retail news in context, analysis with attitude

The Wall Street Journal reports this morning that Barnes & Noble, having spent hundreds of millions of dollars on its Nook e-reader in an effort to be competitive with Amazon's Kindle and Apple's iPad, has decided to stop making the color Nook, and instead will rely on "co-branded devices made by third-party manufacturers."

The story says that "Barnes & Noble will continue to design and make its own black-and-white Nook e-readers, which account for the majority of its e-book sales. But with e-reader sales expected to decline over time, it is unclear how competitive Barnes & Noble can be long term without its own presence in the tablet market, which is forecast to keep growing."

The problem: Barnes & Noble lost so much money on the Nook that it wiped out any profits from its other businesses. The Journal reports that "Nook revenue fell 34% to $108 million, as sales of its new HD tablets fell short of forecasts. The division's loss before interest, taxes, depreciation and amortization widened to $177 million from $77 million a year earlier. The latest-period losses included $133 million of charges to write off unsold inventory."

It is an Eye-Opening conundrum in which Barnes & Noble finds itself, in part created because Apple and Amazon were able to develop for themselves a generous lead in the e-reader business. Barnes & Noble was hampered by an inability to recognize fundamental changes taking place in the market fast enough, and then was too slow to develop an alternative that would woo readers away fromKindles and iPads. (Even though the Nook got generally good reviews from critics.)

And so, Barnes & Noble has to peer into the future and figure out how to not make the same mistake again, has to decide what it is going to do to be relevant to consumers in a digital age.

Which is the same process that every bricks-and-mortar retailer has to go through.
KC's View: