Business Movers - Episode: Saving Barnes and Noble | Undaunted | 3
Host: Lindsey Graham
Release Date: January 23, 2025
Podcast Series: Business Movers
Platform: Wondery

Introduction

In the gripping third episode of Business Movers, titled "Saving Barnes and Noble | Undaunted | 3," host Lindsey Graham delves into the tumultuous journey of Barnes & Noble (B&N) during the COVID-19 pandemic. This episode narrates how James Daunt, a seasoned British bookseller, orchestrated a remarkable turnaround of the struggling retail giant, ensuring its survival and resurgence in an increasingly digital world.

Background of Barnes & Noble

Barnes & Noble, once the titan of American brick-and-mortar bookstores, faced significant challenges in the Internet age. Struggling to adapt to the rise of online shopping, the company saw its revenues dwindle, and multiple CEOs failed to revive its fortunes. In the summer of 2019, Elliott Investment Management, a hedge fund specializing in corporate turnarounds, acquired B&N with the intent of revitalizing the brand.

James Daunt's Acquisition and Strategy

James Daunt, the British bookseller renowned for reviving the UK's largest bookstore chain, Waterstones, was appointed to lead B&N. His customer-centric approach, emphasizing the importance of books and decentralizing operations, was expected to breathe new life into the ailing company.

Notable Quote:

• "You have to make some changes at the national level first." [11:45]

Impact of the COVID-19 Pandemic

Shortly after Daunt took the helm, the COVID-19 pandemic struck, forcing Barnes & Noble to shut down over 400 stores and furlough thousands of employees. The lockdown posed both a threat and an opportunity for B&N. While the physical closures seemed dire, Daunt recognized the potential to rethink and restructure the company's approach to retail.

Notable Quote:

• "The pandemic was either going to be a death knell or a lifeline." [02:15]

Changes Implemented by James Daunt

1. Ending Co-Op Deals with Publishers

B&N had long relied on co-op deals where publishers paid for premium shelf space. Daunt terminated these agreements, allowing stores to curate their inventory based on genuine customer demand rather than publisher mandates.

Notable Quote:

• "I'd rather use all that shelving space for books our customers actually want to read." [09:30]

2. Decentralization of Store Management

Rejecting the traditional one-size-fits-all approach, Daunt empowered individual store managers to make decisions tailored to their local communities. This shift fostered a sense of ownership and responsiveness to regional preferences.

Notable Quote:

• "Each store was provided with a large dumpster, and he encouraged them to remove non-book merchandise." [15:20]

3. Store Renovations and Refurbishments

During the pandemic-induced closures, Daunt accelerated plans to renovate B&N stores. Over half of the 614 locations received fresh looks, removing outdated decor and enhancing spaces to be more inviting and book-focused.

Notable Quote:

• "What made sense for each specific location mattered more to him than a consistent company-wide brand." [17:45]

4. Employee Restructuring

To cut costs and improve customer experience, B&N shifted from part-time to full-time employees, emphasizing knowledgeable booksellers over less experienced staff. Additionally, Daunt reduced corporate overhead by eliminating redundant positions.

Notable Quote:

• "Barnes & Noble had previously replaced most of its full-time store employees with less experienced part-time workers." [22:10]

Results of the Changes

Daunt's strategies began to yield positive outcomes by mid-2020. Book sales surged by 11%, with genres like manga and graphic novels witnessing explosive growth. The elimination of co-op deals reduced unsold inventory returns from 30% to 7%, saving millions in logistics costs. By the end of 2020, B&N started approaching profitability, a feat not achieved in a decade.

Notable Quote:

• "Before the pandemic, the company was sending nearly 30% of its inventory back to publishers unsold. But once the co-op deals were fully phased out, that figure dropped to just 7%." [19:25]

Sales continued to climb in 2021, with total sales up 3% and book sales up 14% compared to 2019, signaling a successful turnaround under Daunt's leadership.

Competitive Landscape: Barnes & Noble vs. Amazon Books

As Amazon Books struggled with its physical retail venture, B&N seized the opportunity to expand. In 2022, Barnes & Noble acquired former Amazon Books locations in Dedham and Linfield, transforming them into vibrant, community-focused bookstores. Daunt's approach contrasted sharply with Amazon's clinical and tech-centric stores, emphasizing human connection and a curated book experience.

Notable Quote:

• "Barnes & Noble will simply be the parent company, which means you will have access to our logistics, our resources..." [24:50]

Expansion and Future Outlook

By 2024, Barnes & Noble had expanded significantly, acquiring independent bookstores like the Tattered Cover in Denver. Daunt aimed to position B&N not as a corporate giant threatening smaller bookstores but as a foundation supporting the broader bookselling ecosystem. With 58 new stores added by mid-2024, B&N emerged as America's last national bookstore chain, symbolizing resilience and adaptation.

Notable Quote:

• "Under James leadership, Barnes and Noble stopped chasing Amazon into the world of e-readers and tech devices." [28:35]

Conclusion

"Saving Barnes and Noble | Undaunted | 3" encapsulates the remarkable transformation of a struggling retail giant into a thriving, community-centric bookseller. Through strategic decentralization, employee restructuring, and a steadfast focus on customer experience, James Daunt not only saved B&N but also redefined its role in the modern retail landscape. As the episode concludes, Barnes & Noble stands as a testament to the power of visionary leadership and adaptability in overcoming unprecedented challenges.

Additional Information

Production Credits:

• Hosted, Edited & Executive Produced by: Lindsey Graham
• Audio Editing: Mohamed Shazib
• Sound Design: Molly Bach
• Music: Lindsey Graham
• Written and Researched by: Cody Hofmachle
• Executive Producers: William Simpson (Airship), Aaron O'Flaherty, Jenny Lauer Beckman, and Marcia Louie (Wondery)

Recommended Reading:

• The Noble Legacy by Betty Noble Turner
• The Late Age of Print by Ted Streussel

Follow-Up Episode: The next episode features publishing executive and industry commentator Jane Friedman discussing Barnes & Noble's turnaround and its impact on the state of bookselling in America.

Notable Excerpts from the Episode:

• "It couldn't just start firing people." [00:50]
• "There's no second chance for Barnes & Noble." [01:40]
• "We need to make several more calls like this one." [02:10]
• "Books represent B&N's one major advantage over Amazon." [10:00]
• "Barnes & Noble will just be the name outside. In reality, this will be your store." [20:50]
• "The changes I made were not a free pass to incompetence." [25:30]

This comprehensive summary captures the essence of the episode, highlighting the strategic maneuvers, challenges, and successes that defined Barnes & Noble's resurgence under James Daunt's leadership.