A Lesson to Take Note Of
If you look for ways to grow, no matter the economy they will find their way.
Barnes and Noble, the largest bookstore chain in the United States, was struggling to survive in the digital age. Sales were declining, customers were switching to online platforms, and competitors were offering lower prices and faster delivery. The company needed a radical change to stay relevant and profitable.
That's when James Daunt stepped in as the new CEO in 2019. Duant had a vision for transforming Barnes and Noble into a modern and innovative retailer that could compete with the likes of Amazon and Walmart. He implemented a series of bold moves that reshaped the company's strategy, culture, and operations.
One key strategy was to decentralize so each store looked more like an independent bookseller than a chain. He gave power to each location to clean out and start over. That was bold because it also meant walking away from a revenue source from publishers that paid Barnes and Noble money for space to present its books. This was a big risk, but the results of ending this program and empowering the stores resulted in increased sales and a reduction in return to publishers from 70% to 8%. They are now targeting returns to publishers at 5% This kind of metric change is massive.
This strategy also bolsters my long-standing argument against consignment because you are paying for merchandise no one else wanted, and also each consignment sale robs the purchase of an item that you bought and have to pay the vendor.
Within two years, Barnes and Noble saw a significant increase in revenue, profit, customer loyalty, and market share. Empowering the stores supported other strategies and the results were stellar. The company also received positive feedback from employees, suppliers, and stakeholders. Duant was hailed as a visionary leader who saved Barnes and Noble from bankruptcy and turned it into a thriving business.
Had Ron Johnson considered the history of JC Penney he might have had a different outcome. At one time Penney’s store managers were allowed to purchase a significant percentage of their merchandise, allowing for local and regional culture and tastes. This was a successful formula for many years. It also made it almost impossible to recruit the many talented managers from Penny’s as they were dialed into their positions and had significant responsibility and could earn excellent performance pay.
I had my own personal experience. I ran stores for a large chain and was responsible for stores covering the entire South Eastern United States. The company was becoming more and more centralized and I was in a constant battle to allow my managers as much discretion over their stores as possible. I was threatened three times, but eventually, the results we achieved could not be overlooked. Fortunately, I had the backing of the President. However, over time as the entrepreneurial culture changed and in time got extinguished, I eventually had to leave. The chain was sold and eventually went the way of many other chains. It was not the economy or a recession that killed it, it was losing the roots of what made them successful in the first place.
The lesson here is to be mindful that chains may follow the success of Duant. We could see a trend away from the homogenization of retail across the U.S., where every store within a chain is a mirror image of each other. What if your local Gap started to not look like every other Gap? You might be facing down a competitor you were not prepared for. It also is a lesson to be mindful of the power of being a good merchant. If chains want to look more like Indie retailers, we are the trend they want to capture.
The day you start to batten down the hatches is the day you start to lose.
There are opportunities to seize, capacities to fill, activities to nurture and exploit. If you look for decreases they will accommodate you. If you look for ways to grow, no matter the economy they will find their way.
You never know where your competition will come from. What you can control is your own destiny. Barnes and Nobles is opening stores and flourishing, to learn more about their strategy, here is a link to an interview where Daunt shares his strategy.
Onwards, and Upwards,
Marc Weiss - Co-founder, Management One