Why Barnes & Noble Just Made a Big Mistake…

So, the latest news in the publishing world is that Barnes & Noble will not stock Amazon-published titles in its stores. (Amazon recently signed a distribution agreement with Houghton Mifflin Harcourt’s new imprint for just this purpose.) Social media is all abuzz right now with the majority of publishing people stating something along the lines of it’s great to see B&N standing up to the bullying ways of Amazon, and all the rest of the assorted statements about Amazon being the Big Bad Wolf, evil corporate empire, etc. etc. blah blah blah.

Me? I happen to think B&N just made a critical error. As admirable a job a William Lynch has done as the head of Barnes & Noble, he’s made a potentially disastrous mistake with this decision and here’s why:

He’s put Amazon on notice that B&N will not play with them in the sandbox.

There’s an old strategy that states you keep your friend close and your enemies closer. B&N would have done well to heed this advice – even if they simply faked it. Barnes & Noble is the only real major national retailer left after the Borders implosion. And indie booksellers only account for 10% of sales. Obviously, if Amazon is intent on market dominance, then that road takes them right through B&N. If B&N was truly interested in its survival – rather than appeasing the publishing world, which is itself a tired anachronism being dragged kicking and screaming into the 21st century – then they would have agreed to carry Amazon’s titles.

One reason B&N might have wanted to take this approach is to buy time while they strengthen their own shaky foundations. B&N had a strong fourth quarter, but overall, it pales in comparison to Amazon. B&N’s stock closed yesterday around $12 bucks with a market cap of $700 million. Some experts have recently valued the company at around $8 billion, but I think that’s being extremely kind.

Amazon, by comparison, has at least $6 billion in CASH. That’s not the valuation of the company and all its assets – that’s CASH. Jeff Bezos could easily stomp B&N into the ground and not lose a single night’s sleep over it.

So the question becomes: do you rush to war with such an incredibly powerful enemy as Amazon? Do you charge into battle knowing you have far less resources than your opponent?

Or do you bide your time, strengthen your own position, and search for other unorthodox ways to level the battlefield?

Barnes & Noble currently has something that Amazon does not: real estate. Even with the massive number of bookstores closing, B&N still has about 700 stores around the country. Amazon has no real retail presence. Perhaps they don’t want one, but what if they do? By agreeing to carry Amazon titles, B&N could then open up further talks with Amazon – what about a joint venture where the two companies partner and open up new retail fronts in the old Borders locations? Such a move would increase value for both companies, enabling B&N to better right its own ship during these turbulent economic times and potentially entice better buyout offers from interested parties. (Biding time would allow B&N to roll out that newer version of its Nook device that might help it capture more ebook market share than it currently has…)

If Amazon and B&N teamed up, they could then actually create real and lasting change in the publishing world. B&N has a very good relationship with the Big 6 publishers – again, something that Amazon does not have. B&N and Amazon could sit down with the publishers and suggest ways they could all benefit from making changes. This is a long-shot, of course. Knowing what a stubborn bunch the Big 6 are – and given the fact that they refuse to admit their own failings but instead seek to blame outside influences (like Amazon) for their faltering steps towards the future – it’s unlikely anything would come of that.

But instead, B&N has opted to draw a line in the sand.

“Hooray!” shout the masses of publishers and booksellers. “We’re not going to let Amazon bully us anymore!”

Except, they’ve all forgotten one thing: their customers.

Most customers don’t really care about this stuff. They know they can go to Amazon and get what they’re looking for at a cheap price and have it in-hand as quickly as tomorrow. Yes, there are bookstore aficionados – but the masses that make up the bottom line for B&N simply don’t care. And if B&N isn’t doing its best to service its customers, then what the hell are they doing in business in the first place?

Amazon has perfected customer service. My own experiences have never once been bad. When the UPS guy left my expensive hardcover out in the rain and I sent an email – I didn’t call, mind you, but sent an email – Amazon had the UPS driver return the next day with a brand new book and take back the old ruined one without it costing me a single penny. Amazon services its customers and treats them like gold. And that’s why customers love them.

So when B&N draws its line in the sand – they haven’t really done much except angered a juggernaut and told their customers they’re not interested in providing them with exceptional service.

That’s not smart.

Amazon now knows exactly where B&N stands and can take its next steps accordingly. Such steps might be drastic, or they might not. Either way, Amazon wins again. With $6 BILLION in CASH, Bezos can open up tons of retail storefronts and drive B&N right out of business.

Here’s the thing: ever since the Kindle appeared, the publishing world has only been reacting to Amazon’s moves. Not one publishing world entity has taken that initiative away from Amazon because all they can do is react and try to deal with it. In a fight, if you spend all your time reacting to your attacker, you will eventually (sometimes quicker than others) lose. At some point during the fight, you have absolutely got to take the initiative and win. Whether you do this by launching a sudden blitz counter-attack, or by setting a trap that your attacker falls into, or by some other technique, it doesn’t matter. What matters is you stop reacting and start doing something.

B&N’s move here might be seen by some as taking the initiative, but it’s not. It’s reaction. And the wrong reaction at that. As Amazon jabs and jabs and the publishing world tries to slip and bob and weave out of the way of each successive jab – thinking they’re doing great for avoiding those – they fail to see that Amazon – just as a good prize fighter does – is merely lulling them into a rhythm, ranging them, and getting ready to deliver a final knockout blow so severe that the publishing world won’t see it coming until it’s far too late. Bezos has already demonstrated his far-reaching view, putting things into motion now that will bear fruit in later years.

I have no doubt that Bezos knows exactly how to take down B&N now, thanks to the poor decision B&N has made in refusing to stock their titles.

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