In the next two years, Borders will fill its superstores with stand-alone sections, such as areas where people can craft stuffed animals through the Build-a-Bear Workshop Inc. brand, that will differentiate it from Barnes & Noble, Edwards said.

“You create more shops within a shop, so you really know you are in a unique part of the store,” Edwards said.

Edwards chose this route because he expects half the chain’s books to be sold online in three years, and other items can boost profits because they have higher margins than books. His time working for defunct computer retailer CompUSA also showed him the wisdom of diversifying, he said.

Bookstores aren’t the first retailers to face down the two- pronged attack of new technology and increased competition. The key for book chains is how quickly and well they can execute their transformations, said Wendy Liebmann, CEO of retail consultancy WSL Strategic Retail in New York.

“The final nail hasn’t shown up, but somebody has the hammer ready to hit it,” Liebmann said. “The coffin has been built.”

Barnes & Noble Updates E-Reader to Fix Frozen Screen

Bloormberg

 

Barnes & Noble Inc. plans to release a software update to its Nook e-reader this week to stop the screen from freezing, increase its speed and offer a Web browser and games for the first time, a company executive said.

“We’re fixing the problem,” Anthony Astarita, vice president of digital products, said in an interview in his New York office on April 16. “Like any consumer product, you have issues that do come up. No product is 100 percent perfect.”

Barnes & Noble released the Nook in November, entering a growing market led by Amazon.com Inc.’s Kindle and Sony Corp.’s Reader. Apple Inc.’s new iPad tablet computer, out this month, increased competition. The Nook is fundamental to the retailer’s push into the digital market, since users will turn to Barnes & Noble first to purchase e-books, said Michael Souers, a New York-based analyst for Standard & Poor’s.

Sales of reading devices will grow to 5 million this year from 2.2 million in 2009, the Consumer Electronics Association estimates. E-books and the Nook represent about 3 percent to 5 percent of Barnes & Noble’s sales, said Souers, who advises clients to sell the company’s shares. That should double to about 10 percent within five years, he said.

Revenue in the four quarters ended Jan. 30 totaled $6.07 billion. The company doesn’t disclose sales figures for the Nook or digital books.

Barnes & Noble, based in New York, fell 52 cents, or 2.3 percent, to $22.14 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have gained 16 percent this year.

‘Almost Daily’

Hundreds of Nook owners have posted complaints online, including on Barnes & Noble’s Web site.

“It freezes almost daily,” Stacey Hendricks, a student at University of Louisiana at Lafayette, said in an e-mail to Bloomberg. “Assuming Barnes & Noble doesn’t whip this situation into shape pronto, I’ll likely be switching over to the iPad.”

Barnes & Noble has updated Nook software twice before now. The latest update speeds page-turns, lengthens battery life, and adds Web browsing and free chess and Sudoku games, Astarita said.

Best Buy Co. began selling the Nook in its U.S. stores yesterday. Barnes & Noble also provides the digital bookstore for e-readers such as Plastic Logic’s Que and free software that allow users of devices such as Apple’s iPhone to buy and read its electronic books.

The bookseller decided to make an e-reader in August 2008 and began work on the Nook in February 2009 at its offices in Palo Alto, California, Astarita said. Given the speed of development, the company assumed the software would need updating, he said.

‘Nail-Biting’

“It was one of those nail-biting scenarios that came down to the wire,” Astarita said. “It was that very reason that we made sure when we developed this product that we had the ability to do software updates and continually improve the product.”

Gloria Spink’s first Nook displayed garbled text. Barnes & Noble sent her a replacement last month. That one repeatedly froze, forcing her to open the device and remove the battery to unlock it, she said in a telephone interview.

“I said, ‘Enough and I want my money back,’” said Spink, a 63-year-old assistant buyer for Boyd Gaming Corp. in Las Vegas. “I returned the Nook and bought a Kindle online that same day.”

The Nook’s return rate, which also includes replacements, is below what the company expected, Astarita said, declining to provide specific numbers.

The retailer’s response to the freezing will determine the Nook’s success, Mike McGuire, a San Jose, California-based analyst for Gartner Inc., a technology research firm, said in a telephone interview.

“With hardware it’s not that there was a problem, it’s how you recover,” McGuire said.

Amazon Selling More E-Books Than Paper Books

Brighthand

After years of anemic sales, e-books are starting to take off. As evidence: for the first time ever, Christmas Day shoppers on Amazon.com bought more books for their Kindles than they did regular books.

Obviously, this was an unusual situation -- Christmas Day isn't typically a big day for shopping, but virtually everyone who received a new Kindle e-book reader as a gift that day needed to download at least one book to try out their new device.

An E-book Milestone
The e-book has been around for years, but until recently there were questions about whether it would ever become a main-stream product. That changed with the success of the Amazon Kindle, which allows users to wirelessly purchase books from almost everywhere, and then read them on a device with a good screen and long battery life.

This retailer says the Kindle is "the most gifted item in Amazon's history".

With the success of Amazon's e-book reader -- which is on its second generation -- Barnes and Noble entered the market late this year with the nook.

More about the Kindle
The Amazon Kindle 2 debuted earlier this year. It has a 6-inch, 600-by-800-pixel e-Ink display that offers 16 shades of gray.

This device also sports 2 GB of memory, allowing it to hold more than 1,500 books.

The Kindle Store now includes over 390,000 books, including New York Times Bestsellers and New Releases.

Google's E-Book Format Not Device Specific

From PC World

Google will launch an e-book store called Google Editions with a "don't be evil" twist. Unlike Google's biggest competitors, Amazon and Barnes & Noble, which rely heavily on restrictive DRM, Google's store will not be device-specific--allowing for e-books purchased through Google Editions to be read on the far greater number of e-book readers that will flood the market in 2010.

Google's e-books will be accessible through any Web-enabled computer, e-reader, or mobile phone instead of a dedicated device. This will allow content to be unchained from expensive devices such as Amazon's Kindle e-book reader. However, as democratizing as this sounds, it's still unclear how many people are ready to curl up with a Google Editions title on their laptop or smartphone, instead of the traditional paper format.

Google Editions: The Basics

The new e-book store will launch sometime during the first half of 2010, and will have about 500,000 titles at launch. Under Google's payment scheme, publishers will receive about 63 percent of the gross sales, and Google will keep the remaining 37 percent.

Google also hopes to offer Editions titles through other online book retailers. In this scenario, online retailers would get 55 percent of revenues minus a small fee paid to Google, and publishers would get 45 percent. Google may also create deals to sell Google Editions books directly through a book publisher's Web site, but no details have been announced for how that scenario would work, according to Read Write Web.

Google Editions as Web Apps?

Google's e-books would reportedly be indexed and searchable like many books are now through Google's Book Search, according to Reuters. Unlike titles offered through e-readers, Google Editions books would not have to be accessed through a dedicated reader or special application.

Instead, any device with a Web browser will be able to access a Google Editions book. After you purchase and access your online book for the first time, it will be cached in your browser making the book available when you're offline.

To me this sounds like Google wants to turn the e-book, or more accurately the e-reader, into a Web App. Considering Google's push with its yet-to-be-unveiled Chrome OS and the Chrome browser, turning books into Web Apps isn't a particularly surprising move.

But Is Google Editions a Game-Changer?

Whenever Google gets involved with any new business, the immediate assumption is that the company will be able to reshape the market. From the sounds of it, Google's plans may do just that, since it will make reading and accessing e-books nearly universal on almost any device that can get to the Web. However, Google is not the first company to deliver e-books to your PC. Companies like Buy Ebook and eBooks.com already do this, and the online social publishing site, Scribd started selling e-books earlier this year.

Google's use of the Web browser as an e-reader may make it slightly easier to access an e-book than these other retailers since Google will essentially shun the ePub and PDF formats. But one hurdle Google can't overcome is the fact that you'll be reading your book on a computer screen. And so far, reading e-books on a PC has not caught on.