DANGERS OF PEACOCK MANAGEMENT …

Dan Belanger

 

Is Barnes & Noble the next Blockbuster?

This eye-opening information came to me via an email from ceofocus.com. The lesson should be that continual improvement, creativity, and keeping an eye on the market and the horizon are so VERY important for any company. Never think that you are immune to ever changing business climates. Dan

Could Barnes Noble (NYSE: BKS) be the next Blockbuster? The once-dominant Blockbuster business model disintegrated into bankruptcy this year and seems unlikely to ever rebound. A close look at the Barnes Noble business model yields many of the same issues as Blockbuster:

1. Blockbuster faced intense competition from disruptive business models such as Netflix and Redbox. BN’s business model is under attack from online competition, half-price bookstores, and Amazon.

2. Blockbuster insisted on sticking with a retail store model despite signs that the growth was elsewhere. Barnes and Noble continue to focus on palatial retail bookstores despite retail rents of $250/square foot. In fact, BN had to close a high-profile Lincoln Center location due to its $1.25 million monthly rent.

3. Blockbuster was slow to embrace digital technology. The first Kindle was released in 2007. B N released the Nook in November 2009. It is estimated that Amazon sold 3 million Kindles in 2009 alone, many of them prior to the release of the Nook.

 4. Barnes and Noble margins continue to decrease while competitors increase margins through lower cost operating models.

From the outside it appears Barnes Noble is working from the Blockbuster Business Model Playbook. They insist on hanging onto a dying business model at all costs. They ignore disruptive technology as an annoyance rather than an opportunity. They come late to the technology party with “better” products like the Nook Book reader.

“From CEOFocus at ceofocus.com”

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