The Idea Logical Company

  • Blog
  • Speeches
  • Consulting
  • Clients
  • Media
  • About
  • Contact

Should Barnes & Noble rethink its supply chain?

November 25, 2019 by Mike Shatzkin Leave a Comment

About 25 years ago, Ingram was benefiting from a big buildout of America’s bookstore network. Borders and Barnes & Noble were both opening new stores — big stores — at a rapid rate. Ingram hit a mother lode delivering “store opening assortments” and then, at least in some cases, doing the stock replenishment for the first 90 days.

The stock for the store opening cost the retailer more that way because Ingram couldn’t offer the discounts that publishers would give the stores for direct orders. But getting the opening stock delivered by store section, ready for shelving, and then covering the entire breadth of inventory for reorders across publishers that would also arrive consolidated rather than piecemeal, was worth a couple of points of margin.

Around this same time — 25 years ago — Jeff Bezos was using Ingram’s superior service to build Amazon.com in an industrial building in Seattle, in the same-day service zone for Ingram’s Roseburg, Oregon, warehouse.

Consolidation was the order of the day. Borders and Barnes & Noble were building out store networks that clearly threatened smaller chains and independents. (They would all also be hurt by Amazon, but that would take a few years to become obvious.) Publishers were also consolidating. (Random House and Bantam Doubleday Dell were the big merger of the late 1990s.) All of this threatened Ingram’s basic business model, which was built on being an efficiency-creator between many publishers selling to many bookstore customers.

But the efficiency of centralized supply was also clearly demonstrated to the chains, so B&N saw value in acquiring Ingram to own their own supply chain, presumably opening up the possibility of buying from publishers at the higher discounts normally afforded to wholesalers. It took two years for the deal to fall through because of federal government concern about “monopoly”. That meant Ingram had to start rethinking the future of their company.

And it meant Barnes & Noble would build its own warehouse network to provide more efficient resupply to its own stores that would give them a competitive advantage over Borders, their primary competitor. Borders, of course, was thinking along similar lines. They built one distribution center in Nashville near Ingram. But B&N was much more committed to the internal distribution capability and they invested a lot more into it

Lots of other factors came into play, but the superior supply chain efficiencies really did pay off for B&N in that direct competition. Borders never really matched it and for that reason, among others, collapsed about a decade later.

And now things have changed again. B&N’s viability is threatened by the movement of book sales from physical retail to online retail. New ownership is now challenged to find new paths to commercial viability. The biggest opportunity may be a return to the past, once again turning over the supply chain to Ingram.

As sales of books in the retail channel decline, as they have and will continue to, the per-unit cost of maintaining a proprietary supply infrastructure just keeps rising. Warehouses and shipping relationships have to be maintained. Inventory in those warehouses constitute additional investment. And substantial management resources are required to run what is, effectively, a wholesaling operation with only one customer.

On top of that, the “job” of the resupply infrastructure for a retail chain has become much more challenging. When B&N was building out its capabilities at the turn of this century, the number of possible titles was probably not even a million and many of their stores carried over 100,000. Now there well over 10 million titles available through Ingram’s print-on-demand database plus nearly a million more in warehouse stock (which includes most of what is new and sells the fastest), and the retail stores carry a third or less than they did back then. The more that ratio shifts, as what each store carries is a smaller and smaller fraction of the possible universe, the more expensive it is to maintain your own supply chain.

So shifting resupply to Ingram, perhaps with additional support from other wholesalers and certainly with some direct publisher relationships being maintained, would free up capital for store improvements and liberate the management from big challenges that can only distract from what must be Job One: discovering and implementing the right store experience for the 21st century.

James Daunt, the new head of B&N, had no such option when he was rebuilding Waterstones, the UK chain he previously managed. There is no wholesaling operation in the UK with comparable ability to supply the breadth of titles Ingram does. But one imagines that Daunt sees every day what it is costing him to keep operating his distribution centers. One also imagines he also feels a need to free up capital on a daily basis. Whether those two things will come together so that B&N knocks on Ingram’s door and says “let’s make a new deal” is not known to me, but it makes so much sense to explore that option that it is hard to believe they won’t look into it.

Filed Under: General Trade Publishing, Supply-Chain Tagged With: Amazon, Barnes & Noble, Borders, Ingram, James Daunt, Jeff Bezos

Search

Mike Shatzkin

Mike Shatzkin is the Founder & CEO of The Idea Logical Company and a widely-acknowledged thought leader about digital change in the book publishing industry. Read more.

Follow Mike on Twitter @MikeShatzkin.

Interview with Mike Shatzkin

Book Cover: The Book Business: What Everyone Needs to Know

The Book Business: What Everyone Needs to Know

Sign Up

Get The Shatzkin Files posts by email.

Recent Posts

  • Running a big publishing house is not as much fun as it used to be
  • Google knocked us out for a couple of days, but we’re back!
  • When a publisher might not do as good a job as a self-publishing author
  • What the ruling against the PRH-S&S merger means for the publishing business
  • “Automated ebook marketing by Open Road; can anybody else do it?”

Archives

Categories

  • Atomization
  • Authors
  • Autobiographical
  • Baseball
  • Chuckles
  • Climate Change
  • Community
  • Conferences
  • Digital Book World
  • Direct response
  • eBooks
  • Enhanced ebook university
  • General Trade Publishing
  • Global
  • Industry Events
  • libraries
  • Licensing and Rights
  • Marketing
  • New Models
  • Politics
  • Print-On-Demand
  • Publishers Launch Conferences
  • Publishing
  • Publishing History
  • rights
  • Scale
  • Self-Publishing
  • SEO
  • Speeches
  • Subscriptions
  • Supply-Chain
  • Technology
  • Unbundling
  • Uncategorized
  • Vertical

Recent Posts

  • Running a big publishing house is not as much fun as it used to be
  • Google knocked us out for a couple of days, but we’re back!
  • When a publisher might not do as good a job as a self-publishing author

Pages

  • Blog
  • Consulting
  • In the Media
  • Clients
  • About Us

Follow Mike

  • Facebook
  • LinkedIn
  • Twitter

Search

Copyright © 2023 · eleven40 Pro Theme on Genesis Framework · WordPress · Log in