- [Narrator] This Barnes & Noble in Pikesville, Maryland used to be in a 24,000 square foot
space in this building. Now it's moved across
the street to a space that's less than half the size, and with the downsizing came a new look and new books chosen specifically for this store's customers. It's all part of Barnes &
Noble's strategy to tailor each of the company's more than
600 locations to local tastes. - Barnes & Noble is adopting the strategy of independent bookstores that
it once put out of business. - [Narrator] Here's how the bookseller is implementing its new approach and why it thinks this new
strategy will sell more books. This is "The Economics of Barnes & Noble." Barnes & Noble was first founded in 1873. In 1971, Leonard Riggio
acquired the company, which set off a period of growth. The retailer went public in 1993 in an era when it was opening superstores across the country. - In the 1990s and 2000s, Barnes & Noble bookstores really looked like large supermarkets filled with books, usually anchoring strip centers in the suburbs or rural areas. - [Narrator] And whether in
Phoenix or Maryland or Ohio, the stores had the same books with the same furniture
and the same layout. - It either had one floor or it had two. If it had two, it had
enormous escalators going up with this huge sort of
open space in the middle to an upper floor. - [Narrator] That model happened
to be extremely scalable. - They were trying to fill their stores with books and infrastructure
at the lowest cost possible, so they wanted to order all
the same types of bookshelves, the same type of furnishings and decorations and other accoutrements. - [Narrator] So the
company grew, and fast. Those huge stores carried more books at lower prices than
independent bookstores. - [Interviewee] We all remember
the rom com "You Got Mail." - Joe Fox. I'm in the book business. - I am in the book business. - So many closed when
Barnes & Noble came to town and they weren't able to
compete with the title selection or prices that Barnes & Noble offered. - [Narrator] The big stores
and large inventories weren't enough to save Barnes
& Noble from a digital threat. - Amazon was able to offer,
kind of like Barnes & Noble had in the past, a huge selection
of titles at lower prices than Barnes & Noble could
because it didn't have the cost of real estate and other costs that Barnes
& Noble was shouldering. - [Narrator] And it sunk a lot of money trying to keep
pace, particularly in NOOK, its e-reader business. - [Announcer] Take your story
wherever you want it to go. - [Narrator] But nothing
helped stop the bleeding. The company's revenue
has declined since 2012. Then in 2019, hedge fund Elliott Management
Corporation acquired the chain and installed James Daunt who led British Retailer Waterstones and founded his own independent bookstore, Daunt Books, as CEO. - It felt entirely intuitive to me that you allow each bookstore to run as an independent bookstore. They will create much more
interesting, much more dynamic, much more engaging bookstores. - [Narrator] And that
meant reminding people about the appeal of in-person
versus online shopping. - What you're missing is
the opportunity to kind of read the book flaps of all
the other books that are there and maybe get recommendations from the local bookseller
who's working there. - [Narrator] The company says it wanted to emphasize the experience of visiting a physical bookstore so its new strategy strips
stores of the cookie cutter look and feel that had helped
the chain grow its revenue and store count. Some locations have moved on from the big box model to smaller stores. - And in these smaller spaces, they are reconfiguring the stores so that they're more of maze and less of a supermarket aisle. - [Narrator] Plus, the company
says each individual store has more autonomy over what books to order
and how to display them. Here at the Pikesville, Maryland location, the store manager says that customers like romance, books from Black
authors and lots of fiction. So the large romance section
is at the front of the store and there's a huge display right in the center celebrating
Black History Month. Store managers can also
choose how to run promotions, like this buy one, get one 50% off deal on specific fiction books
chosen by the team here. - Brooklyn has a very
different demographic, very different set of
customers, a very different set of book interests to let's say somebody in Alabama, in Georgia. Who is the best person to judge what those particular
communities wanna buy? It's the booksellers in those communities. - [Narrator] The company
has also been listening to its store managers on wider trends. - Manga was a small
part of our assortment. We had maybe five, six
bays of books on manga, and yet when these booksellers were reorganizing their stores, they were coming back to us
saying, we want to do 38. You know, we want to do 42, which was just almost
sort of incomprehensible, except that's what they
said their customers would respond to. - [Narrator] Daunt also used
this localizing strategy to turn around British
bookstore chain Waterstones, which reported a 42.91 million pound loss across 268 stores in 2012 compared to a 16.32 million pound
profit across 278 stores six years later. - The two businesses
are on paper identical. It had had identical histories and had reached an
identical point of failure. - [Narrator] That's why Barnes & Noble relinquished some control to individual stores, but that comes with its own set of
challenges for the company. - You could walk into a
bookstore and find out that it's really not doing well. The manager's choices aren't appealing to customers and books aren't selling. - [Narrator] Still Barnes & Noble says the strategy is promising. For the first time in more than a decade, the company is planning on opening more stores
than it closes in 2023. - We've seen a balancing in
which a much higher percentage of our sales are coming from books and books are growing
really very dramatically. If you run better bookstores,
you sell more books. (pensive music)
