Barnes and Noble, the last remaining US bookstore chain, ran into the buzzsaw that Amazon created with its online, discounted book marketplace and dominance in the e-book space. But a strengthening hard-copy book market has created an opportunity for the bookseller use its large membership program to attract loyal customers and reemerge as a stronger company.
Hard copy book sales are up for the first time in nearly a decade, which is great for booksellers like Barnes and Noble.
Bookstore sales rose 2.5% in 2015, up to $11.2 billion from the year before. This is the first year-over-year increase in book sales since 2007, according to data from the U.S. Census Bureau. This does not necessarily mean that Barnes and Noble will greatly benefit from this change, but the company does have a leg up on smaller bookstores: the millions of customers in its membership program.
A Barnes and Noble membership costs $25 per year and offers 10 percent off cover prices. Members also an additional 10 percent of any discounted books. And they get free two-day shipping on purchases made online. This gives Barnes and Noble a “unique asset” to maintain a loyal customer base.
In Barnes and Noble’s 2016 annual report, it highlights that the membership program enables them “to have deeper relationships and more meaningful communications with its members.” Barnes and Noble use the data it gets from its membership program to better target sales towards what the members buy.
Len Riggio, Barnes and Noble’s CEO, highlighted this in the second quarter conference call with analysts. “The membership program is important to us, and it really does drive loyalty, and it affects our bottom line in many, many respects,” Riggio said.
One way for Barnes and Noble to regain strong growth is to make its membership program more enticing to grow its loyal customer base. Marketing larger exclusive sales to its members during peak retail periods could be a way to make the $25 cost of the membership seem worthwhile.
Barnes and Noble could also create more perks for its membership program to expand its loyal customer base if it wants to compete in an expanding book market. The company could even throw in free memberships when customers buy books in bulk to reward them for shopping and encourage them to come back.
The bookseller still has quite the uphill climb.
Its stock price has fallen 58 percent since July of last year and the bookseller just settled a severance with its recently fired CEO, Ron Boire, for $4.8 million.
Its e-book market has not been as successful as the company hoped it would be able to compete with Amazon. Its e-reader, the Nook, posted an operating loss of $14 million in the first quarter and sales slid 24.5% to $41 million.”
And the bookseller could enhance its Nook sales by extending more benefits through its membership program. Right now, you can get the same 10 percent off on e-books as you can hard-copy books. But maybe it could institute an e-book equivalent to its “buy two, get one free” just for its members. Whatever Barnes and Noble does, it needs to turn it around or face the same fate as Borders.