Barnes & Noble is the largest bookstore chain in the United States having sold more than 6.7 billion books since going public in 1993. Leonard Riggio, the bookseller's chairman, started with a single Manhattan location and now operates 627 stores in all 50 states. The New York-based company has approximately 26,000 employees.

Barnes & Noble has fallen on hard times. The bookseller has experienced declining revenues, resulting in increased debt from $84 million in 2017 to $178 million in 2018. The company also was forced to lay off its entire full-time staff of 1,800 employees in February 2018 to alleviate some of the mounting financial pressure. These financial pressures have taken a toll on the bookseller's stock, which plunged more than 60 percent between 2015 and 2018. Let's explore the causes of Barnes & Noble's downfall.

The Retail Bookstore Industry Has Evolved

Barnes & Noble was once vilified as a behemoth that drove local bookstores out of business. The bookselling giant grew at the turn of the century with the number of independent bookstores falling 43 percent from 1995 to 2009, according to the American Booksellers Association. This growth was fueled by the increased development of malls and shopping centers.

The company's fortunes changed with two critical, yet conflicting, events. First, the success of online retailers, such as Amazon, has led to the decline of storefront traffic, which Barnes & Noble relies on as a primary revenue source. Second, independent bookstores are making a comeback, aided by increased customer interest in localization and a curated experience. In fact, the number of independent store locations has increased 67 percent between 2009 and 2018.

Stagnation and Confusion at Barnes and Noble

So why is Barnes & Noble failing in an industry that is growing in the face of Amazon? Its flagship Union Square location in New York City provides a clue. "The CD and DVD sections, which still occupy a sizable chunk of store space, are often deserted and unmanned," according to Andria Cheng, a Forbes contributor. Customers don't seem to have a reason to come into a Barnes and Noble like they would a niche independent bookstore. The national bookseller doesn't have a unique experience to offer; on the contrary, it seems to offer too much of everything. "Elsewhere in the store, alongside bestsellers, signed copies and books . . . are more examples of mismatched merchandise: journals, toys, candles and diffuser sets, tea and chocolate selections," says Cheng.

Business Insider compared New York's Barnes & Noble with Amazon stores and found Barnes & Noble to be "like a dollar store" and that "the grab-bag inventory strategy makes the store seem confused and desperate." The Amazon store, on the other hand, resembled "the future of chain retail." In the end, Barnes & Noble doesn't seem to know what it stands for, and what it wants to be, according to Forbes.

Who's Atop the Hierarchy?

It's difficult to come up with an effective strategy when you don't have a leader. Chairman Leonard Riggio stepped down as CEO of Barnes & Noble in 2002. The company had stable leadership for another decade, first led by Stephen Riggio (Leonard's younger brother) and then by William Lynch. Lynch is credited with launching the company's electronic bookstore and introducing its electronic book reader, the Nook. Lynch stepped down in 2013, launching a turbulent time for company leadership with five chief executives leaving between 2013 and 2018.

Some of the turnover atop the organization can be attributed to Chairman Riggio. Riggio is notorious for micromanaging his CEOs. An analyst at Gabelli & Company told The New York Times that, "Anyone who joins there knows that the chairman is very hands on." For example, Riggio fired former-CEO Ronald Boire less than one year into Boire's tenure. The chairman simply stated that Boire "was not a good fit for the organization" and declined to provide additional commentary after letting him go in 2016. Riggio then hired Demos Parneros as chief executive. Parneros was fired for misconduct a year later and is now suing Barnes & Noble for wrongful termination.

The organization's skyrocketing CEO turnover rate has caught the attention of external stakeholders. For example, book-publishing executives expressed concerns to Riggio about continuing management instability at the retail giant and the direction of the business, according to The Wall Street Journal. Publishers argue that Barnes & Noble needs to have a strategy to drive performance. This is especially important when Amazon is competing with it digitally and in stores, and small bookstores are nipping at its heels. "I expressed frustration that if they had a plan, we didn't know it," a publishing executive who met with Riggio told the Journal.

Riggio disputes claims that Barnes & Noble is mired in a leadership crisis. "I have a big stake in the business, I founded it and I've been here forever, so I think there's a lot of stability that comes with that . . . If we're without a leader, I'm it," Riggio told The New York Times. The chairman and interim CEO firmly believes he is the innovative leader the company currently needs. "We have a lot of work that needs to get done, and I think I bring the necessary leadership," he told Publishers Weekly.

Riggio's strategy is for Barnes & Noble to become an innovative storefront bookstore. The new store in Columbia, Maryland, is a prime example. It features a contemporary design, USB and electricity ports in the café, and "book theaters," which offer a 360-degree in-the-round browsing experience. Riggio believes these types of retail outlets are the way of the future. He also believes that the company will succeed with better merchandising and a coherent pricing strategy.

Riggio doesn't appreciate having his strategy questioned, which is evident by the number of CEOs he's lost in a short amount of time. Only time will tell if Reggio's vision and strategy will fix what ails Barnes & Noble.

Questions

Referring to the case study on pp. 325-26 in the eText, use the Problem-Solving Method to answer the following:

1. Define the problem/s.

2. Identify the cause/s of the problem/s.

3. Make recommendations for solving the problem/s.

pur-new-sol

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