Barnes & Noble and Microsoft – back to college

Coverage of the Microsoft/Barnes & Noble alliance over the past 24 hours has been copious – the story even appeared above the fold on the front of the UK edition of the FT this morning.

Here’s a series of links to the most thought-provoking articles:

The New York Times provides a succinct summary of the deal.

Bloomberg notes that, last Friday, B&N was worth $800m; at close of trade yesterday, that valuation (essentially for the core superstore business) had jumped to $1.3bn – but the Microsoft/B&N Nook/College deal was valued at much more, $1.7bn.  Bloomberg’s piece has some great lines, including the observation that: “[the] news reflects tech’s prevailing World War I-style balance of power, where an enemy of your enemy is suddenly your best friend”.

Tools of Change’s Joe Wikert is always worth reading, and he notes that a physical retail presence (where Xbox and other Microsoft and Windows 8 hard and software could be showcased) could create real value.

Gigaom is sceptical – Microsoft is taking what it can get; it missed out on overpaying for Yahoo, has it made a sensible deal here, or is Nook just the only game in town?  On the other hand, Philip Jones at FutureBook says that he has been “watching Microsoft dance around the digital reading business for more than a decade, [and] this may be the first time they’d actually worked out a way of doing it well and making money out of it”.

All of this excitement, and no one’s mentioned the much-speculated Waterstones/Nook tie-up (pause to contemplate Waterstones stores as Xbox showrooms).  But I continue to be convinced that, despite the continuing sector upheavals, there is a strong – but different – future for physical retailers.

(After all, there’s really nothing to stop all of us doing all of our shopping online, right now.  But – although online – or, more correctly, multichannel – continues its exponential growth, we aren’t quite making that leap.)

For many years, the Barnes & Noble brand was used by two separate organisations: the publicly-traded superstore business, and the Len Riggio-owned college stores.  In 2009, the two organisations were finally rolled together, but the Microsoft deal separates them again.  This looks smart to me.

B&N’s college stores are much more than campus bookstores – they’re  sophisticated, multi-purpose, student-targeted marketing vehicles.  New stores are opening regularly, selling new and used books, and a wide variety of other student consumables, from educational products to letterman sweaters.  They serve 4.7m students at 650 colleges.  These students are the tastemakers of tomorrow; B&N College already showcases technology (not just Nook), and this audience has to be an attractive one for Microsoft.

Furthermore, college stores tend not to require the sort of real estate investment that stand-alone big boxes demand.  Located on college premises, where faculties want to ensure a bookstore thrives, they have more scope to negotiate their fixed costs down, and to occupy a small but right-sized, on-brand space.

The College division also owns B&N’s old 5th Avenue flagship, which was (bluntly) in dire straits last time I saw it, but is well-located to test a whole new approach to books-plus retailing.

And of course, separating the college stores from the superstore business makes a future restructuring more straightforward.

This isn’t just a tech story, it’s a bricks-and-mortar story too, and in a world of Amazon, Apple and more Amazon, it’s one that has to be vigorously welcomed.

Online retail sales growth, by country and by category

There’s an interesting report in The Times today; if you have a Times subscription, I urge you to take a look behind the paywall.  The purpose of the story is track sales growth online, and there is much additional data regarding online research, different online trends across luxury/premium/mass market products, and so on.

The data has been provided by Bain & Company, and I’ve reproduced the gist of two of the graphs below.  Please note:

  • the graphs merely mimic graphics from today’s Times
  • copyright rests with Bain & Co

Just treat these charts as trend indicators:

1.  Internet retail as a percentage of total retail:

No doubt about it, we are leading the world in Britain, which makes the repurposing of our high streets and an intelligent repsonse to the Portas Report all the more vital.  The flatter growth in the US is surprising; the sudden take-off in China is no surprise at all.

And it looks as though we’ll be maintaining our UK lead in the future:

2.  Online sales forecast as a percentage of total sales, by category:

Music and video close  the decade with 95% of sales online, and books are at 75%; within these percentages a large (but unspecified) proportion of the whole will be digital downloads.

In physical products, electricals soar to just under 60%, and clothing/footwear and homewares grow significantly.  Travel and food are more stable, but still likely to see  growth.

Both charts show a percentage of spend, and are therefore not suggesting that total spending by category could rise.  They simply illustrate channel shift, and spending might just as likely fall.

As the sector returns to work, we brace ourselves for the Christmas trading statements (which we’ll be following closely on this blog) and, of course, the progress of the administrations and restructurings that were being signalled in the run-up to Christmas.  Consumers are making the most of clearance sales now, but the medium-term future for  most retail categories is very challenging.  Watch this space…

Rainy days and Sundays

It’s a little hard to get your head around, but the UK has a five day working week ahead of it – for those without long memories, the last time Monday sat at the foot of a five-day hill was 11th April.

All well and good, but as well as getting back to work, it would be refreshing to have politicians and commentators get back to business as usual.   The swift succession of Royal Wedding, Bin Laden and Saying No to AV has created a sense of unreality – politicians haven’t had to think out loud about the economy or public services for weeks, but it would be great to stop the nursery squabbling, ditch the trivia, and knuckle down.

For what it’s worth, I’d like to see a functioning coalition again, which lives by the principle of Cabinet responsibility.  (David Laws would raise the tone a little, I’d like to think.)  Global politics, terrorism and the euro are well beyond my remit, but, domestically, I’d welcome a straightforward focus on key issues: rebooting the economy, and effecting the right balance between the private and public sectors.  The Prime Minister told us repeatedly when he entered office that this was a long-term project, but we’re seeing too many flip-flops, U-turns and eye-catching announcements, a situation hugely worsened during the grim and futile AV referendum.

My other main concern, from both a business and social standpoint, is education.  Our schools need to be creating entrepreneurs, engineers, artists and craftspeople.  This will take at least ten years to effect, but an educated, enthused and socially involved new generation would be a far greater prize than any short-term poll wins.

Otherwise, domestically, health is always emotive, always personal – it needs reforming, but with care.  And as to the rest?  My plea would be to avoid stupid conflicts.  The Blair government felt as though it wasted most of its first term on the hunting bill – a classic example of an issue about which two small minorities cared passionately, and the great majority of the population really wasn’t fussed.  (Rather like electoral reform, then.)  The recent proposal to raise a few bob from selling forests was another own goal.

An unlikely partnership of Eric Pickles and Vince Cable is apparently committed to cutting red tape for business.  This is an important step towards a broader and sustained economic recovery, so I’d like to make a plea to retailers: leave Sunday trading alone.  Not because the status quo is ideal – it isn’t, but because Sunday trading is a classic example of a polarising non-issue.  The benefits of longer hours would be most felt by the large supermarkets chains who (passim) are used but not loved by all.  Other sectors – fashion, home – would appreciate the opportunity to trade the hours they chose, but it isn’t make or break – longer Sunday hours wouldn’t have saved Focus DIY.  There is an opportunity, working with this government, to create a more business-friendly, even retail-friendly commercial environment – let’s not blow it by focusing on divisive issues, rather than those from which everyone can quietly and progressively benefit.

Of course, this isn’t a political blog, but we do live in a political world…

Print media, yesterday and today

My local Yellow Pages, 2010 and 2011.  As photographed in my space-age kitchen.

You’ll note that last year’s edition has barely been opened…